Grant of Individual Exemptions; NCNB Real Estate Fund, et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 95-39; Exemption Application No. D-

09358, et al.]

Grant of Individual Exemptions; NCNB Real Estate Fund, 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.

NCNB Real Estate Fund (the Fund), NationsBank Pension Plan, NationsBank

Retirement Savings Plan Located in Charlotte, North Carolina; Exemption

[Prohibited Transaction Exemption 95-39; Exemption Application Nos. D-

09358, D-09359 and D-09360, respectively]

Based on the facts and representations set forth in the

application, the Department and the Service have determined to grant

the following 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,

August 10, 1990) and Revenue Procedure 75-26, 1975-1 C.B. 722.

Section I: Covered Transactions

1. 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 (the Sale) of units in the Fund (Units) by

plans participating in the Fund (the Plans) pursuant to an Option

election made available by NationsBank, N.A. (Carolinas) (the Bank), to

a standby trust (the Standby Trust) established and maintained by

NationsBank, Corporation (the Holding Company), a party in interest

with respect to the Plans. This exemption is subject to the conditions

set forth in Section II.

2. The restrictions of sections 406(a)(1)(D), 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) (D) and (E) of the

Code shall not apply to any decision by the Bank to sell a property

held by the Fund to a third party, and jointly owned by the Plans and

the Holding Company, provided that: each Plan receives no less than

fair market value for its interest in the property; and

[[Page 28627]] the Independent Fiduciary approves the reasonableness

and propriety of the sale of the property.

Section II: Conditions

(a) The properties held by the Fund (the Properties) shall be

appraised by an independent and qualified appraiser within twelve

months and updated within fifteen days before the Settlement Valuation

Date.

(b) The Plans selling Units pursuant to the Options will receive a

price equal to the value of each Unit sold based on the value of the

Fund as of the Settlement Valuation Date (the Unit Purchase Price) plus

the Interest Amount which will be calculated by the Bank and reviewed

and approved by the Independent Fiduciary who has been retained to

represent the interests of the Plans with respect to the Sale and the

subsequent activities of the Fund related to the Fund's liquidation.

(c) Plans selling Units pursuant to Options 1 or 2 will receive the

Unit Purchase Price plus the Interest Amount for each Unit sold on the

settlement date (Settlement Date) which will be no more than 120 days

after the Settlement Valuation Date.

(d) If Options 2 or 4 are elected, the Plans involved will receive

the final payment, if any, within sixty days after the two year

anniversary of the Settlement Valuation date for Option 2, or the date

of complete liquidation of the Fund for Option 4.

(e) Prior to the Settlement Valuation Date, the Bank will provide

each Plan with written information regarding the terms of the Sale.

Such information includes, but is not limited to:

(i) notice that each Plan will be entitled to elect one or more

Options which will permit the Plan to sell all or part of its Units to

the Stand-by Trust, or to continue to hold all or part of its Units in

the Fund until the Fund's liquidation is complete, provided that if

multiple Options are elected they must be uniform with respect to the

grant, or failure to grant, a Release to the Bank,

(ii) a description of each Option,

(iii) the date by which a Plan must elect an Option (Option

Election Date), and

(iv) forms for electing the Options.

(f) Except for Plans with respect to which the Bank or any of its

Affiliates is an employer, the decision whether to authorize the

Independent Fiduciary to make an Option election on behalf of the Plan

will be made by a fiduciary independent of the Bank and its Affiliates

and the Independent Fiduciary.

(g) The Bank and any Affiliate which is an employer with respect to

a Plan will authorize the Independent Fiduciary to choose among all of

the Options.

(h) A Plan's Option election will be made by a Plan fiduciary who

is independent of the Bank and its Affiliates or by the Independent

Fiduciary.

(i) The Independent Fiduciary's duties and responsibilities are set

forth in the Independent Fiduciary Agreement between the Independent

Fiduciary and the Bank dated April 1, 1994 and amended by the First

Amendment thereto dated September 1, 1994. These duties and

responsibilities include such activities as:

(1) Reviewing and determining whether to rely on the appraisals of

the Properties;

(2) Ordering a new appraisal to the extent it deems necessary in

cases in which it has determined that an existing appraisal cannot be

relied upon;

(3) Reviewing and approving all of the relevant disclosures,

written explanations, and forms furnished to the Plans by the Bank;

