Proposed Exemptions; T.J. Lambrecht Construction, Inc. et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-09872, et al.]

Proposed Exemptions; T.J. Lambrecht Construction, Inc. 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 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 [[Page 24900]] 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.

T.J. Lambrecht Construction, Inc., Employees' Profit Sharing Plan and

Trust (the TJLC Plan); Brown & Lambrecht Earthmovers, Inc. Employees'

Profit Sharing Plan and Trust (the B&L Plan; collectively referred to

as the Plans)

Located in Joliet, Illinois

[Application Nos. D-09872 and D-09873]

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 cash sale (the Sale) by each of

the Plans of a 12.5% partnership interest in Prime Industries (the

Partnership Interest) to Mr. Thomas J. Lambrecht (Mr. Lambrecht), a

party in interest with respect to the Plans; provided the following

conditions are satisfied: (1) The Sale is a one-time transaction for

cash; (2) the sale price for each Partnership Interest will be the

higher of (a) the fair market value of the Partnership Interest as

determined by a qualified independent appraiser at the time of the Sale

or, (b) each Plan's total investment in the Partnership Interest

($300,000); and (3) the Plans do not suffer any loss nor incur any

expenses in connection with the transaction.

Summary of Facts and Representations

1. The Plans are defined contribution profit sharing plans. As of

December 31, 1994, the TJLC Plan had 48 participants and $1,472,427.00

in assets. As of September 30, 1994, the B&L Plan had 29 participants

and $6,253,423.00 in assets. T.J. Lambrecht Construction, Inc. and

Brown & Lambrecht Earthmovers, Inc. (the Employers) are Illinois

subchapter S corporations in the business of earthmoving and road

construction. Mr. Lambrecht is the sole trustee of the TJLC Plan and

co-trustee (with Mr. Paul Lambrecht) of the B&L Plan. Mr. Lambrecht is

also the sole shareholder and sole director of both Employers.

2. The Plans purchased the Partnership Interests in Prime

Industries from Lennon Wallpaper Company in 1991. The total purchase

price of each Partnership Interest was $258,750.00. The applicant

represents that both Lennon Wallpaper Company and Prime Industries are

unrelated to the Employers. Prime Industries' only asset is a 300,000

square foot steel building on 15.6 acres located in Shorewood, Illinois

(the Partnership Property). From 1991 through September 30, 1994, each

Plan advanced additional funds in the amount of $125,000.00 for

improvements to the Partnership Property. The applicant represents

that, during this same time period, the Partnership Property generated

income for each Plan in the amount of $83,750.00. The applicant also

represents that the Partnership Property continues to generate income

for the Plans in the form of rental payments from tenants who are not

related to the Plans or the Employers. In addition, it is represented

that the Partnership Interest currently represents 25.47% of the TJLC

Plan's assets and 6% of the B&L Plan's assets.1

1The Department notes that the decisions to acquire and hold

the Interests are governed by the 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 which may have arisen as a result of the

acquisition and holding of the Interests by the Plans.

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3. The applicant represents that, because the Partnership Interests

are minority interests and because the interests are not publicly

traded, there is not an established market for the Partnership

Interests. Furthermore, it is represented that the Partnership Property

is the only asset owned by the partnership. The applicant represents

that, for the foregoing reasons, the interests are valued according to

the proportionate value of the underlying property. In this regard, the

applicant submitted a letter prepared by Charles Sharp, a general

partner of the partnership, in which Mr. Sharp explained that the sole

value of the Partnership Interests is the value of the Partnership

Property itself and that the Partnership Interests have no value in and

of themselves.

4. The applicant represents that Brown & Lambrecht Earthmovers,

Inc. was merged into T.J. Lambrecht Construction, Inc. on January 1,

1995. As a result, the B&L Plan is in the process of being terminated.

In addition, the TJLC Plan is being terminated and T.J. Lambrecht

Construction, Inc. is in the process of establishing a new profit

sharing plan which will allow for participant-directed investments. The

applicant requests an exemption to permit the Sale by the Plans of the

Partnership Interests to Mr. Lambrecht. Each Plan will receive the

greater of (1) the fair market value of the Partnership Interest as

determined by an independent appraiser at the time of the Sale, or (2)

the Plan's total investment in the Partnership Interest. The applicant

represents that this Sale is in the best interests of Plan participants

and beneficiaries because it will allow the Plans to convert the

Partnership Interests into cash, creating the liquidity needed for

distributions to participants who, at their election, have the right to

roll over their Plan benefits into the new profit sharing plan. It is

also represented that the Sale will facilitate implementation of

participant-directed investment of accounts in the new profit sharing

plan.

