Grant of Individual Exemptions; Operating Engineers Pension Trust, et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 94-30, et al.; Exemption Application

No. D-8865, et al.]

Grant of Individual Exemptions; Operating Engineers Pension

Trust, 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.

Operating Engineers Pension Trust (the Plan) Located in Pasadena,

California

[Prohibited Transaction Exemption No. 94-30; Application No. D-8865]

Exemption

The restrictions of section 406(a) 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 (D) of the Code, shall not apply to

the leasing by the Plan of mobile home lots (the Lots) at mobile home

parks (the Parks) owned and to be owned by the Plan to active

participants (the Actives) in the Plan who are parties in interest

thereto within the meaning of section 3(14)(H) of the Act because they

are employees of employers who contribute to the Plan, provided: (a)

leases with Actives will be on the same basis as transactions engaged

in with the general public, utilizing standard form lease agreements

and with rental rates determined according to the existing market; (b)

the transaction will cover only those Plan participants who are parties

in interest because they are employees of a contributing employer to

the Plan, and no Lots will be leased to Plan fiduciaries, officers,

directors or 10 percent shareholders of contributing employers to the

Plan or to persons who are parties in interest for any reason other

than that they are employees of a contributing employer; (c) the leases

ordinarily will be for relatively short, one year terms, and the Plan

will adjust rental rates annually based on experience with market

conditions; (d) no Lot will be leased to an Active unless the lease is

approved by Buss-Shelger Associates (the Manager), the independent

fiduciary who will also monitor such lease to assure that its terms,

and enforcement thereof, are at least as favorable to the Plan as those

the Plan could obtain in similar transactions with unrelated parties;

(e) neither Mr. Ronald L. Buss, President of the Manager, nor the

Manager is related to any employer who contributes to the Plan or to

the International Union of Operating Engineers or its Local Union No.

12 (collectively, the Union), and the Manager does not derive any of

its income from the Union or from any such employer; (f) no more than

50 percent of the Lots in the Parks will be leased to Actives; and (g)

no more than 1 percent of Plan assets will be involved in leases to

Actives.

Written Comments

In the Notice of Proposed Exemption (the Notice), the Department

invited all interested persons to submit written comments and any

requests for a hearing on the proposed exemption. The applicant

represents that interested persons were provided with a copy of the

Notice, plus a copy of the supplemental statement (the Supplemental

Statement), as required pursuant to 29 CFR 2570.43(b)(2), either

through first class mailing of such documents or through publication of

such documents in the bi-monthly Union newsletter, ``News-Record.'' The

newsletter was also distributed to various Union offices and hiring

halls. All written comments and requests for a hearing were to have

been received by the Department by February 1, 1994, based on an

anticipated publication date of December 17, 1994, for the newsletter

containing the Notice and the Supplemental Statement. Subsequently, the

applicant notified the Department that the publication of the

newsletter had been delayed and that the newsletter was not actually

mailed to interested persons until January 5, 1994. In light of this

fact, the Department determined to extend the comment period on the

proposed exemption until February 28, 1994, to ensure that all

interested persons had sufficient time to comment on the proposed

exemption. In this regard, the Department required the applicant to

notify interested persons of the extended comment period by enclosing a

notice of extension of time to comment (the Notice of Extension of

Time) with each monthly report form mailed to contributing employers,

by asking employers to post the Notice of Extension of Time or

distribute it to employees, and by posting the Notice of Extension of

Time together with a copy of proposed exemption in all Union offices

and hiring halls. In a letter dated January 31, 1994, the applicant

notified the Department that it had completed notification to all

interested persons as required by the Department.

As of the close of the comment period on February 28, 1994, the

Department had received one letter from an interested person commenting

on the proposed exemption and requesting a hearing. In the opinion of

the commentator the transaction involved a highly speculative

investment in real property that would jeopardize the ability of the

Plan to provide stable retirement pension income to participants and

beneficiaries.

The Department forwarded a copy of the commentator's letter to the

applicant and requested that the applicant address in writing the

concerns raised by the commentator. In response, the applicant stated

that the general concern of the commentator regarding the Plan's

purchase of the Lots and construction of the Parks was not at issue in

the application, as relief was requested only for the lease of the Lots

to Actives who are parties in interest solely because they are

employees of contributing employers to the Plan. With respect to the

leasing of Lots to Actives by the Plan, the applicant points out that

no fiduciary or other party in interest except Actives will be allowed

to lease Lots from the Plan. Further, an independent fiduciary will be

required to review the leases to Actives and the number of such leases

will be limited. The transactions would involve a very small percentage

of the assets of the Plans. In the opinion of the applicant, the

requested exemption would make the Plan's investment more productive by

increasing the rental income to the Plan and would permit the Actives

to decide whether to live in one of the Parks, rather than being

prohibited from doing so.

With respect to the purchase of the Lots by the Plan and

construction of the Parks, the applicant maintains that such an

investment by the Plan was not a prohibited transaction and did not

require an exemption. In the opinion of the applicant, there is

substantial evidence in the application file which addresses the

propriety and attractiveness of the purchase by the Plan of the Lots

and the construction of the Parks, which took into account the Plan's

portfolio and the general investment objective to achieve the highest

rate of return commensurate with safety of principal over the long

term. In this regard, it is represented that the investment satisfied

the Plan guidelines requiring diversification and profitability, and

that the Board of Trustees made such determination, after considering

independent professional investment advice.

