[Federal Register Volume 60, Number 28 (Friday, February 10, 1995)]
[Notices]
[Pages 8087-8093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3407]



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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-09855, et al.]


Proposed Exemptions; PACCAR Inc. Savings Investment Plan, et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restriction of the Employee 
Retirement Income Security Act of 1974 (the Act) and/or the Internal 
Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
request for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
request for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing. A request for a hearing must also state the issues to be 
addressed and include a general description of the evidence to be 
presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration, Office of Exemption Determinations, Room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 
20210. Attention: Application No. stated in each Notice of Proposed 
Exemption. The applications for exemption and the comments received 
will be available for public inspection in the Public Documents Room of 
Pension and Welfare Benefits Administration, U.S. Department of Labor, 
Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR [[Page 8088]] 32836, 32847, August 
10, 1990). Effective December 31, 1978, section 102 of Reorganization 
Plan No. 4 of 1978 (43 FR 47713, October 17, 1978) transferred the 
authority of the Secretary of the Treasury to issue exemptions of the 
type requested to the Secretary of Labor. Therefore, these notices of 
proposed exemption are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

PACCAR Inc Savings Investment Plan (the Plan) Located in Bellevue, 
Washington

[Application No. D-09855]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 C.F.R. Part 
2570, Subpart B (55 F.R. 32836, 32847, August 10, 1990). If the 
exemption is granted the restrictions of sections 406(a), 406(b)(1) and 
(b)(2) of the Act and the sanctions resulting from the application of 
section 4975 of the Code, by reason of section 4975(c)(1) (A) through 
(E) of the Code, shall not apply to (1) the proposed guarantee (the 
Guarantee) by PACCAR Inc (the Employer), the sponsor of the Plan, of 
the Plan's investment in a guaranteed investment contract (the GIC) 
issued by Confederation Life Insurance Company (Confederation Life), 
including the potential extensions of credit to the Plan by the 
Employer (the Advances) pursuant to the Guarantee; and (2) the 
potential repayment of the Advances (the Repayments); provided that the 
following conditions are satisfied:
    (A) All terms and conditions of the transactions are no less 
favorable to the Plan than those which the Plan could obtain in an 
arm's length transaction with an unrelated party;
    (B) The Repayments are made only from GIC Proceeds, defined as the 
amounts actually received by the Plan (1) from Confederation Life or 
any other entity making payment with respect to Confederation Life's 
obligations under the terms of the GIC, or (2) from the sale or 
transfer of the GIC to unrelated third parties;
    (C) The Repayments will be made only after the Plan has recovered, 
through the Advances plus GIC Proceeds, the amount guaranteed by the 
Employer with respect to the GIC; and
    (D) To the extent the Advances exceed GIC Proceeds, Repayment of 
the difference will be waived.

Summary of Facts and Representations

Introduction
    Confederation Life was recently placed in a receivership. As a 
result, the Confederation Life GIC owned by the Plan is frozen, and the 
future of Confederation Life is uncertain. The Employer, PACCAR Inc, 
proposes to protect the Plan from loss on its investment in the GIC, by 
guaranteeing the value of the GIC as of the commencement of the 
receivership, as described below.
    1. The Employer is a publicly-owned Delaware corporation engaged in 
the production of class 8 trucks, winches, oil drilling equipment and 
retail auto parts. Its principal place of business is Bellevue, 
Washington. The Employer sponsors the Plan, which is a defined 
contribution 401(k) plan, providing for individually-directed 
participant accounts (the Accounts). As of September 21, 1994, the Plan 
had 4,816 participants and, as of July 31, 1994, total assets of 
approximately $211,979,510. The trustee of the Plan is Fidelity 
Management Trust Company of Boston, Massachusetts (the Trustee). Plan 
participants may invest their accounts in and among six investment 
funds, including an income fund (the I Fund) which consists of 
guaranteed investment contracts issued by insurance companies, a cash 
short-term investment fund, and units in a group trust maintained by 
the Trustee and designated as the Fidelity Managed Income Portfolio II 
of the Fidelity Group Trust for Employee Benefit Plans (the MI 
Portfolio).
    2. Among the assets of the I Fund is the GIC, which is identified 
as Confederation Life Guaranteed Investment Contract No. 62185, issued 
to the Plan by Confederation Life on July 10, 1990 for a principal 
deposit of $6 million. The GIC is a single-deposit, non-benefit-
responsive contract, with interest on principal at the annual rate of 
9.67 percent, requiring payment to the Plan of $9.49 million on the 
maturity date of June 30, 1995 (the Maturity Date). On August 12, 1994 
(the Receivership Date), Confederation life was placed in receivership 
(the Receivership) pursuant to rehabilitation proceedings by the State 
of Michigan.<SUP>1 Consequently, Confederation Life's assets and 
operations were frozen, and payments on all its guaranteed investment 
contracts, including the GIC held by the Plan, were suspended effective 
as of the Receivership Date. As of the Receivership Date, the total GIC 
principal and accumulated interest was $8.752 million (the Receivership 
Value), representing 17.92 percent of the assets of the I Fund.