(4) Furnishing certain information to an independent Plan

fiduciary, in advance of any date by which the independent Plan

fiduciary is required to respond in order to authorize the Independent

Fiduciary to make a decision on behalf of the Plan. Such information

includes, but is not limited to:

(i) the Unit Purchase Price;

(ii) a description and explanation of the Options;

(iii) dates by which the Plans must act in order to make Option

elections and authorize the Independent Fiduciary to make Option

elections on behalf of the Plan;

(iv) information summarizing: the effect of failing to authorize

the Independent Fiduciary to make Option elections on behalf of the

Plan, the effect of failing to make an Option election after informing

the Independent Fiduciary that the independent Plan fiduciary would

make the decision to select an Option election, and the availability

and effect of the different Option election authorizations which the

Plan may provide to the Independent Fiduciary, in language calculated

to be reasonably understood by the average independent Plan fiduciary

responsible for making decisions on behalf of a Plan with regard to

Units of the Fund held by the Plan;

(5) making Option elections on behalf of any Plan if: (a) the Bank

or any of its Affiliates is an employer with respect to the Plan; (b)

the independent Plan fiduciary authorizes the Independent Fiduciary to

make Option elections on behalf of that Plan; or (c) the independent

Plan fiduciary fails to make an option election prior to the Option

Election Date;

(6) providing certain assistance regarding the four Options, to

those independent Plan fiduciaries who wish to make their own Option

elections;

(7) reviewing and determining whether to approve the Unit Purchase

Price as of the Settlement Valuation Date, and the value of a Unit in

the Fund as of two years from the Sale of the Units by the Plans to the

Standby Trust (for purposes of determining the amount which is due to

those Plans electing Option 2);

(8) reviewing and determining whether to approve the Interest

Amount payable to any Plan which elected either Option 1 or 2;

(9) exercising its veto authority with regard to the proposed Unit

Purchase Price, Interest Amount, or value of Fund Units pursuant to

Option 2, which it has determined not to approve;

(10) monitoring, by attending the Bank's Trust Real Estate

Investment Committee's quarterly meetings, the Bank's efforts to

dispose of the Properties during the liquidation of the Fund;

(11) approving the reasonableness and propriety of sales of the

Properties during the period in which the Standby Trust owns units in

the Fund.

(j) The Independent Fiduciary may be removed by a majority vote of

the Plans ``for cause.''

(i) The term ``for cause'' shall mean that there must be sufficient

and reasonable grounds for removal and the grounds must be related to

the ability and fitness of the Independent Fiduciary to perform his

required duties.

(ii) Each Plan's vote for or against removal will be proportionate

to its ownership interest in the Fund exclusive of Units owned by the

Standby Trust.

(k) The Bank and the Holding Company will be bound by the decisions

and determinations made by the Independent Fiduciary.

(l) The Bank will continue its efforts, with due diligence to

liquidate the Fund.

(m) Any distributions made by the Fund will be made pro rata, in

cash.

(n) Any payment made pursuant to any of the Options will be made in

cash.

(o) The Independent Fiduciary is responsible for taking reasonable

steps consistent with its duties and responsibilities hereunder to

monitor compliance with the terms and conditions of the exemption at

all times. [[Page 28628]]

Section III: Definitions

For purposes of this exemption:

(a) Affiliate of the Bank includes:

(1) Any person directly or indirectly through one or more

intermediaries controlling, controlled by, or under common control with

the Bank;

(2) Any officer, director or employee of the Bank, or of a person

described in paragraph (a)(1) of Section II; and

(3) Any partnership in which the Bank is a partner;

(b) Control means the power to exercise a controlling influence

over the management or policies of a person other than an individual.

(c) Affiliate of the Independent Fiduciary includes:

(1) Any person directly or indirectly through one or more

intermediaries controlling, controlled by, or under common control with

the Independent Fiduciary;

(2) Any officer or director of the Independent Fiduciary (where the

Independent Fiduciary is other than a partnership);

(3) Any partner in the Independent Fiduciary with the authority to

make, or who actually makes, fiduciary decisions which are within the

scope of the Independent Fiduciary's duties and responsibilities under

this exemption, or who holds a five percent (5%) or greater interest in

the Independent Fiduciary;

(d) Independent Fiduciary means a person who:

(1) Is not an Affiliate of the Bank as defined in Section III(a);

(2) does not have an ownership interest in the Bank or its

Affiliates;

(3) is not a corporation or partnership in which the Bank or any of

its Affiliates has an ownership interest;

(4) is not a fiduciary with respect to any of the Plans other than

in connection with the transactions described in this exemption;

(5) has acknowledged in writing acceptance of fiduciary

responsibility;

(6) is either:

(i) A business organization which has at least (5) years of

experience with respect to commercial real estate investments or other

relevant experience;

(ii) a committee comprised of three to five individuals who each

have at least five (5) years of experience with respect to commercial

real estate investments or other relevant experience; or

(iii) a committee comprised both of a business organization or

organizations and individuals having the qualifications described in

paragraphs (d)(1) through (6)(ii) above.

