Grant of Individual Exemptions; G. Robert Taylor Individual Retirement Account, et al.

DEPARTMENT OF LABOR

[Prohibited Transaction Exemption 94-15, et al.; Exemption Application

No. D-9460, et al.]

Grant of Individual Exemptions; G. Robert Taylor Individual

Retirement Account, 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, D.C. 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.

G. Robert Taylor Individual Retirement Account (the Account) Located in

Chattanooga, Tennessee

[Prohibited Transaction Exemption 94-15; Exemption Application No. D-

9460]

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 sale for cash of certain shares of stock from

the Account to R. Scott Taylor, a disqualified person with respect to

the Account, provided that the following conditions are met:

1. The fair market value of the stock is established by an

appraiser independent of G. Robert Taylor;

2. The buyer pays no less than current fair market value for the

stock;

3. The transaction is entirely for cash; and

4. The Account pays no fees or commissions in regard to 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 29, 1993, at 58

FR 68957.

FOR FURTHER INFORMATION CONTACT: Paul Kelty of the Department,

telephone (202) 219-8883. (This is not a toll-free number.)

Money Purchase Retirement Plan of Local 567, I.B.E.W. (the Plan)

Located in Falmouth, Maine

[Prohibited Transaction Exemption 94-16; Exemption Application D-9465]

Exemption

The restrictions of section 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 lease (the Lease) of 360 square feet of office

space (the Office Space) in a commercial office building located in

Falmouth, Maine, to the Plan by the Local No. 567, International

Brotherhood of Electrical Workers (I.B.E.W.), Building Corporation (the

Building Corporation), a corporation which is wholly-owned by the Local

No. 567 of the I.B.E.W., AFL-CIO (the Union), a party in interest with

respect to the Plan.

This exemption is conditioned upon the following requirements: (a)

The terms of the Lease are at least as favorable to the Plan as those

obtainable in an arm's-length transaction with an unrelated party; (b)

an independent, qualified appraiser determines annually the fair market

rental value of the Office Space; (c) the Lease payments are adjusted

annually by an independent, qualified fiduciary, to assure that such

Lease payments are not greater than the fair market rental value of the

Office Space; (d) the independent, qualified fiduciary determines that

the transaction is appropriate for the Plan and in the best interests

of the Plan's participants and beneficiaries; and (e) the independent,

qualified fiduciary monitors the transaction and the conditions of the

exemption and takes whatever action is necessary to enforce the Plan's

rights under the Lease.

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 3, 1993 at 58 FR

64013.

FOR FURTHER INFORMATION CONTACT: Kathryn Parr of the Department,

telephone (202) 219-8971. (This is not a toll-free number.)

Scios Nova Inc., Scios Nova Inc. 401(k) Plan (the Plan) Located in

Mountain View, CA

[Prohibited Transaction Exemption 94-17; Application No. D-9551]

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 by the Plan of Group Annuity Contract, No.

GA-10,021 (the GAC) issued by Mutual Benefit Life Insurance Company

(Mutual Benefit) to Scios Nova Inc. (the Employer), 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 sale price is not less than the

current fair market value of the GAC; and (4) the Plan's trustee has

determined that the transaction is appropriate for and in the best

interests of the Plan and its participants and beneficiaries.

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 17, 1993 at 58

FR 66029.

FOR FURTHER INFORMATION CONTACT: Ms. Virginia J. Miller of the

Department, telephone (202) 219-8971. (This is not a toll-free

number.).

Local No. 60 Health and Welfare Fund (the Plan) Located in Leominster,

Massachusetts

[Prohibited Transaction Exemption 94-18; Exemption Application No. L-

9526]

Exemption

The restrictions of sections 406(a), 406 (b)(1) and (b)(2) of the

Act shall not apply to the cash sale of a parcel of real property (the

Property) by the Plan to the New England Joint Board of the Retail,

Wholesale and Department Store Union, AFL-CIO, for the greater of (1)

$170,000 in cash or (2) the fair market value of the Property as of the

date of the sale, provided the following conditions are satisfied: (a)

the purchase price is not less than the fair market value of the

Property on the date of the sale; and (b) the fair market value of the

Property is determined by a qualified, independent appraiser as of the

date of 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 17, 1993 at 58

FR 66032.

WRITTEN COMMENTS AND HEARING REQUESTS: The Department received one

comment with respect to the proposed exemption, but it did not address

any issues relating to the subject transaction. The Department received

no requests for a hearing with respect to the proposed exemption.