    \1\The Department notes that the decisions to acquire and hold 
the GIC are governed by the fiduciary responsibility requirements of 
Part 4, Subtitle B, Title I of the Act. In this proposed exemption, 
the Department is not proposing relief for any violations of Part 4 
which may have arisen as a result of the acquisition and holding of 
the GIC.
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    3. In order to avoid liquidity problems in the I Fund, after the 
Receivership was announced, the Employer and the Trustee froze the I 
Fund assets invested in the GIC. The Employer represents that it 
appears unlikely that Confederation Life will make timely payment to 
the Plan upon the Maturity Date of the GIC. The Employer has notified 
Plan participants that it will undertake measures to protect the 
Accounts from adverse effects of any nonpayment of the GIC or from the 
effects of a lengthy rehabilitation of Confederation Life. Accordingly, 
the Employer proposes to guarantee the Plan's investment in the GIC 
plus interest, by means of potential extensions of credit to the Plan, 
and is requesting an exemption for these transactions under the terms 
and conditions described herein.
    4. The terms of the Employer's guarantee (the Guarantee) of the 
Plan's investment in the GIC and the Employer's potential cash advances 
(the Advances) pursuant to the Guarantee will be evidenced in a written 
agreement between the Plan and the Employer.<SUP>2

    \2\The Department notes that this exemption, if granted, will 
not affect the rights of any participant or beneficiary with respect 
to claims under section 404 of the Act in connection with any aspect 
of the GIC transactions.
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The Guarantee
    In making the Guarantee, the Employer is undertaking to ensure that 
in the eventual resolution of the Receivership the Plan receives a 
total amount with respect to the GIC which is no less than its 
investment in the GIC as of the Receivership Date plus interest 
thereafter at a market rate. In accordance with this undertaking, the 
amount which the Employer proposes to guarantee (the Guarantee Amount) 
is the Receivership Value of the GIC, which is $8.752 million, less GIC 
Proceeds (defined as the amounts actually received by the Plan from 
Confederation Life or any other entity making payment with respect to 
Confederation Life's obligations under the terms of the GIC, 
[[Page 8089]] or from the sale or transfer of the GIC to unrelated 
third parties) and advances made by the Employer (Advances, as 
described below), plus interest on the net of the foregoing amount 
after the Receivership Date at the rate earned by the MI Portfolio (the 
Guarantee Rate), accrued on a daily basis. The Trustee's MI Portfolio 
is a diversified portfolio of short-term and long-term conventional and 
synthetic guaranteed investment contracts issued by insurance companies 
and other institutions. The average yield on the MI Portfolio Assets 
for the month of November, 1994, was 5.81 percent.
The Advances
    Although the GIC is non-benefit-responsive, the Employer is 
concerned that the Receivership may result in an increase in transfers 
of Accounts out of the I Fund to other investment funds maintained by 
the Plan, posing potential liquidity problems for the I Fund. 
Accordingly, if as a result of Account transfers or withdrawals from 
the I Fund the Guarantee Amount commences to represent more than 30 
percent of the I Fund, the Employer will make Advances to the I Fund in 
an amount sufficient to reduce the ratio to 30 percent.
Final Resolution
    If the Receivership and any rehabilitation of Confederation Life 
are resolved and completed prior to the end of the year 2000, within 60 
days of the Plan's receipt of final payment from or on behalf of 
Confederation Life with respect to the GIC, the Employer will honor the 
Guarantee by making a final Advance to the I Fund in an amount 
sufficient to cause the Guarantee Amount to equal zero. If the 
Receivership and any rehabilitation extend beyond the year 2000, the 
Employer will make a final Advance to the I Fund on the first business 
day in the year 2001 in the amount of the Guarantee Amount.
Repayments
    Repayment of the final Advance and all previous Advances will be 
restricted to the GIC Proceeds. The Repayments will only be made after 
such time as the Plan has recovered, through the Advances plus the GIC 
Proceeds, the amount guaranteed by the Employer with respect to the 
GIC, as described above. To the extent the total Advances exceed GIC 
Proceeds, repayment will be waived.
    5. In summary, the applicant represents that the proposed 
transactions satisfy the criteria of section 408(a) of the Act for the 
following reasons: (1) The Guarantee will enable the Employer to 
complete its commitment to Plan participants to protect the Plan from 
any loss of its investment in the GIC as of the Receivership Date; (2) 
The Advances will protect the I Fund from threats to its liquidity 
resulting from possible transfers and withdrawals of Accounts; (3) The 
Repayments will be made only from GIC Proceeds, and only after the Plan 
has recovered the amount guaranteed by the Employer; (4) After 
resolution of the Receivership, the Plan will be made whole with 
respect to the Guarantee by means of a final cash Advance; and (5) To 
the extent the Advances exceed the GIC Proceeds, Repayment of the 
difference will be waived.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department, 
telephone (202)219-8881. (This is not a toll-free number.)