(7) An individual acting in a fiduciary capacity with respect to

the Fund on behalf of, and at the direction of, an Independent

Fiduciary meeting the conditions of paragraphs (d)(1) through (6)(iii)

above shall be considered an Independent Fiduciary.

For purposes of this definition, no organization or individual may

serve as an Independent Fiduciary for the Fund for any fiscal year, if

the gross income received by such organization or individual (or by any

partnership or corporation of which such organization or individual is

an officer, director, or ten percent (10%) or more partner or

shareholder) from the Bank, or any Affiliate, for that fiscal year

exceeds five percent (5%) of its or his annual gross income from all

sources for the prior fiscal year. If such organization or individual

has no income for the prior fiscal year, the 5% limitation shall be

applied with reference to the fiscal year in which such organization or

individual serves as an independent fiduciary. The income limitation

will include income received for services rendered to the Plans and the

Fund as Independent Fiduciary, as described in this exemption.

In addition, no organization or individual who is an Independent

Fiduciary or an Affiliate of such Independent Fiduciary, and no

partnership or corporation of which such Independent Fiduciary is an

officer, director, or ten percent (10%) or more partner or shareholder

with the authority to cause such corporation or partnership to engage

in the following transactions, or who exercises such authority in

conjunction with others, may:

(1) Acquire any property from, sell any property to, or borrow any

funds from, the Bank, its Affiliates, or any collective investment

vehicle or separate trust maintained or advised by the Bank or its

Affiliates, during the period that such organization or individual

serves as an Independent fiduciary and continuing for a period of six

(6) months after such organization or individual ceases to be an

Independent Fiduciary; or

(2) Negotiate any such transaction, described above in paragraph

(1) above during the period that such organization or individual serves

as Independent Fiduciary.

No Plan fiduciary or sponsor of a Plan or a designee of such Plan

fiduciary, sponsor or Plan may serve as the Independent Fiduciary with

respect to the Fund.

(e) Option(s) means the following:

Option 1: A Plan will accelerate the liquidation of its investment

in the Fund by selling each of its Units subject to this Option to the

Standby Trust for an amount equal to the Unit Purchase Price plus the

Interest Amount. A Plan electing this Option will reserve all rights it

may have with respect to the Fund, the Bank and other appropriate

persons. However, with respect to a participant directed account Plan,

the Plan sponsor and an authorized independent Plan fiduciary will

provide a Release to the Fund, the Bank and other appropriate persons

without any affect on the rights of the participants or beneficiaries

regarding the matters covered by the Release.

Option 2: A Plan will accelerate the liquidation of its investment

in the Fund by selling each of its Units subject to this Option to the

Standby Trust for an amount equal to the Unit Purchase Price plus the

Interest Amount. In addition, the Bank will pay promptly following the

second anniversary of the Settlement Valuation Date, an amount equal to

the excess, if any, of (A) the sum of (1) the value that the Unit would

have had at the Valuation Date two years after the Settlement Valuation

Date if such Unit had not been sold, plus (2) the amount of any

distributions made with respect to such Unit during such two year

period, over (B) the Unit Purchase Price plus the Interest Amount. The

Bank will pay Litigation Expenses to the Plan, if any. Under this

Option, a Plan will release the Fund, the Bank and other appropriate

persons with respect to all matters relating to the investment in the

Fund occurring prior to the Sale.

Option 3: A Plan will continue its investment in the Fund through

the end of the liquidation process. Under this Option, a Plan reserves

all rights with respect to the Fund, the Bank and all other appropriate

persons. However, with respect to a participant directed account Plan,

the Plan sponsor and an authorized independent Plan fiduciary will

provide a Release to the Fund, the Bank and other appropriate persons

without any affect on the rights of the participants or beneficiaries

regarding the matters covered by the Release.