Accordingly, the Department has determined to grant the exemption

as proposed.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

Penn Mutual Life Insurance Company (Penn Mutual), Located in

Philadelphia, Pennsylvania, The Pennsylvania Trust Company (PTC),

Located in Radnor, Pennsylvania; Independence Capital Management, Inc.

(ICMI), Located in Horsham, Pennsylvania

[Prohibited Transaction Exemption 94-19; Application Nos. D-9194, D-

9195, D-9196]

Exemption

Section I. Covered Transactions

The restrictions of section 406(a)(1) (A) through (D) and section

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

extension of credit by Penn Mutual, the sponsor and third party

guarantor of an investment product involving a guaranteed investment

contract (GIC), to a plan invested in the GIC pursuant to the terms of

its participation in the Independence Stable Asset Trust (Stable Asset

Trust); (2) the sale of the assets of a closed-end collective

investment fund (Fund) which is part of the Stable Asset Trust to Penn

Mutual upon termination of the Fund, or in connection with a non-

benefit withdrawal from the Fund; (3) the transfer of a Fund's assets

to Penn Mutual upon termination of the Fund, or in connection with a

non-benefit withdrawal from the Fund; and (4) the operation of the

Stable Asset Trust in accordance with the letter agreement between Penn

Mutual and PTC.

The exemption is subject to the following conditions which are set

forth below in Section II.

Section II. General Conditions

The relief provided under Section I is available only if the

following conditions are met:

1. The decision to invest in a Fund will be made by a plan

fiduciary who is responsible for and knowledgeable regarding the

investment of plan assets in GICs and similar investment products and

who is independent of Penn Mutual, PTC, and ICMI and any affiliates of

such entities (the Independent Fiduciary).

2. Prior to a plan's investment in a Fund, the Independent

Fiduciary for such plan receives the following written disclosures:

(a) All material facts concerning the structure, operation and

investment objectives of the Fund including:

i. A copy of the Supplement creating the Fund in which the plan

intends to invest which identifies the proposed investment portfolio of

the Fund (the Supplement), the Fund Commencement Date and the Scheduled

Fund Termination Date, the date projected for the funding of all

investments to be made in the Fund, the guaranteed rate of return for

the Fund, and any other material terms of the Fund;

ii. The confirmation document which confirms the plan fiduciary's

written approval of matters set forth in the Supplement;

iii. The Independence Stable Asset Trust Participant Investment

Agreement;

iv. The Declaration of Trust of the Short Term Investment Fund of

the Pennsylvania Trust Company for Employee Benefit Accounts; and

v. The letter agreement between the Pennsylvania Trust Company and

the Penn Mutual Life Insurance Company (Letter Agreement).

(b) The corporate affiliation existing between Penn Mutual, PTC and

ICMI and either the amount of the compensation or the method of

calculation of the compensation paid to such entities.

3. Neither Penn Mutual nor any of its affiliates has discretionary

authority or control with respect to the decision to invest plan assets

in the proposed investment product described herein or render

investment advice (within the meaning of 29 CFR 2510.3-21(c)) with

respect to those assets.

4. The interest charged by Penn Mutual with respect to an amount

advanced by Penn Mutual to a plan for a benefit payment advance will be

100% offset by the returns realized with respect to the Stable Asset

Trust units held by the plan and no other interest costs or charges

will be associated with benefit payment advances.

5. Penn Mutual provides copies of the proposed and final exemption

as published in the Federal Register to each plan which invests in the

proposed investment product.

6. The fees paid to Penn Mutual, PTC, and ICMI will not be in

excess of ``reasonable compensation'' within the meaning of section

408(b)(2) of the Act and such fees cannot be increased during the term

of a Fund as the result of any action taken by Penn Mutual, PTC or

ICMI.

7. Penn Mutual maintains or causes 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 Penn Mutual 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 Penn Mutual 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 this 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 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, any 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

Penn Mutual or its affiliates or commercial or financial information

which is privileged or confidential.

The availability of this exemption is subject to the express

condition that the material facts and representations contained in the

application are true and complete, and that the application accurately

describes all material facts which are the subject of this exemption.

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.

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 November 15, 1993 at 58

FR 60219.