Shippers Paper Products Company 401(k) Plan (the Plan) Located in 
Glenview, IL

[Application No. D-09866]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2) 
of the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1)(A) through (E) of the 
Code shall not apply to the proposed sale by the Plan of Group Annuity 
Contract, No. GA-4725 (the GAC) issued by Mutual Benefit Life Insurance 
Company (Mutual Benefit) to Illinois Tool Works Inc., a party in 
interest with respect to the Plan; provided the following conditions 
are satisfied: (1) The sale is a one-time transaction for cash; (2) the 
Plan receives no less than the fair market value of the GAC at the time 
of the sale; (3) the Plan's trustee, acting as independent fiduciary 
for the Plan, has determined that the proposed sale price is not less 
than the current fair market value of the GAC; and (4) the Plan's 
trustee has determined that the proposed transaction is appropriate for 
and in the best interests of the Plan and its participants and 
beneficiaries.

Summary of Facts and Representations

    1. The Plan is sponsored by the Shippers Paper Products Company, 
which is an wholly-owned subsidiary of Illinois Tool Works Inc. (the 
Applicant). The Plan is a defined contribution plan with a salary 
reduction feature. There were 91 participants as of October 20, 1994. 
As of September 30, 1994, the Plan's total assets were $635,695.00. The 
Plan is administered by the Employee Benefits Committee of the Board of 
Directors of the Applicant (the Committee). The Plan's trustee, 
Northern Trust Company (the Trustee), manages the investment of Plan 
funds at the direction of the Committee. The GAC, which is the sole 
asset of the Plan, was effective as of July 1, 1985.\3\ The Applicant 
represents that the GAC was scheduled to terminate only after 
disbursement of the final annuity payment thereunder and, therefore, 
had no stated maturity date. The terms of the GAC provided for a 
minimum annual interest rate of 4.0%.

    \3\The Department notes that the decisions to acquire and hold 
the GAC are governed by the fiduciary responsibility requirements of 
Part 4, Subtitle B, Title I of the Act. In this regard, the 
Department is not herein proposing relief for any violations of Part 
4 which may have arisen as a result of the acquisition and holding 
of the GAC issued by Mutual Benefit.
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    2. On July 16, 1991, Mutual Benefit was placed into rehabilitation 
proceedings by the New Jersey Commissioner of Insurance. As a result of 
these proceedings, the Plan's assets have been frozen.\4\ The Applicant 
represents that it wishes to enter into the proposed transaction in 
order to protect the accounts of Plan participants and beneficiaries 
from the risk of investment loss associated with the GAC. The Applicant 
further represents that the Plan needs to sell its interest in 
[[Page 8090]] the GAC in order to give the Plan more investment 
flexibility to direct the investment of participant account balances to 
safer and more prudent investments. The Applicant also represents that 
the Plan will not incur any expenses with respect to the sale of the 
GAC.

