Proposed Exemption; Hensel Phelps Construction Co. Profit Sharing Plan

DEPARTMENT OF LABOR

[Application No. D-9623]

Proposed Exemption; Hensel Phelps Construction Co. Profit Sharing

Plan

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.

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, NW., Washington, DC

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, NW., Washington, DC 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 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.

Hensel Phelps Construction Co. Profit Sharing Plan (the Plan) Located

in Greeley, Colorado

[Application No. D-9623]

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) and 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) of certain

real property (the Property) by the Plan to Hensel Phelps Construction

Co. (the Employer), a party in interest with respect to the Plan;

provided that (1) the Sale is a one-time transaction for cash; (2) the

Plan does not suffer any loss nor incur any expenses in the proposed

transaction; (3) the Plan receives as consideration the greater of

either the fair market value of the property as determined by an

independent appraiser on the date of the Sale, or receives all the

funds expended by the Plan in acquiring and maintaining the Property;

and (4) the trustee of the Plan has determined that the proposed Sale

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

and its participants and beneficiaries.

Summary of Facts and Representations

1. The Plan is a defined contribution plan with total assets of

$19,877,932 and approximately 394 participants and beneficiaries, as of

November 30, 1993. The fiduciaries of the Plan consist of the Employer

and Bank One, Greeley, N.A., located in Greeley, Colorado (the

Trustee).

The Employer implements its responsibilities as fiduciary through

the appointment of the Administrative Committee, which currently

consists of the Employer's President and Chief Executive Officer, the

Vice President-Finance, and the Vice President-General Counsel. The

Administrative Committee responsibilities, inter alia, are to appoint

and monitor activities of the Trustee and arrange for the payment of

benefits by the Plan. The Trustee has complete discretionary authority

and responsibility for investing and reinvesting the assets of the

Plan.

The Employer is a Delaware corporation that is headquartered in

Greeley, Colorado with district offices in Santa Clara and Irvine,

California; Austin, Texas; and Little Rock, Arkansas. It is a 56-year-

old employee-owned company that specializes in commercial and

industrial construction and has approximately 1,600 employees. During

the fiscal year which ended May 31, 1993, the Employer generated

revenues of $645,597,000.

2. The Property is a condominium designated as Unit 34 in Writer

Square Condominiums located at 1512 Larimer Street, Denver, Colorado.

The Property was appraised at the request of the Trustee by an

independent appraiser, Gary L. Berz, SRA, of Berz Appraisal Group,

Ltd., located in Lakewood, Colorado, who determined the fair market

value to be $260,000, as of June 24, 1993. The Property is described by

Mr. Berz to consist of 2,624 square feet with 6 rooms, which include 3

bedrooms and 2.5 bathrooms. Parking facilities are provided underground

for two vehicles. Outer construction is brick. The location of Writer

Square Condominiums is described by Mr. Berz to be on busy downtown

streets with zoning classification for business-residential units.

The Employer served Writer Square, Inc., Englewood, Colorado, as

construction manager for the construction of Writer Square

Condominiums, which included the Property. Final payment by Writer

Square, Inc. to the Employer for its services as construction manager

was made to the Employer on October 23, 1981.

3. On March 18, 1983, at the direction of IntraWest Bank of

Greeley, Greeley, Colorado, as trustee of the Plan at that time with

discretionary authority, the Plan issued a loan for $275,000 to Rudy

and Betty J. Marich to enable them to purchase the Property from Writer

Square, Inc.1 The loan was secured by a first deed of trust,

paying 12.5 percent per year on the outstanding balance. The monthly

payments on the loan were $2,998.48, with the entire outstanding

balance due on June 1, 1990. When the Marichs defaulted on the final

payment on June 1, 1990, the successor trustee of the Plan agreed to

refinancing the loan with the same terms and conditions, except the

final payment on the outstanding balance would be due May 15, 1992.

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\1\The Department notes that the decisions to issue and reissue

a loan to the Marichs are governed by fiduciary responsibility

requirements of Part 4, Subtitle B, Title I of the Act. In this

regard the Department herein is not proposing relief for any

violations of Part 4 of the Act which may have arisen as a result of

the issuance and reissuance of the loan by the Plan.

The applicant represents that the Marichs are not parties in

interest with respect to the Plan.

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Again the Marichs defaulted on the loan and the Plan commenced

foreclosure proceedings to acquire title to the Property. At the

foreclosure sale on December 28, 1993, the Plan bid an amount to cover

the current balance due on the revised loan, including interest,

attorney's fees and foreclosure costs, in order to obtain clear title

to the Property upon the expiration of the 75 day redemption period on

March 13, 1994.

4. Upon obtaining clear title to the Property the Plan proposes to

sell the Property to the Employer for the greater of either the fair

market value of the Property on the date of the Sale as determined by a

qualified, independent appraiser, or for the total amount of the funds

the Plan expended in acquiring and maintaining the Property. The

applicant represents that the Plan will not suffer any loss nor incur

any expenses from the proposed transaction. The applicant further

represents that by the Employer acquiring the Property, the Plan will

avoid the impact of any future negative yields and fluctuations in the

rental and market values of the Property and costs associated with

leasing or selling the Property. Also, the applicant represents that

the Sale will provide the Plan with liquid assets that can be placed in

more diversified investments.

The Trustee of the Plan represents that, as of February 22, 1994,

the adjusted cost to the Plan for acquiring and maintaining the

Property is $338,622.73; and the Trustee represents that this figure

will be updated on the date of the Sale of the Property. The Trustee

further represents that an appraisal by Mr. Berz was made of the

Property on February 21, 1994, that determined the fair market value of

the Property to be $325,000. In addition, the Trustee represents that a

residential rental in Denver, Colorado is an asset that is an atypical

investment for a profit sharing plan.

5. In summary, the applicant represents that the proposed

transaction will satisfy the statutory criteria for an exemption under

section 408(a) of the Act because (a) the proposed Sale will be a one-

time transaction for cash; (b) the Plan will receive as consideration

for the Sale the greater of either the fair market value of the

Property as determined by an independent appraiser on the date of the

Sale, or will receive all of the funds expended by the Plan in

acquiring and maintaining the Property; (c) the Plan will not suffer

any losses nor incur any expenses in effecting the proposed

transaction; (d) the proposed transaction will enable the Plan to

diversify its assets to more liquid investments and avoid economic

risks associated with ownership of the Property; and (e) the Trustee

has determined that the proposed Sale is appropriate for the Plan and

is in the best interests of the Plan and its participants and

beneficiaries.

For Further Information Contact: Mr. C. E. Beaver 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 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 23rd day of March, 1994.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 94-7270 Filed 3-28-94; 8:45 am]

BILLING CODE 4510-29-P