5. The Property was appraised by Mr. Joseph Batis, MAI, a State of

Illinois Certified General Real Estate Appraiser who is independent of

the Plans, the Employers, and Mr. Lambrecht. In analyzing the value of

the Partnership Property, Mr. Batis stated that he relied mainly on the

direct sales comparison approach but also considered the cost approach

and the income approach to estimate the value of the property. The

appraised value of the Partnership Property as of September 30, 1994

was $4,000,000.00. The ratable value of each Plan's 12.5% interest in

the Partnership Property as of that date was $500,000.00.2

\ 2\The applicant represents that the fair market value of the

Partnership Interests will not be discounted for lack of

marketability, or for any other reason.

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6. The applicant represents that the Plans would incur no expenses

or commissions with respect to the Sale. The applicant also represents

that the proposed transaction is administratively feasible and

protective of the Plans' participants and beneficiaries. Finally, the

applicant represents that the proposed transaction will provide the

Plans with the liquidity needed to fund participant-directed

investments and cash distributions to Plan participants.

7. In summary, the applicant represents that the transaction

satisfies the statutory criteria of section 408(a) of the Act and

section 4975(c)(2) of the Code because: (1) The Sale will be a one-time

transaction for cash; (2) no [[Page 24901]] commissions or fees will be

paid by the Plans as a result of the Sale; (3) the Sale will enable the

Plans to liquidate their assets and will facilitate implementation of

participant-directed investments; and (4) the Sale price will be the

higher of: (a) The fair market value of the Partnership Interest on the

date of the Sale, or (b) the Plan's total investment in the Partnership

Interest.

FOR FURTHER INFORMATION CONTACT: Virginia J. Miller of the Department,

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

Pediatric Dentistry Ltd. Profit Sharing Trust (the Plan),

Located in Fargo, North Dakota

[Exemption Application No. D-09903]

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

406(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 Code3 shall not apply to the proposed cash sale of a

parcel of improved real property (the Property) by the Plan to William

Hunter, M.D. (Dr. Hunter), a party in interest with respect to the

Plan; provided that: (1) The sale will be a one-time transaction for

cash; (2) as a result of the sale, the Plan will receive in cash the

greater of $79,000 or the fair market value of the Property, as

determined by an independent, qualified appraiser, as of the date of

the sale; (3) the Plan will pay no commissions, fees, or other expenses

as a result of the transaction; and (4) the terms of the sale will be

no less favorable to the Plan than those it would have received in

similar circumstances when negotiated at arm's length with unrelated

third parties.

\3\For purposes of this exemption, references to specific

provisions of Title I of the Act, unless otherwise specified, refer

also to the corresponding provisions of the Code.

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Summary of Facts and Representations

1. The Plan is a defined contribution profit sharing plan sponsored

by Pediatric Dentistry Ltd. (the Employer). As of November 29, 1994,

there were seven (7) participants. As of November 17, 1994, the assets

of the Plan totaled approximately $1,295,866. Approximately seven

percent (7%) of the Plan's assets are invested in the Property.

Northern Capital Trust Company is the trustee (the Trustee) of the

Plan. Dr. Hunter is the administrator of the Plan.

2. The Employer which sponsors the Plan is a professional service

corporation providing dental services. The Employer's business office

is located in a residential area immediately adjacent to the Property.

Dr. Hunter is the sole shareholder of the Employer.

3. In 1989, the Property was purchased at a price of $67,500 from

third parties unrelated to Dr. Hunter or to any other beneficiary of

the Plan. It is represented that one of the factors contributing to the

purchase was the view that eventually the Property would be needed for

the Employer's business and would at that time satisfy the definition

of ``qualifying employer real property,'' as set forth in section

407(d)(4) of the Act.4

\ 4\The Department notes that the decisions of the fiduciary,

acting on behalf of the Plan, in connection with the acquisition and

holding of the Property are governed by the fiduciary responsibility

requirements of part 4, subpart B, of Title I. The Department

expresses no opinion herein, as to whether any of the relevant

provisions of part 4, subpart B, of title I have been violated

regarding the Plan's investment in and subsequent holding of the

Property, and no exemption from such provisions is proposed herein.