    \4\Following the cessation of payments by Mutual Benefit with 
respect to the GAC, Shippers Paper Products Company made the 
decision to make periodic advances to the Plan to enable the payment 
of distributions to terminating and retiring participants and the 
payment of certain in-service withdrawals to current participants. 
The Applicant represents that, as of November 30, 1994, the periodic 
advances to the Plan totaled approximately $178,595. The Applicant 
also represents that the terms of those periodic advances satisfy 
the conditions of PTE 80-26 (45 FR 28545, April 29, 1980). This 
conditional class exemption permits a party in interest to make an 
interest-free loan to an employee benefit plan, and the repayment of 
such loan. Specifically, the exemption states, in relevant part, 
that effective January 1, 1975, the restrictions of section 
406(a)(1)(B) and (D) and section 406(b)(2) of the Act and the taxes 
imposed by section 4975(a) and (b) of the Code by reason of section 
4975(c)(1)(B) and (D) of the Code, shall not apply to the lending of 
money from a party in interest to an employee benefit plan, nor to 
the repayment of such loan in accordance with its terms, if no 
interest or other fee is charged to the plan, the loan is unsecured, 
and the loan proceeds are used only for the payment of ordinary 
operating expenses of the plan, including the payment of benefits in 
accordance with the terms of the plan. In this proposed exemption 
the Department expresses no opinion as to whether the periodic 
advances satisfy the provisions of PTE 80-26.
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    3. The Applicant proposes to protect the interests of the affected 
participants by purchasing the GAC from the Plan. The purchase price 
for the GAC will be the contract balance of the GAC as of September 30, 
1994, as determined by Mutual Benefit using the following interest 
rates: (1) Interest is credited at the rate of 10.35% for the period 
from July 1, 1986 through June 30, 1990; (2) interest is credited at 
the rate of 8.7% for the period from July 1, 1990 through June 30, 
1991; (3) interest is credited at the rate of 8.35% for the period from 
July 1, 1991 through December 31, 1991. These are the rates of interest 
actually earned under the GAC until December 31, 1991. After December 
31, 1991, pursuant to the terms of the proposed plan of rehabilitation 
set forth by the Superior Court of New Jersey, interest is credited at 
a rate equal to 5.75% for 1992, 5.25% for 1993, and at a rate equal to 
5.10% for 1994. The purchase price will be adjusted to reflect any 
contract distributions and additional interest earned from September 
30, 1994 to the date the actual purchase takes place.\5\ From January 
1, 1995 through December 31, 1999, the GAC will earn interest based on 
Mutual Benefit's actual investment performance, with a minimum annual 
rate of 3.5%.

    \5\The Applicant represents that, following the sale of the GAC 
to the Applicant, the Plan will repay any amounts due Shippers Paper 
Products Company in connection with the periodic advances discussed 
above.
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    4. The Trustee has reviewed the proposed transaction on behalf of 
the Plan. The Trustee represents that it has determined that the 
proposed purchase price for the GAC is at least equal to the fair 
market value of the GAC. In addition, the Trustee represents that it 
has determined that the proposed transaction is appropriate for the 
Plan and in the best interests of its participants and beneficiaries.
    5. In summary, the Applicant represents that the proposed 
transaction satisfies the criteria of section 408(a) of the Act 
because: (1) The Plan will receive cash for the GAC in the amount of 
the contract balance of the GAC, as determined by Mutual Benefit as of 
the date of the sale; (2) the transaction will enable the Plan and its 
participants and beneficiaries to avoid any risk associated with the 
continued holding of the GAC, and to exercise all of their rights under 
the Plan to request distributions and withdrawals from the Plan; and 
(3) the Plan's trustee, acting as the Plan's independent fiduciary, has 
determined that the sale at the proposed price is in the best interests 
of the participants and beneficiaries of the Plan, and that the 
proposed price is not less than the fair market value of the GAC.

FOR FURTHER INFORMATION CONTACT: Virginia J. Miller of the Department, 
telephone (202) 219-8971. (This is not a toll-free number.)

Manke Lumber Company, Inc. Profit Sharing Plan (the Plan) Located in 
Tacoma, Washington

[Exemption Application No. D-09897]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, August 10, 1990). If the exemption is 
granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2) of 
the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1)(A) through (E) of the 
Code, shall not apply to the proposed cash sale (the Sale) by the Plan 
of certain real property (the Property) to Manke Family Resources, 
Limited Partnership (MFR).
    This proposed exemption is conditioned upon the following 
requirements: (1) All terms and conditions of the Sale are at least as 
favorable to the Plan as those obtainable in an arm's length 
transaction with an unrelated party; (2) the Sale is a one-time cash 
transaction; and (3) the Plan is not required to pay any commissions, 
costs or other expenses in connection with the Sale; and (4) the Plan 
receives a sales price equal to the greater of: (a) The fair market 
value of the Property on the date of the Sale; or (b) the Plan's 
aggregate costs of acquiring and holding the Property.