In addition to commenting on the transaction, the commentator

requested the Department schedule a hearing on the matter. The

Department notes that in its final regulation on procedures for filing

and processing prohibited transaction exemption applications, 29 CFR

2570.46, there is no provision for a hearing unless the exemption is

from the fiduciary self-dealing prohibitions of section 406(b) of the

Act. This exemption does not grant relief from section 406(b) of the

Act. Further, the Department does not believe that any issues have been

raised which would require the convening of a hearing.

Accordingly, after giving full consideration to the record,

including the comment by an interested person and the responses of the

applicant, the Department has determined to grant the exemption, as

described herein. In this regard, the comment submitted to the

Department has been included as part of the public record of the

exemption application. The complete application file, including all

supplemental submissions received by the Department, is made available

for public inspection in the Public Documents Room of the Pension

Welfare Benefits Administration, room N-5507, U.S. Department of Labor,

200 Constitution Avenue NW., Washington, DC 20210.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption refer to

the Notice published on October 29, 1993, 58 FR 58190.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the

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

CS Holding and its Worldwide Affiliates Headquartered in Zurich,

Switzerland

[Prohibited Transaction Exemption 94 -31; Exemption Application No.

D-9605]

Exemption

CS Holding and each of its affiliates (collectively, CS Holding),

except Banque Leu Luxembourg (BLL), shall not be precluded from

functioning as a ``qualified professional asset manager'' pursuant to

Prohibited Transaction Exemption 84-14 (PTE 84-14, 49 FR 9494, March

13, 1984) solely because of a failure to satisfy Section I(g) of PTE

84-14, as a result of affiliation with BLL, including any current or

future affiliate of CS Holding, other than BLL, which is, or in the

future may become, eligible to serve as a QPAM under PTE 84-14.

Effective Date: This exemption is effective as of December 17, 1993.

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 February 9, 1994 at 59 FR

6049.

WRITTEN COMMENTS: The Department received one written comment and no

requests for a hearing. The comment was submitted on behalf of the

applicant, CS Holding, in supplementation of the Notice of Proposed

Exemption (the Notice). The matters addressed in the applicant's

comment are summarized as follows:

1. The Notice indicated that the location of CS Holding and

Affiliates is New York, New York. The applicant states that the

corporate headquarters of CS Holding is actually located in Zurich,

Switzerland, and its affiliates operate in a variety of worldwide

locations. Accordingly, the exemption heading has been amended to

include this information.

2. The operative exemption language in the Notice concluded with

the following phrase: ``* * * including any current or future affiliate

of CS Holding, other than BLL, which in the future may become eligible

to serve as a QPAM under PTE 94-14.'' The applicant requests, in the

interests of completeness and accuracy, that the words ``is or'' be

inserted between the words ``which'' and ``in''. In response to this

request, the operative exemption language in the final exemption

includes the requested insertion, and the phrase reads as follows: ``*

* * including any current or future affiliate of CS Holding, other than

BLL, which is, or in the future may become, eligible to serve as a QPAM

under PTE 94-14.''

3. The Notice states that the proposed exemption was requested ``on

behalf of CS Holding affiliates that are banks, investment banking

firms, or registered investment advisers which are or may become

eligible to serve as QPAMs.'' The applicant comments that it is more

accurate to state that the proposed exemption was requested ``on behalf

of CS Holding affiliates that include banks, investment banking firms,

and investment advisers which are, or may become, eligible to serve as

QPAMs.''

After consideration of the entire record, the Department has

determined to grant the exemption, as supplemented by the applicant's

comment.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,

telephone (202) 523-8881. (This is not a toll-free number.)

Richmond, Fredericksburg and Potomac Railway Company Employee Thrift

and Investment Plan (the Plan) Located in Richmond, Virginia

[Prohibited Transaction Exemption 94-32; Application No. D-9578]

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 a guaranteed investment

contract, No. GA-5250 (the GIC) issued by Mutual Benefit Life Insurance

Company of New Jersey (Mutual Benefit) to the Richmond, Fredericksburg

& Potomac Corporation (RFP), 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 GIC 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 GIC; 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.

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 February 9, 1994 at 58 FR

6074.

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

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

number.).

Stroh Brewery Company, Inc. Salaried Employees' Thrift Plan (the Plan)

Located in Detroit, Michigan

[Prohibited Transaction Exemption 94-33; Exemption Application No. D-

9580]

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 cash sale (the Sale) of certain pooled fund units from

the Plan to Stroh Brewery Company, Inc., a party in interest with

respect to the Plan.

This 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; (2) the Sale

is a one-time cash transaction; (3) the Plan is not required to pay any

commissions, costs or other expenses in connection with this

transaction; and (4) the Plan receives a sales price equal to the fair

market value of its residual interest in the Morgan Guaranty Trust

Company of New York Convertibles Fund.

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 February 9, 1994 at 59 FR

6049.

EFFECTIVE DATE: This exemption is effective as of December 31, 1993.

FOR FURTHER INFORMATION CONTACT: Kathryn Parr 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 8th day of April, 1994.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 94-8843 Filed 4-12-94; 8:45 am]

BILLING CODE 4510-29-P