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However, it is represented that since the acquisition by the Plan,

the Property has been rented to various parties unrelated to Dr. Hunter

or to any other beneficiary of the Plan. It is represented that the

annual average return on the investment to the Plan since the Property

was acquired in 1989, has been 4.31%.

4. The Property is described as a one-story detached single family

residence on a corner lot in a newer diversified neighborhood in Fargo,

North Dakota. The Property consists of an 8,447 square foot level site

improved by a structure that contains a 1,253 square foot finished

living area above grade and a basement of the same size below grade.

The Property is located at 1206 15 Avenue South and is situated on the

lot adjacent to the Employer's business office.

5. This exemption is requested to permit the Plan to sell the

Property to Dr. Hunter for the greater of $79,000 or the appraised fair

market value of the Property on the date of sale. Dr. Hunter represents

that beginning in April, 1992, the Property was listed with a local

realtor as part of the multiple listing service. The Property was

initially listed at a price of $71,950 which it is represented

reflected the fair market value of the Property at that time based on

an appraisal. Subsequently, the price of the Property was reduced to

$68,950. Though the Property was shown to prospective buyers by several

realtors who participate in the multiple listing service, it is

represented that the Plan did not receive any offers from those buyers

to purchase the Property.

It is represented that the proposed transaction is feasible in that

it involves a one-time sale of the Property for cash. In addition, the

proposed transaction is in the interest of the Plan in that the price

offered by Dr. Hunter could not be obtained otherwise. In addition, the

Plan will be able to sell the Property without incurring any further

expense of searching for a buyer and without paying brokerage

commissions, fees, or other expenses as a result of the transfer. The

Trustee is desirous of selling the Property, which is illiquid, in

order to facilitate the establishment of participant directed

individual accounts in the Plan. It is anticipated that once the

Property is sold the cash proceeds would be invested in marketable

securities.

In the opinion of the Trustee, the proposed transaction is

protective of the participants and beneficiaries of the Plan in that

the sales price would be based on the fair market value of the Property

as determined by an independent, qualified appraiser, as of the date of

the sale. Further, the Trustee will review the transaction and make the

final determination regarding the sale of the Property to Dr. Hunter.

In this regard, the Trustee represents that in its fiduciary capacity

with respect to the Plan, it will review the contemplated transaction

so as to insure that the interests of the participants of the Plan are

protected.

6. An appraisal of the Property was prepared by Jerry Link (Mr.

Link), of Appraisal Services, Inc., in Fargo, North Dakota. It is

represented that Mr. Link is qualified in that he is licensed by the

State of North Dakota as an appraiser. It is further represented that

he is independent in that he has no present or prospective interest in

the Property and has no personal interest or bias with respect to the

participants in the proposed transaction. Mr. Link represents that

neither his employment nor his compensation was conditioned upon the

appraised value of the Property, nor was he required to report a

predetermined value or base the appraisal on a requested minimum value

for the Property. After physically inspecting the Property, and

reconciling values for the Property established by the cost approach,

income approach, and sales comparison approach, Mr. Link determined

that the fair market [[Page 24902]] value of the Property was $79,000,

as of January 13, 1994.

Because the Property is located on the lot adjacent to the

Employer's business office, Mr. Link was asked to determine whether

there would be any premium value associated with the Property. In this

regard, Mr. Link indicated that the Property is a single family

dwelling located in an R-l, One/Two Family Dwelling District. It is

represented that this zoning category does not allow commercial

development without a special use permit. According to Mr. Link the

highest and best use of the Property is single family. Based on this

highest and best use, it is the opinion of Mr. Link that the Property's

location next to the Employer's business office does not result in a

premium associated with the value of the Property to Dr. Hunter.

7. In summary, the applicant represents that the proposed

transaction meets the statutory criteria for an exemption under section

408(a) of the Act because:

(a) the sale of the Property will be a one-time transaction for

cash; (b) as a result of the sale, the Plan will receive in cash the

greater of $79,000 or the fair market value of the Property, as

determined by an independent, qualified appraiser, as of the date of

the sale; (c) the Plan will pay no commissions, fees, or other expenses

as a result of the transaction; (d) the terms of the sale will be no

less favorable to the Plan than those it would have received in similar

circumstances when negotiated at arm's length with unrelated third

parties; (e) the Plan will be able to invest the proceeds from the sale

of the Property in marketable securities; (f) the Plan will be able to

dispose of the Property which is illiquid; and (g) the sale of the

Property will facilitate the establishment of participant directed

individual accounts in the Plan.