Summary of Facts and Representations

    1. Manke Lumber Company, Inc. (Manke) sponsors the Plan, a profit 
sharing plan which was established on May 1, 1971. The Plan was 
amended, effective May 1, 1988, to include 401(k) features which allow 
participants to direct the investments of their accounts. As of April 
30, 1993, approximately eighty-eight percent of Plan assets were held 
as general assets while the remaining twelve percent were subject to 
participant direction. As of the same date, the Plan had assets 
totalling $9,360,468 and approximately 520 participants.
    West One Trust Company (the Trustee) serves as the trustee of the 
Plan and has the sole investment discretion with respect to the 
Property and certain other non-liquid assets. Piper Capital Management, 
a registered investment adviser, has investment management discretion 
over the marketable securities and other liquid assets of the Plan. 
Under the terms of the Plan, Manke appoints an Advisory Committee (the 
Advisory Committee) which is responsible for setting the funding policy 
for the Plan. The Advisory Committee does not have any investment 
discretion. As of January 9, 1995, the Advisory Committee consisted of 
two Manke employees--J. Randal Jordan and Milton Farvour.
    2. Manke is a Washington corporation engaged in the manufacturing 
and sale of lumber and other wood products. In addition, Manke also 
owns and manages timberland. The principal shareholders of Manke 
include Charles Manke, Virgil Manke and James Manke, who also comprise 
the Board of Directors (the Directors) and are the officers of Manke.
    MFR is a Washington limited partnership engaged in the business of 
owning, utilizing and developing timberland and personal property 
related to the timber business. Tacoma Timber Co. (Tacoma Timber), a 
Washington corporation, serves as the general partner of MFR. Both MFR 
and Tacoma Timber are wholly owned by sons and daughters of the 
Directors, who are parties in interest with respect to the Plan. In 
addition, the owners of MFR and Tacoma Timber also own small amounts of 
Manke stock.
    3. Among the general assets of the Plan is the Property, which 
consists of approximately 275 acres of land and timber located in 
Clallam County, Washington. The Property lies contiguous to a forty 
acre parcel of property owned by Manke. The Plan acquired the Property 
on September 25, 1975 for $200,709 from Raymond B. Fife, an unrelated 
party. Since its acquisition, the Plan has held the Property as 
timberland, and it has not been utilized by, or leased to, any related 
or unrelated party. As of December 9, 1994, the Plan had expended a 
total of $14,384 in connection with the Property for taxes and other 
expenses such as surveying and insurance.
    4. Steven D. Lodge of Shorett & Riely, a real estate appraising and 
consulting firm located in Seattle, Washington, appraised the Property. 
Mr. Lodge is a Washington State-certified General Real Estate Appraiser 
and has fifteen years of [[Page 8091]] experience in appraising real 
estate. Mr. Lodge represents that both he and Shorett & Riely are 
independent of, and unrelated to, Manke, MFR, Tacoma Timber and the 
Directors.
    Because the timber located on the Property has a substantial value 
apart from the underlying land, Mr. Lodge valued the two components of 
the Property, the timber and the land, separately and then as one. 
Based upon a report prepared by Washington Timberland Management, Inc., 
which estimates harvestable area, timber volume and timber value, Mr. 
Lodge placed the fair market value of the timber at $1,519,283 as of 
April 30, 1994. In addition, based upon comparable sales of properties 
located in the Tacoma area, Mr. Lodge placed the fair market value of 
the land within a range of $220,456 and $385,798 as of April 30, 1994. 
Finally, as of result of these two valuations, Mr. Lodge placed the 
fair market value of the Property at $1,700,000 as of April 30, 1994.
    5. The Trustee attempted to sell the Property on October 7, 1994 in 
a written/oral bid auction sale. Beginning on September 2, 1994, the 
Trustee circulated a written bid proposal, to approximately 100 
prospective bidders. The written bid proposal set the minimum bid at 
$2,000,000 in cash. None of the prospective bidders submitted an oral 
or written bid in response to the written bid proposal, and, as a 
result, the Property was not sold. Despite this, the Trustee believes 
that a new proposal will result in a sale of the Property and, 
therefore, proposes to attempt to sell the Property again through a 
written/oral bid auction sale.
    Because of its need for timberland, MFR desires to purchase the 
Property from the Plan provided that it is the highest bidder. MFR 
represents that the Sale price will be at least the greater of: (a) The 
fair market value of the Property on the date of the Sale; or (b) the 
Plan's aggregate costs of acquiring and holding the Property. 
Accordingly, the Advisory Committee of the Plan requests an 
administrative exemption from the Department to permit the Sale of the 
Property under the terms and conditions described herein. The Sale will 
be a one-time cash transaction, and the Plan will not be required to 
pay any fees, commissions or expenses in connection with the Sale.
    6. The Trustee has indicated that the bid auction sale for the 
Property will be conducted sometime in 1995. In preparation of such 
auction, the Advisory Committee represents that the Trustee will 
circulate a written bid proposal to approximately 100 prospective 
bidders which will allow them to bid either in writing prior to the 
auction or orally at the action. The minimum bid set forth in the bid 
proposal will be at least the Property's fair market value as of the 
date of such proposal. The Property will be sold to the highest bidder, 
which may or may not be MFR, only if the highest bid exceeds the 
minimum bid set by the Trustee. Acceptance of the highest bidder's 
offer is subject to final acceptance and approval by the Trustee's 
Trust Committee. For purposes of condition #4 of this proposed 
exemption, the fair market value of the Property on the date of the 
Sale will be determined in the following manner. If the Trustee 
receives two or more bids from unrelated individuals or entities, the 
highest bid will be deemed to be the Property's fair market value on 
the date of the Sale. If the Trustee receives less than two bids from 
unrelated individuals or entities, the fair market value on the date of 
the Sale will be determined by an independent, qualified appraiser. In 
this event, MFR's bid cannot be less than the fair market value of the 
Property as determined by the independent, qualified appraiser on the 
date of the Sale.
    7. In summary, it is represented that the transaction will satisfy 
the statutory criteria of section 408(a) of the Act because: (a) All 
terms and conditions of the Sale will be at least as favorable to the 
Plan as those obtainable in an arm's length transaction; (b) the Sale 
will be a one-time cash transaction; (c) the Plan will not be required 
to pay any commissions, costs or other expenses in connection with the 
Sale; and (d) the Plan will receive a sales price equal to the greater 
of: (1) The fair market value of the Property on the date of the Sale; 
or (2) the Plan's aggregate costs of acquiring and holding the 
Property.