Option 4: A Plan will continue its investment in the Fund through

the end of the liquidation process. For a Plan electing this Option,

the Bank will agree to pay promptly following the completion of the

liquidation of the Fund, with respect to each Unit subject to this

Option, an amount equal to the excess, if any, of the (i) the value of

a Unit on September 28, 1990 over (ii) the value of all distributions

made to the Plan with respect to such Unit since September 29, 1990 and

during the liquidation of the Fund. The Bank will also pay Litigation

Expenses to the Plan, if any. Plans electing this Option will

[[Page 28629]] release the Fund, the Bank and other appropriate persons

with respect to all matters related to the investment in the Fund

occurring prior to the Sale.

(f) Unit Purchase Price means the amount which is calculated by

dividing the value of all of the assets of the Fund, as reviewed and

approved by the Independent Fiduciary, by the total number of units in

the Fund.

(g) Interest Amount means the amount approved by the Independent

Fiduciary, equal to the net income earned on a Fund unit during the

period commencing on the Settlement Valuation Date and ending on the

day immediately preceding the Settlement Date, exclusive of realized or

unrealized appreciation or depreciation.

(h) Settlement Valuation Date means the date on which the value of

the Fund will be determined by the Bank in order to establish the Unit

Purchase Price in connection with the Sale. The Settlement Valuation

Date will be the last business day of the calendar month following the

calendar month in which final prospective approval will be granted by

the Office of the Comptroller of the Currency subsequent to the final

grant of this exemption and approval of the transaction which is the

subject of this exemption by the Federal Reserve Board.

(i) Litigation Expenses means the out-of-pocket expenses of

litigation instituted before November 24, 1992 by or on behalf of a

Plan against the Bank or the Fund with respect to the Plan's investment

in the Fund exclusive of any expense of litigation with respect to a

case which has proceeded to trial, or with respect to which there is a

judgment against the Bank or the Fund, prior to the Option Election

Date, plus interest. The total amount of Litigation Expenses, the rate

of interest and the period for which interest is paid must be agreed to

in writing between the Bank and the Plan prior to the Plan's election

of Options 2 or 4. However, in the event there has never been a written

settlement agreement specifying the amount of Litigation Expenses,

prior to the date on which the Plan elects Option 2 or 4, Litigation

Expenses will be the amounts requested by the Plan, unless such

expenses are unreasonable.

(j) Option Election Date means the date as communicated to the

Plans, at least Ninety (90) days subsequent to the Settlement Valuation

Date and at least sixty (60) days subsequent to the completion of the

mailing of the general post Settlement Valuation Date disclosure to all

of the Plans by the Independent Fiduciary, on or prior to which a Plan

must submit its Option election forms to the Bank.

(k) Settlement Date means the date, no more than 120 days after the

Settlement Valuation Date, on which the transfer of the Units to the

Standby Trust and delivery of Releases to the Bank will be effected

pursuant to the Options.

(l) Release means a release covering activities and transactions in

connection with the Fund prior to, and during, the Fund's liquidation,

but in no case shall be effective on or after the Settlement Date. In

this regard, the Release does not cover activities and transactions

necessary to comply with the exemption, the conditions of the

exemption, and the material representations made in connection

therewith, which form the basis for the Department's decision to grant

the exemption for the Sale and subsequent dispositions of properties

owned by the Fund.

Written Comments

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

invited all interested persons to submit written comments and requests

for a hearing on the proposed exemption within 30 days of the date of

publication of the Notice in the Federal Register on March 20, 1995.

During the comment period, the Department received no requests for

a hearing. However, the Department received four comment letters; one

from a person who appears to represent an employee benefit plan

invested in the Fund, one from the Bank, and two from Arthur Anderson,

the Independent Fiduciary.

The comment on behalf of Drs. Auman, Anderson & Munt, who appear to

represent an employee benefit plan invested in the Fund, favored the

liquidation of the plan's interest in the Fund.

The comment from the Bank dated March 30, 1995, states that the

name of the applicant has been changed from ``Nations Bank of North

Carolina, N.A.'' to NationsBank, N.A. (Carolinas). The Department

concurs.