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

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

Bob Murphy, Inc. Profit Sharing Plan (the Plan)

Located in Boynton Beach, Florida

[Exemption Application No. D-09949]

Proposed Exemption

The Department is considering granting an exemption under the

authority of 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 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 (the Sale) of certain works of art (the Art Work) by

the Plan to Robert J. Murphy, Jr., a disqualified person with respect

to the Plan.\5\

\5\Since Robert J. Murphy, Jr. and his wife, Gail F. Murphy, are

the only participants in the Plan, there is no jurisdiction under

Title I of the Act pursuant to 29 CFR 2510.3-3(b). However, there is

jurisdiction under Title II of the Act pursuant to section 4975 of

the Code.

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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 between unrelated parties; (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 the Sale; and (4) the Plan

receives a sales price equal to the fair market value of the Art Work

on the date of the Sale as determined by an independent, qualified

appraiser.

Summary of Facts and Representations

1. The Plan is a profit sharing Plan whose only participants are

Mr. Murphy and his wife, Gail F. Murphy. As of June 30, 1994, the Plan

had total assets of $572,050. Mr. and Mrs. Murphy serve as the trustees

of the Plan (the Trustees) and have sole investment discretion with

respect to its assets.

2. The Plan has approximately 17 percent of its assets in the Art

Work, which consists of ten Leroy Nieman serigraphs. The Plan received

the Art Work as a rollover from the Bob Murphy, Inc. Defined Benefit

Pension Plan (the DB Plan), which the trustees terminated on November

15, 1987. The DB Plan purchased the Art Work between 1980 and 1987 from

two dealers--Hammers Gallery in New York and Hanson Gallery in New

Orleans. Mr. Murphy represents that he is independent of, and unrelated

to, both Hammers Gallery and Hanson Gallery.

3. Following its acquisition, the Art Work has been in the

possession of Mr. Murphy at his residence at Delray Beach, Florida and

his office at the Delray Dunes Country Club in Boynton Beach, Florida.

In an examination report dated January 6, 1993, the Internal Revenue

Service (the Service) determined that Mr. and Mrs. Murphy had engaged

in prohibited transactions by reason of their use of the Art Work for

the years 1989, 1990 and 1991. Mr. Murphy represents that on August 22,

1994 he filed Forms 5330 with the Service and paid the applicable

excise taxes associated with the past prohibited transaction in the

amount of $9,195.

4. Because the Art Work is not an income producing asset for the

Plan and certain pieces of the Art Work have declined in value, Mr.

Murphy proposes to purchase the Art Work from the Plan for a cash

amount equal to its fair market value on the date of the Sale.

Accordingly, Mr. Murphy requests an administrative exemption from the

Department to permit his purchase of the Art Work from the Plan under

the terms and conditions described herein.

5. Celeste B. Stover, the Assistant Director for Hanson Gallery in

New Orleans, Louisiana, valued the Art Work as of August 10, 1994. In

her capacity as Assistant Director, Ms. Stover has actively represented

the work of Leroy Nieman since 1983. Ms. Stover represents that while

Mr. Murphy has been a client of the Hanson Gallery since 1984, both she

and Hanson Gallery are unrelated to, and independent of, Mr. and Mrs.

Murphy. Ms. Stover states that she derives less than 1 percent of her

annual income from Mr. Murphy.

In determining the fair market value of the Art Work, Ms. Stover

represents that she looked to the recommended retail values of Leroy

Nieman serigraphs provided yearly to Hanson Gallery by Knoedler and

Co., the publishers of Leroy Nieman's prints. The recommended values

are based upon current demand for the specific image as well as

availability of the image and previous bids within the last year. Ms.

Stover's valuations of the Art Work are as follows:

------------------------------------------------------------------------

Fair

Work Market

Value

------------------------------------------------------------------------

Rush Street Bar................................................ $6,500

Elephant Nocturne.............................................. 10,000

New York Stock Exchange........................................ 15,000

P.J. Clarkes................................................... 15,000

Buena Vista Bar................................................ 8,000

Harry's Wall Street Bar........................................ 7,000

Bistro Gardens................................................. 6,800

Polo Lounge.................................................... 11,000

Bar at 21...................................................... 7,000

Fix McRory's Whiskey Bar....................................... 12,000

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6. In summary, it is represented that the proposed transactions

will satisfy the statutory criteria for an exemption under section

4975(c)(2) of the Code 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 between unrelated parties; (b) the Sale

will be a one-time cash transaction; (c) the Plan will not be required

to pay any commissions, costs [[Page 24903]] or other expenses in

connection with the Sale; (d) the Plan will receive a sales price equal

to the fair market value of the Art Work based on a determination by an

independent, qualified appraiser.