FOR FURTHER INFORMATION CONTACT: Kathryn Parr of the Department, 
telephone (202) 219-8971. (This is not a toll-free number.)

Virginia Fibre Corporation Employees Retirement Savings Plan (the Plan) 
Located in Amherst, Virginia

[Application No. D-09901]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted the restrictions of sections 406(a), 406 (b)(1) and (b)(2) 
of the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1) (A) through (E) of 
the Code, shall not apply, effective February 1, 1995, to (1) The 
proposed purchase from the Plan (the Purchase) by the Virginia Fibre 
Corporation (the Employer), the sponsor of the Plan, of a guaranteed 
investment contract (the GIC) issued by the Confederation Life 
Insurance Company (Confederation Life); or, in the alternative, (2) the 
proposed interest-free loan to the Plan by the Employer (the Loan) with 
respect to the GIC, including repayment of the Loan; provided that the 
following conditions are satisfied:

    (A) All terms and conditions of the transactions are at least as 
favorable to the Plan as those which the Plan could obtain in an 
arm's-length transaction with an unrelated party;
    (B) In the event of the Purchase, the Plan receives a cash 
purchase price which is no less than the greater of (1) The fair 
market value of the GIC as of the sale date, or (2) the GIC's 
Maturity Payment, as described below;
    (C) In the event of the Loan: (1) The Loan is in the amount of 
the GIC's Maturity Payment, as described below; (2) the Loan is 
repaid only from GIC Proceeds, defined as the amounts paid by or on 
behalf of Confederation Life or any other entity making payment with 
respect to Confederation Life's obligations under the GIC; (3) the 
Plan incurs no expenses or interest with respect to the Loan; and 
(4) repayment of the Loan is waived to the extent the Loan exceeds 
the GIC Proceeds.