The comment letter from Arthur Andersen dated, May 1, 1995, as well

as a second letter clarifying certain comments in the first letter,

requested certain modifications and clarifications of the conditions of

the exemption and certain revisions of the language of the Summary of

Facts and Representations in the Notice (SFR). Arthur Andersen's

comments are as follows:

First, Arthur Andersen requests modification of the condition

contained in Section II(i) on page 14781 of the Notice. A list of

activities follows the language, ``[t]he Independent Fiduciary's duties

and responsibilities include, but are not limited to,'' which appears

at the beginning of paragraph (i). Arthur Andersen suggests replacing

the quoted language with the following language: ``[t]he Independent

Fiduciary's duties and responsibilities are set forth in the

Independent Fiduciary Agreement between the Independent Fiduciary and

the Bank dated April 1, 1994, and amended by the First Amendment

thereto dated September 1, 1994. These duties and responsibilities

include such activities as.'' Arthur Andersen states that this change

would clarify that Section II(i) is meant to describe the terms of the

Agreement which the parties should look to in order to determine the

specific scope of Arthur Andersen's responsibilities. The Department

concurs.

Second, the condition contained in Section II(i)(1) on page 14781

of the Notice states that the Independent Fiduciary's duties include

``reviewing and determining whether to approve appraisals of the

Properties.'' Arthur Andersen suggests replacing the word, ``approve,''

with the words, ``rely on.'' Arthur Andersen explains that its role is

limited to reviewing the appraisals to determine whether they can

reasonably be relied upon as the basis for establishing the Unit

Purchase Price. The Department concurs.

Further, the third sentence of item 9 of the SFR on page 14785 of

the Notice states that ``[t]he Independent Fiduciary will review and

approve the qualifications of the appraisers and their technical

analyses and methodologies employed.'' Arthur Andersen states that it

will not approve the professional qualifications of the appraisers, but

rather will evaluate and consider their qualifications in the course of

its review of the appraisals. The Department concurs.

Moreover, the fourth sentence of item 9 of the SFR on page 14785

states that ``[a]s part of this approval process, the Independent

Fiduciary will determine whether such appraisals are reasonable and

adequate to establish the fair market value of the Properties.'' Arthur

Andersen states that it would be more accurate to say that the

Independent Fiduciary will determine to what extent such appraisals

provide a reasonable basis for such purpose. Arthur Andersen explains

that it's role will be limited to reviewing the appraisals to determine

whether they can reasonably be relied upon as a basis for establishing

the Unit Purchase Price, rather than approval of the underlying

appraisals. The Department concurs.

In addition, the fourth sentence of the second paragraph of item 9

of the SFR [[Page 28630]] on page 14785 states that ``[f]urther, if the

Independent Fiduciary believes that the Unit Purchase Price proposed by

the Bank is not accurate, the Independent Fiduciary has the authority

to order the Bank to recalculate the Unit Purchase Price.'' Arthur

Andersen suggests that the quoted language above should be replaced

with the following language: ``[f]urther, if the Independent Fiduciary

cannot approve the Unit Purchase Price proposed by the Bank, the

Independent Fiduciary has the authority to order the Bank to

recalculate the Unit Purchase Price.'' Arthur Andersen explains that

the word, ``accurate,'' is not the appropriate term to use, because the

property values will be based on a range of reasonableness. The

Department concurs.

Third, the condition contained in Section II(i)(2) on page 14781 of

the Notice states that the Independent Fiduciary is responsible for

``[o]rdering a new appraisal in cases in which it has determined not to

approve an existing appraisal.'' Arthur Andersen suggests that the

quoted language above be replaced with the following language:

``[o]rdering a new appraisal to the extent it deems necessary in cases

in which it has determined that an existing appraisal cannot be relied

upon.'' Arthur Andersen explains that this revision would make this

condition consistent with the above described revision it proposes for

the first sentence in Section II(i) of the conditions. The Department

concurs.

Fourth, the condition contained in Section II(i)(3) on page 14781

of the Notice states that the Independent Fiduciary is responsible for

``[r]eviewing and approving all of the disclosures, written

explanations, and forms furnished to the Plans by the Bank.'' Arthur

Andersen states that the word, ``relevant,'' should be inserted before

the word, ``disclosures.'' In this regard, Arthur Andersen explains

that it will review and approve materials only insofar as they are

relevant to Arthur Andersen's duties and responsibilities in connection

with the Option election process. Other communications by the Bank to

the Plans would be outside the scope of Arthur Andersen's role under

the exemption. Arthur Andersen believes this is particularly

appropriate since the Bank may engage in a number of communications to

the Plans during the liquidation period which are unrelated to the

exemption or the Independent Fiduciary's role. The Department concurs.