Notice to Interested Persons

Since Mr. and Mrs. Murphy are the only participants in the Plan, it

has been determined that there is no need to distribute the notice of

proposed exemption to interested persons. Comments are due within

thirty days after publication of this notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Kathryn Parr of the Department,

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

The Brown Group, Inc., 401(k) Savings Plan (the Plan),

Located in St. Louis, Missouri

[Application No. D-09951]

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 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 guarantee (the Guarantee) by The

Brown Group, Inc. (the Employer), the sponsor of the Plan, of amounts

due the Plan with respect to a guaranteed investment contract issued by

Confederation Life (Confederation Life), including the Employer's

potential cash advances to the Plan (the Advances) pursuant to the

Guarantee and the potential repayment of the Advances (the Repayments);

provided that the following conditions are satisfied:

(A) No interest and/or expenses are paid by the Plan;

(B) The Advances are made in lieu of amounts due the Plan under the

terms of the GIC;

(C) The Repayments are restricted to cash proceeds 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, or from the sale or transfer of the GIC to unrelated

third parties (the GIC Proceeds), and no other Plan assets are used to

make the Repayments; and

(D) The Repayments will be waived to the extent the Advances exceed

the GIC Proceeds.

Summary of Facts and Representations

1. The Plan is a defined contribution plan which includes a cash or

deferred arrangement under section 401(k) of the Code, and which

provides for employer matching contributions and additional employer

discretionary contributions. As of December 31, 1994 the Plan had

approximately 2,500 participants and total assets of approximately

$44,937,281. The trustee of the Plan is Boatmen's Trust Company (the

Trustee), located in St. Louis, Missouri. The Employer, a New York

publicly-traded corporation, is engaged in the manufacture, import and

retail sales of shoes, with its corporate headquarters in St. Louis,

Missouri.

2. The Plan provides for individual participant accounts (the

Accounts) and for participant-directed investment of each Account. Plan

participants direct investment of their Accounts among four investment

options (the Funds), and may reallocate their Account balances among

the Funds on a periodic basis. The Funds include a guaranteed interest

fund (the G.I. Fund), which invests in guaranteed investment contracts

issued by insurance companies.

3. Among the assets of the G.I. Fund is the GIC, a guaranteed

investment contracts issued to the Plan in 1992 by Confederation Life

Insurance Company (Confederation Life), a Canadian insurance company

doing business in the United States. The GIC is a single-deposit,

benefit-responsive contract, principal amount $1,000,000, earning

interest at a guaranteed annual rate of 7.15% (the Contract Rate). The

GIC's terms enable the G.I. Fund to make monthly withdrawals (the

Withdrawals) to effect, in accordance with the terms of the Plan,

benefit distributions, in-service withdrawals, participant Advances,

and participant-directed transfers of Account balances to other Funds

offered by the Plan (the Withdrawal Events). Interest at the Contract

Rate is credited daily, calculated on the balance remaining deposited

under the GIC. If interest earned under the GIC exceeds the amount

withdrawn, the difference is paid annually (the Interest Payments) on

December 31. All Interest Payments were made when due through December

31, 1993. The terms of the GIC also require Confederation Life to make

a final payment to the Plan on December 12, 1996 (the Maturity Payment)

in the amount of the GIC's total principal deposits plus interest

earnings at the Contract Rate less previous withdrawals (Accumulated

Book Value) as of such date. As of July 31, 1994, the GIC had an

Accumulated Book Value of $1,034,447.59.

4. Commencing August 1, 1994 (the Receivership Date), insurance

regulatory authorities in Canada and the state of Michigan instituted

proceedings to place Confederation Life in receivership (the

Receivership).\6\ Consequently, Confederation Life's assets and

operations are frozen, and payments on all its guaranteed investment

contracts, including the GIC held by the Plan, were suspended effective

as of the Receivership Date. Since the commencement of the

Receivership, the Plan has been unable to make withdrawals from the GIC

to fund Withdrawal Events with respect to Account balances invested in

the GIC, and the Employer represents that it is uncertain whether, or

to what extent, the Plan will receive any GIC payments or withdrawals

to enable funding of future Withdrawal Events. Additionally, the

Employer represents that it is uncertain whether and to what extent the

Maturity Payment under the GIC will be paid. The Employer desires to

alleviate the G.I. Fund of risks associated with investments in the

GIC, and to enable the G.I. Fund to fully fund the Withdrawal Events

with respect to Account balances invested in the G.I. Fund.

