[Federal Register Volume 60, Number 28 (Friday, February 10, 1995)]
[Notices]
[Pages 8093-8096]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3406]



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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 95-09; Exemption Application No. D-
09462, et al.]


Grant of Individual Exemptions; Peoples Security Life Insurance 
Company, et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, DC. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, 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 proposed to the Secretary 
of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:

    (a) The exemptions are administratively feasible;
    (b) They are in the interests of the plans and their 
participants and beneficiaries; and
    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

Peoples Security Life Insurance Company (Peoples) Located in Durham, 
North Carolina

[Exemption Application No.: D-09462]

Commonwealth Life Insurance Company (Commonwealth) Located in 
Louisville, Kentucky

[Prohibited Transaction Exemption 95-09; Exemption Application No.: D-
09463]

Exemption

    The restrictions of section 406(a) of the Act and the sanctions 
resulting from the application of section 4975(c)(1) (A) through (D) of 
the Code, shall not apply, effective March 1, 1992, to: (1) The 
extension of credit by Peoples or Commonwealth (the Applicants), the 
sponsors of an investment product (the Group Annuity Contract or GAC) 
in connection with a plan's investment in the GAC; and (2) the 
reimbursement of Peoples or Commonwealth for benefit payments made to 
investing plans from the cashflow generated by the investments in the 
plans' Custodian Accounts which are set up by a plan pursuant to the 
GAC, or (3) the reimbursement of Peoples or Commonwealth for benefit 
payments made to investing plans from the proceeds generated by 
liquidation of investments in the Custodial Accounts upon termination 
of the Group Annuity Contract provided:
    1. The decision to enter into the Group Annuity Contract will be 
made [[Page 8094]] by a plan fiduciary who is independent of Peoples 
and Commonwealth and any affiliates of such entities (the Independent 
Fiduciary).
    2. Prior to a plan's investment in the Group Annuity Contract, the 
Independent Fiduciary for such plan receives full and detailed written 
disclosures of all features of the Group Annuity Contract including all 
applicable premium charges.
    3. Neither Peoples nor Commonwealth or any of their affiliates has 
discretionary authority or control with respect to the decision to 
invest plan assets in the investment product described herein or 
renders investment advice (within the meaning of 29 CFR 2510.3-21(a)) 
with respect to those assets.
    4. Neither Peoples nor Commonwealth or any of their affiliates 
exercises any discretion or renders investment advice on behalf of a 
plan with respect to the ongoing acquisition, management or disposition 
of Custodian Account assets.
    5. For all transactions that occur after the date of publication of 
the proposed and final exemptions, Peoples and Commonwealth provide 
copies of the proposed and final exemptions as published in the Federal 
Register to each plan which invests in a Group Annuity Contract.
    6. The premiums charged by Peoples and Commonwealth for the GAC 
(including early termination charges assessed in the event of early 
contract termination) will not be in excess of ``reasonable 
compensation'' within the meaning of section 408(b)(2) of the Act and 
will constitute the only fees charged by Peoples or Commonwealth in 
connection with such contract other than accrued interest on 
unreimbursed benefit payments.
    7. Peoples and Commonwealth maintain or cause to be maintained, for 
a period of six years, the records necessary to enable the persons 
described in paragraph (8) of this section to determine whether the 
conditions of this exemption have been met, except that (a) a 
prohibited transaction will not be considered to have occurred if, due 
to circumstances beyond the control of Peoples or Commonwealth or its 
agents, the records are lost or destroyed prior to the end of the six 
year period, and (b) no party in interest other than Peoples or 
Commonwealth shall be subject to the civil penalty that may be assessed 
under section 502(i) of the Act, or to the taxes imposed by section 
4975(a) and (b) of the Code, if the records are not maintained, or are 
not available for examination as required by paragraph (8) below.
    8(a). Except as provided in section (b) of the paragraph and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to in paragraph 7 of this section 
shall be unconditionally available at their customary location during 
normal business hours by:
    (1) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service (the Service);
    (2) Any fiduciary of an investing Plan or any duly authorized 
representative of such fiduciary;
    (3) Any contributing employer to an investing Plan or any duly 
authorized employee or representative of such employee; and
    (4) Any participant or beneficiary of an investing Plan, or any 
duly authorized representative of such participant or beneficiary.
    (b) None of the persons described above in subparagraph (2)-(4) of 
this paragraph 8 shall be authorized to examine the trade secrets of 
Peoples or Commonwealth or its affiliates or commercial or financial 
information which is privileged or confidential.
    For purposes of this exemption, affiliate means:
    (a) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (b) Any officer, director or partner, in such other person; and
    (c) Any corporation or partnership of which such other person is an 
officer, director or partner.
    Control means the power to exercise a controlling influence over 
the management or policies of a person other than an individual.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department 
invited all interested persons to submit written comments on the 
proposed exemption within 45 days from the date of publication of the 
Notice in the Federal Register. All written comments were to have been 
received by the Department by December 29, 1994. The Department 
received one written comment submitted by the Applicants. The issue 
addressed in the comment and the Department's response are summarized 
as follows:
    The application for exemption submitted by the Applicants requested 
a March 1, 1992 effective date for the requested exemption. The 
effective date was not specified in the notice of proposed exemption 
published in the Federal Register on November 14, 1994 (59 FR 5655). 
Accordingly, the Applicants request that the Department clarify that 
the final exemption is effective as of March 1, 1992.
    The Department concurs with the Applicants' comment and notes that, 
in order for the exemption to apply to a covered transaction, all of 
the conditions in the exemption except condition 5 (relating to the 
provision of copies of the proposed and final exemption to plan 
investors) must have been met.