Fifth, the condition contained in Section II(i)(4) on page 14781 of

the Notice states that the Independent Fiduciary is responsible for

``[f]urnishing information to an independent Plan fiduciary, in advance

of any date by which the independent Plan fiduciary is required to

respond in order to authorize the Independent Fiduciary to make a

decision on behalf of the Plan.'' Arthur Andersen suggests inserting

the word, ``certain,'' between the word, ``furnishing,'' and the word,

``information.'' Arthur Andersen explains that the change would clarify

that it is responsible for providing certain types of information

relevant to its role as Independent Fiduciary. The Department concurs.

Sixth, the condition contained in paragraph (i)(4) (renumbered in

the final exemption as (i)(5)) on page 14782 of the Notice states that

the Independent Fiduciary is responsible for--

Making Option elections on behalf of any Plan if: (a) the Bank

or any of its Affiliates is an employer with respect to the Plan;

(b) the independent Plan fiduciary authorizes the Independent

Fiduciary to make an Option elections on behalf of that Plan; or (c)

the independent Plan fiduciary does not reserve the right to make an

Option election and fails to make an Option election prior to the

Option Election Date.

Arthur Andersen suggests that the language in item (c) quoted

above, should be replaced with the following language: ``the

independent Plan fiduciary fails to make Option election prior to the

Option Election Date.'' Arthur Andersen states that Independent Plan

fiduciaries that reserve the right to make an Option election but fail

to do so within the prescribed time frames are not described in the

current language quoted above.

Because Arthur Andersen will make Option elections for such Plans,

the language in item (c) should include this omitted category, which

can be accomplished by eliminating the distinction between Plan

fiduciaries that do or do not reserve the right to make option

elections. The Department concurs.

Further, the second paragraph of item 12 of the SFR on page 14786

states that--

[I]f the Plan reserves the right to make it's own Option

election and subsequently fails to make an Option election by the

Option Election Date, the Plan will be deemed to have elected Option

3. If the Plan does not reserve the right to make its own Option

election and the Plan fails to make: a sufficiently broad

authorization; any authorization at all; or fails to complete the

profile survey, Arthur Andersen will elect only between Options 1

and 3 for the Plan. However, Arthur Andersen will choose among all

four Options if the independent Plan fiduciary completes and returns

timely all required parts of the profile/survey and the related

authorization form expressly authorizing Arthur Andersen to choose

among all four Options. The Bank represents that it will authorize

Arthur Andersen to choose among all four Options for Plans with

respect to which the Bank or any of its Affiliates is an employer.

Arthur Andersen states that the above quoted language should be

clarified to indicate that ``where the Plan fails to make its own

Option election by the Option Election Date, Andersen will make an

election for the Plan between Options 1 and 3, unless otherwise

expressly authorized in writing by an independent Plan fiduciary to

elect from among all four options. The Option election will not

automatically default in certain cases to Option 3.'' Arthur Andersen

explains that in each case, an Option election will be made either by a

Plan's independent fiduciary, a plan participant or beneficiary in a

participant-directed plan (where applicable), or by Arthur Anderson as

Independent Fiduciary, as described in the Notice, and in no case will

an Option election automatically default to any particular Option. The

Department concurs.

Seventh, the condition contained in Section II(i)(5) (renumbered in

the final exemption as (i)(6)) on page 14782 of the Notice states that

the Independent Fiduciary is responsible for ``providing guidance

regarding the four Options, to those independent Plan fiduciaries who

wish to make their own Option elections.'' Arthur Andersen states that

the words, ``certain assistance,'' should replace the word,

``guidance.'' Arthur Andersen explains that where independent Plan

fiduciaries have decided to make their own Option elections, they will

not be depending on Arthur Andersen in making their decisions.

Consequently, the word, ``guidance,'' would overstate the interaction

between Arthur Andersen and such fiduciaries regarding Option

elections, whereas ``certain assistance'' more accurately describes

this interaction. The Department concurs.

Further, the first sentence of the fourth paragraph of item 12 of

the SFR on page 14786 states that ``[w]ith respect to those independent

Plan fiduciaries who notify Arthur Andersen that they will be making

their own Option elections, Arthur Andersen is prepared to counsel any

Plan fiduciary regarding the election process.'' Arthur Andersen

suggests substituting the word, ``assist,'' for the word, ``counsel.''