Accordingly, the Employer proposes to guarantee (the Guarantee) that

the Plan will recover all amounts due under the GIC, and in its

discretion to make advances to the Plan (the Advances) pursuant to the

Guarantee. The Employer requests an exemption for the Guarantee and the

Advances, as well as the potential repayment of the Advances (the

Repayments), 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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5. The Employer and the Trustee will execute a written agreement

embodying all the terms and conditions of the Guarantee, the Advances

and the Repayments (the Agreement).

The Guarantee: The Guarantee is the Employer's undertaking to

insure that in the eventual resolution of the Receivership, the Plan

recovers 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 the Contract Rate. Accordingly, the amount which the

Employer guarantees under the [[Page 24904]] Agreement (the Guaranteed

Amount) is the Receivership Date Accumulated Book Value of the GIC,

which is $1,034,447.59, less the sum of GIC Proceeds (cash proceeds

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, or from the sale or transfer of the GIC to

unrelated third parties) and Advances under the Agreement as described

below, plus interest on the net of the foregoing amount after the

Receivership date at the Contract Rate of 7.15 percent.

The Advances: On the monthly occasions when the Employer, as Plan

administrator, would otherwise request a withdrawal from the GIC to

fund Withdrawal Events with respect to Account balances invested in the

GIC, the Employer will instead notify the Trustee of the requested

withdrawal amount. The Trustee will then determine whether it can

satisfy the withdrawal request by using the assets in the G.I. Fund

other than the GIC. If the Trustee determines that the funds available

from the G.I. Fund are insufficient to honor the withdrawal request,

the Trustee will determine the amount of additional funds necessary to

honor the withdrawal request, and the Employer will make an Advance in

that amount to the Plan. Valuation of the Account balances invested in

the GIC for purposes of the Advances will be based on the Guaranteed

Amount as described above.

Final Advance: The Agreement provides for a final Advance after the

completion of the Receivership. After the Trustee has determined that

the Plan will not receive any further proceeds from Confederation Life

or its successors with respect to the GIC, the Employer shall make a

final Advance to the Plan in the amount necessary to enable the Plan's

recovery of the Guaranteed Amount. In the event the Receivership

extends beyond the year 2000, the Employer will make the final Advance

on the first business day in the year 2001 in the amount required on

such date to enable the Plan to recover the Guaranteed Amount.

The Repayments: The Agreement provides that the Repayments of the

Advances are restricted to the principal amounts of the Advances, and

the Plan will pay no interest and will incur no expenses with respect

to the Advances. The Repayments may be made only from the GIC Proceeds

received by the Plan. No other Plan assets will be available for the

Repayments. If the GIC Proceeds are not sufficient to repay fully the

Advances, the Agreement provides that the Employer will have no

recourse against the Plan, or against any participants or beneficiaries

of the Plan, for the unpaid amount. To the extent the Plan receives GIC

Proceeds in excess of the total amount of the Advances, such additional

amounts will be retained by the Plan and allocated among the Accounts

invested in the G.I. Fund.

6. In summary, the applicant represents that the proposed

transaction satisfies the criteria of section 408(a) of the Act for the

following reasons: (1) The Advances enable the Plan to resume the full

funding of the Withdrawal Events; (2) The Advances will protect the

Plan's investment in the GIC and will ensure that the Plan will recover

all amounts due under the terms of the GIC; (3) The Plan will pay no

interest or incur any expenses with respect to the Advances; (4)

Repayment of the Advances will be made only from GIC Proceeds and no

other Plan assets will be involved in the transactions; (5) Repayment

of the Advances will be waived to the extent the Plan recoups less from

the GIC Payors than the total amount of the Advances; and (6) In the

event the Plan receives GIC Proceeds in excess of the Guaranteed

Amount, such amounts will be retained by the Plan and allocated among

the Accounts.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department (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.

Ivan Strasfel,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 95-11536 Filed 5-9-95; 8:45 am]

BILLING CODE 4510-29-P