EFFECTIVE DATE: This exemption, if granted, will be effective as of 
Febraury 1, 1995.

Summary of Facts and Representations

    1. The Employer is a Virginia corporation engaged in the 
manufacture of corrugating medium and liner board, with its principal 
place of business in Amherst, Virginia, and is wholly owned by the 
Grief Bros. Corporation, located in Delaware, Ohio. The Plan is a 
defined contribution 401(k) plan with 240 participants and total assets 
of approximately $5,510,972 as of September 30, 1994. The Plan's assets 
are held, managed and invested by its trustee, Society National Bank in 
Cleveland, Ohio.
    2. The Plan provides for individual participant accounts (the 
Accounts) and participant-directed investment of the Accounts. The Plan 
participants may direct the investment of their Accounts among various 
investment options offered by the Trustee, including the Virginia Fibre 
MAGIC Fund (the M Fund), which invests in, among other things, 
guaranteed investment contracts issued by insurance companies. Of the 
Plan's 280 participants, 168 Accounts are invested in the M Fund. Among 
the [[Page 8092]] assets in the M Fund is the GIC, a single-deposit, 
non-benefit-responsive guaranteed investment contract issued to the 
Plan on February 2, 1990 by Confederation Life, a Canadian life 
insurance company doing business in the United States through 
subsidiaries in Michigan and Georgia. The GIC was purchased by the Plan 
for an initial principal deposit of $250,000 (the GIC Principal), which 
earns interest at the rate of 9.18 percent per annum (the Contract 
Rate). The GIC terms provide for annual interest payments (the Annual 
Payments) on February 1 each year, commencing 1991 through 1995. All 
Annual Payments through 1994 have been made by Confederation Life and 
received by the Plan. The GIC provides for no pre-maturity withdrawals 
of principal, and has a maturity date of February 1, 1995 (the Maturity 
Date). Upon the Maturity Date, the Plan is due a final Annual Payment 
plus the total GIC Principal, for a total of $272,950 (the Maturity 
Payment).
    3. On August 12, 1994, Confederation life was placed in 
receivership (the Receivership) pursuant to rehabilitation proceedings 
by the State of Michigan.\6\ Consequently, Confederation Life's assets 
and operations were frozen, and payments on all its guaranteed 
investment contracts were suspended effective as of the Receivership 
commencement. The Employer represents that under the prevailing 
circumstances, it is unlikely that the Maturity Payment will be made to 
the Plan when due on February 1, 1995. The Employer is also concerned 
that the Plan may never recover the full Maturity Payment in its 
entirety. The Employer desires to protect Plan participants and 
beneficiaries from any loss resulting from the Receivership, by 
purchasing the GIC from the Plan, if allowable, or by lending the Plan 
the amount of the Maturity Payment, if the purchase is not allowable. 
The Employer is requesting an exemption for such transactions under the 
terms and conditions described herein.

    \6\The Department notes that the decisions to acquire and hold 
the GIC are governed by the fiduciary responsibility requirements of 
Part 4, Subtitle B, Title I of the Act. In this proposed exemption, 
the Department is not proposing relief for any violations of Part 4 
which may have arisen as a result of the acquisition and holding of 
the GIC.
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    4. The Employer prefers to purchase the GIC from the Plan on 
February 1, 1995 for the amount of the Maturity Payment due the Plan on 
that date. However, the terms of the GIC include a prohibition against 
assignment of the GIC. The Employer and the Trustee represent that they 
have initiated the process of obtaining a release from this contractual 
prohibition. If a release is obtained to enable the GIC's transfer to 
the Employer, the Employer will purchase the GIC on February 1, 1995 
for cash in the amount of the Maturity Payment due on that date. The 
Plan will incur no expenses with respect to this proposed sale 
transaction.
    In the event the parties are unable to obtain a release from the 
prohibition on assignability of the GIC, on February 1, 1995 the 
Employer will make a cash loan to the Plan (the Loan) in the amount of 
the Maturity Payment due on that date. The Loan will be interest-free, 
and the Plan will incur no expenses related to the Loan. Repayment of 
the Loan will be restricted to the amounts which the Plan receives from 
Confederation Life or any other entity making payment with respect to 
Confederation Life's obligations under the GIC (the GIC Proceeds). To 
the extent the Loan exceeds the GIC Proceeds, repayment of the Loan 
will be waived.
    5. In summary, the applicant represents that the proposed 
transactions satisfy the criteria of section 408(a) of the Act for the 
following reasons: (1) The transactions will protect the Plan from any 
loss on the GIC's full Maturity Payment which might result from the 
Receivership; (2) The Employer's proposed purchase of the GIC will be a 
one-time transaction for cash in which the Plan receives no less than 
the greater of the fair market value of the GIC or the Maturity 
Payment; (3) If a release is not obtained to enable the purchase of the 
GIC, the Plan will still receive the Maturity Payment when due, in the 
form of the Loan; (4) If the Loan is made, its repayment will be 
restricted to GIC Proceeds; (5) To the extent the Loan exceeds GIC 
Proceeds, the repayment of the Loan will be waived; and (6) The Plan 
will pay no interest or incur any expenses with respect to the proposed 
transactions.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