Written Comments: The Department received one written comment and

no requests for hearing. The comment was submitted on behalf of the

applicants Penn Mutual, PTC and ICMI. The issues addressed in the

comment and the Department's responses are summarized as follows:

1. The applicants request that the first sentence of Section I.

Covered Transactions section of the Exemption be revised to include the

following phrase at the end of subsequent (2) and (3) ``or in

connection with a non-benefit withdrawal from the Fund,''. The

applicants represent that the added phrase is intended to reflect the

fact that it is contemplated that there may be sales of assets of a

Fund which form a part of the Stable Asset Trust to Penn Mutual in

connection with a non-benefit withdrawal from the Fund by a

participating plan. Such sales are authorized in section 5.6(e) of the

declaration of trust for the Stable Asset Trust. In accordance with the

applicants' request the Department has included the above-referenced

phrase at the end of subsections (2) and (3) of Section I of the final

exemption.

2. Paragraph 1 of Section II of the proposed exemption states that

the decision to invest in a Fund will be made by a plan fiduciary who

is responsible for and knowledgeable regarding the investment of plan

investments in GICs and similar investment products. Similarly,

paragraph 15(a) of the Summary of Facts and Representations section of

the proposed exemption states that the applicants represent that

investment of a Plan's assets in a Fund will be made and approved by a

plan fiduciary who is responsible for and knowledgeable regarding the

investment of plan assets in guaranteed investment contracts and

similar products.

The applicants wish to clarify that this condition will be

satisfied by an express representation that will be required to be made

by the Plan's independent fiduciary under the Independence Stable Asset

Trust Participant Investment Agreement.

3. The applicants have noted two factual errors in paragraph 1 of

the Summary of Facts and Representation section of the proposed

exemption. The correct name of the affiliate listed in the proposed

exemption as ``Penn Assurance and Annuity Company'' is ``Penn Insurance

and Annuity Company.'' Secondly, as of December 31, 1992, Penn Mutual

had $6.9 billion in consolidated assets and not $46.9 billion as

reported in the proposed exemption.

4. Paragraph 10 of the Summary of Facts and Representations section

of the proposed exemption includes a description of the non-benefit

withdrawal provisions of the synthetic GIC product. The description

includes statements to the effect that the withdrawing plan would be

subject to a surrender charge and that there would be a credit against

the amount of the surrender charge owing based on the excess of the

market value of the units of the Fund held by the Plan over the Plan

Account Amount as of such date.

The applicants represent that there may be cases where no surrender

charges will be applied with respect to non-benefit withdrawals and

also there may be circumstances where surrender charges will be applied

and will not be subject to any offset. Thus, the word ``would'' as

noted above should be changed to ``may''. These provisions, in each

case, however, will be determined and approved by the Plan fiduciary at

the Fund's inception.

5. Paragraph 11 of the Summary of Facts and Representations section

of the proposed exemption includes a reference to paragraph 12, which

does not appear to relate to the substance of that paragraph. The

Department notes that the paragraph labeled ``12'' was incorrectly

identified in the Federal Register and the designation for paragraph 13

omitted. As corrected, paragraphs 12 and 13 read as follows.

12. PTC, at its discretion, will be entitled at a Fund's

Termination Date to sell any one or more of the Fund assets to Penn

Mutual for a cash price sufficient to obtain net proceeds equal to the

aggregate of the Plan Account Amounts of plans holding units in the

Fund. The obligations of the parties under these arrangements will be

netted against one another, resulting in a ``swapping-out'' of the

entire remaining portfolio at an amount equal to the aggregate Plan

Account Amounts.

13. Penn Mutual's fee for its minimum yield, liquidity guarantees

and Plan Account Amount assurances will be an amount computed on and

payable as of pre-set quarterly dates from each Fund. The fee will be

equal to the product of the cost of the remaining invested assets in

the Fund adjusted in accordance with generally accepted accounting

principles for amortization of premium and accretion of discount, times

the Penn Mutual Quarterly Compensation Percentage specified in the

applicable Fund Supplement.

* * * * *

After consideration of the entire record, including the comment,

the Department has determined to grant the exemption as amended in the

manner described above.

For Further Information Contact: Ms. Lyssa E. Hall 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 are true and complete and accurately describe all material

terms of the transaction which is the subject of the exemption. In the

case of continuing exemption transactions, if any of the material facts

or representations described in the application change after the

exemption is granted, the exemption will cease to apply as of the date

of such change. In the event of any such change, application for a new

exemption may be made to the Department.

Signed at Washington, DC, this 10th day of February 1994.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 94-3606 Filed 2-16-94; 8:45 am]

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