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

CNA Employees' Retirement Trust (the Trust) Located in Chicago, 
Illinois

[Prohibited Transaction Exemption 95-10; Exemption Application Nos. D-
09539 through D-09544]

Exemption

    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 January 17, 1992, to fifteen past sales and 
purchases by the Trust of twelve issues of short-term commercial paper 
(the CNA Transactions), as identified in the Notice of Proposed 
Exemption, involving the Continental Casualty Company, the Continental 
Assurance Company, the Continental Assurance Company Guaranteed 
Investment Fund, the Valley Forge Life Insurance Company, Valley Forge 
Insurance Company, and the American Casualty Company of Reading, 
Pennsylvania (collectively, the CNA Companies), each of which is a 
party in interest with respect to the CNA Employees' Retirement Plan, 
whose assets are held by the Trust; provided that the following 
conditions are satisfied:

    (A) In each of the CNA Transactions, the Trust paid no more, or 
received no less, than the fair market value of the commercial paper 
involved in the transaction;
    (B) The CNA Transactions constituted, in the aggregate, less 
than four percent of all commercial paper transactions of the Trust 
during 1992; and
    (C) The CNA Companies have undertaken efforts to prevent any 
recurrence of direct or indirect transactions involving the Trust 
and the CNA Companies, including the appointment of an independent 
investment manager of all the Trust's commercial paper investments.

EFFECTIVE DATE: This exemption is effective as of January 17, 1992.
    For a more complete statement of the facts and representations 
supporting the [[Page 8095]] Department's decision to grant this 
exemption, refer to the notice of proposed exemption published on 
November 28, 1994 at 59 FR 60843.

Written Comments

    The Department received one written comment, which included a 
request for a hearing. The comment did not address substantively the 
transactions which were the subject of the proposed exemption. 
Subsection (b) of 29 CFR 2570.46, in the prohibited transaction 
exemption procedure, states that the Department will grant a request 
for a hearing where a hearing is necessary to fully explore material 
factual issues identified by the person requesting the hearing. The 
Department has determined that no issues have been identified which 
would require the convening of a hearing, and, accordingly, has 
determined not to hold a public hearing.
    After careful consideration of the entire record, the Department 
has determined to grant the exemption.