Profit Sharing Plan for Employees of Annis, Mitchell, Cockey, Edwards & 
Roehn, P.A. (the Plan) Located in Tampa, Florida

[Application No. D-09906]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a), 406 (b)(1) and (b)(2) 
of the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1) (A) through (E) of 
the Code, shall not apply to the proposed sale by the Plan to Annis, 
Mitchell, Cockey, Edwards & Roehn, P.A. (the Employer), of the Plan's 
interest (the Interest) in a limited partnership, for $40,000 in cash, 
provided the following conditions are satisfied: (a) The sale is a one-
time transaction for cash; (b) no commissions or other expenses are 
paid by the Plan in connection with the sale; and (c) the Plan receives 
not less than the fair market value of the Interest as of the date of 
the sale as determined by a qualified, independent expert.

Summary of Facts and Representations

    1. The Plan is a defined contribution, profit sharing plan which 
currently has approximately 105 participants. As of September 30, 1994, 
the aggregate fair market value of the Plan's assets was $3,378,407. 
The Employer is a professional association engaged in the practice of 
law in Tampa, Florida.
    2. On June 30, 1988 the Plan acquired the Interest, which is a one-
half unit of limited partnership interest in Hunter's Ridge Associates, 
Ltd. (the Partnership). The business of the Partnership is to acquire, 
own, operate, improve and otherwise deal with an apartment complex 
located in Winter Park, Florida. The Partnership units were not 
registered with the Securities and Exchange Commission or the Florida 
Division of Securities, but rather were privately placed. The total 
number of units offered and sold was 35. No shareholder or employee of 
the Employer individually purchased an interest in the Partnership.
    3. The Plan has now been modified to permit individual investment 
selections by the Plan participants. The Plan's investment in the 
Interest is illiquid, difficult to accurately value and hard to 
allocate among participants. In order to improve the Plan's liquidity 
and to reduce accounting costs for the Plan attributable to this 
investment, the Plan would like to sell the Interest to the Employer.
    4. If the exemption proposed herein is granted, the Plan will 
assign the Interest to the Employer as a substitute investor in the 
Partnership, in exchange for a lump sum cash payment equivalent to the 
current fair market value of the Interest from the Employer. 
Participants' accounts will receive an allocation in cash exactly equal 
to the most recent valuation of the Interest. No broker fees 
[[Page 8093]] or administrative fees will be incurred by the Plan since 
the Employer will absorb the cost of the transfer.
    5. Mr. Richard D. Schofield, a registered real estate broker who 
has been in the real estate business for 17 years, is the general 
partner of the Partnership. Mr. Schofield represents that as of January 
5, 1995, the Interest would be appraised as having a fair market value 
at its original cost, or $40,000. This is the purchase price that the 
Employer proposes to pay to the Plan for the Interest.
    6. In summary, the applicant represents that the proposed 
transaction satisfies the criteria contained in section 408(a) of the 
Act because: (a) The sale is a one-time transaction for cash; (b) the 
Plan will pay no commissions or fees in connection with the 
transaction; (c) the Plan will receive not less than the current fair 
market value of the Interest at the time of the sale; and (d) the fair 
market value for the Interest has been determined by Mr. Schofield, a 
qualified, independent expert who is the general partner of the 
Partnership.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest of disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(b) of the act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 7th day of February, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 95-3407 Filed 2-9-95; 8:45 am]
BILLING CODE 4510-29-P