Arthur Andersen wishes to clarify that with respect to those

independent Plan fiduciaries who notify Arthur Andersen that they will

be making their own Option elections, Arthur Andersen is prepared to

assist any Plan fiduciary [[Page 28631]] regarding the election

process. Arthur Andersen explains that in this context, the word,

``assist,'' is more accurate. The Department concurs.

Eighth, the condition contained in Section II(i)(9) (renumbered in

the final exemption as (i)(10)) on page 14782 of the Notice states that

the Independent Fiduciary is responsible for ``monitoring the Bank's

efforts to dispose of the Properties during the liquidation of the

Fund.'' Arthur Andersen suggests modifying this phrase to read:

``monitoring, by attending the Bank's Trust Real Estate Investment

Committee's quarterly meetings, the Bank's efforts to dispose of the

Properties during the liquidation of the Fund.'' Arthur Andersen states

that the additional language more accurately reflects its duties under

the Agreement, as amended. The Department concurs.

In addition, the condition contained in Section II(o) on page 14782

of Notice states that ``[t]he Independent Fiduciary is responsible for

monitoring compliance with the terms and conditions of the exemption at

all times.'' Arthur Andersen suggests deleting the word,

``monitoring,'' and inserting after the words, ``responsible for,'' the

following language: ``taking reasonable steps consistent with its

duties and responsibilities hereunder to monitor.'' In this regard,

Arthur Andersen explains that it would not have an affirmative

obligation to engage in additional activities to determine compliance

beyond participation in the quarterly meetings of NationsBank's Trust

Real Estate Investment Committee. Arthur Andersen believes that it must

act reasonably within the scope of its defined role, and to the extent

it determines there is non-compliance, it must take appropriate action.

Arthur Andersen represents that notwithstanding its comments

regarding its responsibilities under the conditions contained in

Sections II(i)(9) and (o) of the Notice, Arthur Andersen will be

responsible for obtaining the information necessary to execute its

duties as follows: (a) To approve, in advance of any sales of the

Properties during the period in which the Standby Trust owns Units in

the Fund, the reasonableness and propriety of such sales; and (b) to

approve, in advance of the payments to Plans under Option 2 following

the second anniversary of the Settlement Valuation Date, the

reasonableness and propriety of the value of the Fund Units pursuant to

Option 2, using procedures parallel to those used in reviewing and

approving the reasonableness of the Unit Purchase Price. The Department

concurs.

Ninth, the definition in Section II(c)(2) (renumbered in the final

exemption as Section III(c)(2)) on page 14782 of the Notice states that

``[a]ny officer or director of the Independent Fiduciary'' is defined

as an Affiliate of the Independent Fiduciary. Arthur Andersen requests

that the parenthetical ``(where the Independent Fiduciary is other than

a partnership)'' be appended to the end of the language quoted above.

Arthur Andersen explains that the change would clarify that Section

III(c)(2) is not intended to apply to a partnership. The Department

concurs.

Tenth, the definition in Section II(c)(3) (renumbered in the final

exemption as Section III(c)(3)) on page 14782 of the Notice defines

Affiliate of the Independent Fiduciary to include ``[a]ny partner in

the Independent Fiduciary, or any other related individual, with the

authority to make, or who actually makes, fiduciary decisions which are

within the scope of the Independent Fiduciary's duties and

responsibilities under this exemption, or who holds a five percent (5%)

or greater interest in the Independent Fiduciary.'' Arthur Andersen

suggests that the italicized phrase above be deleted. Arthur Andersen

explains that section (d)(7) of the definitions, already reaches

persons who are not partners in the Independent Fiduciary but

nevertheless act in a fiduciary capacity. The Department concurs.

After giving full consideration to the record, including the

comments by commentators, the Department has determined to grant the

exemption as described herein. In this regard, the comments submitted

to the Department have 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 and

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 published

refer to the notice of proposed exemption published Monday March 20,

1995, at 60 FR 14781.

FOR FURTHER INFORMATION CONTACT: Eric Berger of the Department,

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

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest or disqualified

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(B) of the Act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are supplemental to and not in derogation of,

any other provisions of the Act and/or the Code, including statutory or

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

exemption is not dispositive of whether the transaction is in fact a

prohibited transaction; and

(3) The availability of these exemptions is subject to the express

condition that the material facts and representations contained in each

application accurately describes all material terms of the transaction

which is the subject of the exemption.

Signed at Washington, DC, this 25th day of May 1995.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 95-13300 Filed 5-31-95; 8:45 am]

BILLING CODE 4510-29-P