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

Hospital Supplies, Inc. Pension Plan (the Plan) Located in Radnor, 
Pennsylvania

[Prohibited Transaction Exemption 95-11; Application No. D-09727]

Exemption

    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 cash sale of two adjacent parcels of real 
property (the Properties) by the Plan to Armond J. Civera, Jr. (Mr. 
Civera),<SUP>1 a disqualified person with respect to the Plan, provided 
that the following conditions are satisfied:

    \1\Because Mr. Civera is the only participant in the Plan and 
the Employer is wholly owned by Mr. Civera there is no jurisdiction 
with respect to the Plan under Title I of the Act pursuant to CFR 
2510.3-3(b) and (c). However, there is jurisdiction under Title II 
of the Act pursuant to section 4975 of the Code.
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    (a) The sale will be a one-time cash transaction;
    (b) The Plan will receive for each Property the current fair market 
value established at the time of the sale by an independent qualified 
appraiser;
    (c) The Plan will pay no expenses associated with the sale.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the notice of proposed exemption published on January 4, 1995 at 60 FR 
486/487.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department 
at (202) 219-8883. (This is not a toll-free number.)

Clarence E. Coker, Jr. and the Clarendon Family Practice, PA Employee 
Retirement Plan (the Plan) Located in Manning, South Carolina

[Prohibited Transaction Application 95-12; Exemption Application No. D-
09736]

Exemption

    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 sale of approximately eight acres of unimproved 
land (the Land) by the Plan to Dr. Clarence E. Coker, Jr., (Dr. Coker), 
a party in interest with respect to the Plan; provided that the 
following conditions are satisfied:
    (a) The sale will be a one-time cash transaction;
    (b) The Plan will receive the higher of: (1) the original 
acquisition cost;<SUP>2 or (2) the current fair market value plus a 
certain premium related to the adjacency of the Land to other real 
property owned by Dr. Coker, established at the time of the sale by an 
independent qualified appraiser; and

    \2\The original acquisition cost is determined as follows: 
(original purchase price+aggregate real estate taxes)-aggregate 
rental income=original acquisition cost.
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    (c) The Plan will pay no expenses associated with the sale. For a 
more complete statement of the facts and representations supporting the 
Department's decision to grant this exemption refer to the notice of 
proposed exemption published on December 19, 1994 at 59 FR 65396/65397.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department 
at (202) 219-8883. (This is not a toll-free number.)

Alucobond Technologies, Incorporated Employees' Savings Plan (the Plan) 
Located in St. Louis, Missouri

[Prohibited Transaction Exemption 95-13; Application No. D-09834]

Exemption

    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 interest-free loan to the Plan (the Loan) by 
Alucobond Technologies, Incorporated (the Employer), a party in 
interest with respect to the Plan, and (2) the Plan's potential 
repayment of the Loan upon the receipt by the Plan of payments under 
Guaranteed Investment Contract No. CG01285A3A (the GIC) issued by 
Executive Life Insurance Company (Executive Life); provided the 
following conditions are satisfied:
    (A) No interest or expenses are paid by the Plan in connection with 
the transaction;
    (B) The Loan will be repaid only out of amounts paid to the Plan by 
Executive Life, its successors, or any other responsible third party; 
and
    (C) Repayment of the Loan is waived with respect to the amount by 
which the Loan exceeds GIC proceeds.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on December 19, 1994 at 59 
FR 65393.

FOR FURTHER INFORMATION CONTACT: Virginia J. Miller of the Department, 
telephone (202) 219-8971. (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 or disqualified 
person from certain other provisions to which the exemptions 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) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional 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
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application accurately describes all [[Page 8096]] material terms of 
the transaction which is the subject of the exemption.

    Signed at Washington, D.C., this 7th day of February, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 95-3406 Filed 2-9-95; 8:45 am]
BILLING CODE 4510-29-P