Grant of Individual Exemptions; John B. Toomey Rollover IRA (the IRA), et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 95-76; Exemption Application No. D-

09819, et al.]

Grant of Individual Exemptions; John B. Toomey Rollover IRA (the

IRA), 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.

John B. Toomey Rollover IRA (the IRA), Located in Lorton, Virginia

[Prohibited Transaction Exemption 95-76 Exemption Application No. D-

09819]

Exemption

The sanctions resulting from the application of section 4975 of the

Code, by reason of section 4975(c)(1) (A) through (E) of the Code shall

not apply to the installment sale of 36.2 shares of common stock (the

Stock) in JBT Holding Corporation (JBT) by the IRA 1 to JBT, a

disqualified person with respect to the IRA; provided that: (a) The

purchase price JBT pays for the Stock is the greater of $410,146 or the

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

market value of the Stock is determined by a qualified independent

appraiser, as of the date of the sale; (c) the terms of the transaction

are no less favorable to the IRA than those negotiated at arm's length

with unrelated third parties in similar circumstances; (d) the trustee

of the IRA

[[Page 46309]]

monitors compliance with the terms of the transaction throughout the

duration of the installment sale; (e) the IRA receives a cash

downpayment of no less than $210,146 on the date of the sale and

thereafter receives three (3) equal annual installment payments of

$66,667, the first of which is due and payable December 31, 1995, plus

interest at the fair market rate of interest, as determined by an

independent, qualified third party, as of the date of the transaction,

on the outstanding balance of the installment payments, payable

annually until all the installment payments have been made by JBT on or

before December 31, 1997; (f) the outstanding balance of the

installment payments at no time exceeds 25 percent (25%) of the value

of the assets of the IRA; (g) the outstanding balance on the

installment payments is secured by a recorded first mortgage interest

in real property pledged by JBT in favor of the IRA; (h) the collateral

which secures the installment payments has a value, as determined by an

independent, qualified appraiser, which at all times is no less than

150 percent (150%) of the outstanding balance of the installment

payments; and (i) the IRA pays no commissions, fees, or other expenses

in connection with the transaction.

1 Pursuant to 29 CFR 2510.3-2(d), the IRA is not within

the jurisdiction of Title I of the Act. However, there is

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

the Code.

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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 July 21, 1995, at 58 FR

37682.

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

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

Phillips Petroleum Company (Phillips) Located in Bartlesville, OK

[Prohibited Transaction Exemption 95-77; Exemption Application No. D-

09907]

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 (1) the making of interest-free loans to the Thrift

Plan of Phillips Petroleum Company (the Plan) by Phillips, the Plan

sponsor pursuant to the terms of a credit facility arrangement; and (2)

the repayment of such loans by the Plan to Phillips.

This exemption is conditioned on the following requirements:

(a) Each loan executed under the proposed credit facility

arrangement provides short-term funds to the Plan in connection with

inter-fund transfers, withdrawals and participant loans and permits the

orderly disposal of Phillips common stock.

(b) Each loan made under the proposed credit facility arrangement

is unsecured and no interest, commissions or expenses are paid by the

Plan.

(c) In the event of a loan default or delinquency, Phillips has no

recourse against the Plan.

(d) Each loan is initiated, accounted for and administered by an

independent fiduciary who monitors the terms and conditions of the

exemption.

Written Comments

The Department received six written comments with respect to the

notice of proposed exemption and no requests for a public hearing. Of

the written comments received, five commenters recommended that the

Department grant the proposed exemption. The sixth commenter questioned

whether the proposed credit facility arrangement would be in the best

interest of the Plan since it would allow no recourse against Plan

assets. The commenter also raised several questions about the Plan's

participant loan program.

In response to the sixth commenter, Bankers Trust Company (BTC),

the Plan trustee and independent fiduciary with respect to the proposed

transactions, notes that the purpose of the credit facility arrangement

is to facilitate participant directions regarding their account

balances on a more timely basis. According to BTC, receiving the loans

on an interest-free basis from Phillips meets this purpose and it

allows the Plan to avoid the expense of its current credit facility

arrangement with NationsBank of Dallas, Texas. BTC further represents

that by requiring that the loans be on a non-recourse basis provides an

additional safeguard to the Plan and ensures that participant account

balances will not be impacted adversely.

With respect to the Plan's participant loan program, the commenter

has inquired about the (a) number of participants in the Plan having

outstanding participant loans, (b) the frequency of loan repayments,

(c) the percentage of such loans that are in arrears or default, and

(d) what safeguards can and should be implemented to prevent

depreciation in the value of Phillips common stock.

Phillips has responded to each of the commenter's concerns on these

matters. In this regard, Phillips represents that as of July 17, 1995,

approximately 2,000 participants had outstanding participant loans with

the Plan. Phillips notes that for these loans, repayment schedules

range from three months to 180 months in duration depending upon the

election of the participant. Phillips further explains that virtually

none of the loans are in arrears or default since the Plan requires

that loan repayments be made by payroll deduction or repaid in full.

However, should a participant loan be in default, Phillips states that

there will be no impact on Plan participants since the participant's

account will serve as security for the loan and the event of default

will become a taxable distribution to the participant. Finally,

Phillips notes that neither the Plan nor BTC can control the value of

Phillips common stock that is held by the Plan and that the intent of

the exemption is to allow participants the flexibility of moving into

or out of stock funds with the value of the stock established as of the

transaction valuation date.

Technical Correction

The Department notes that the correct application number for the

subject request is ``D-09907'' and not ``D-09909'' as it appeared in

the proposed exemption. Therefore, the Department has incorporated this

revision into the grant notice.

After giving full consideration to the entire record, including the

written comment that was submitted and the responses made by BTC and

Phillips, the Department has decided to grant the exemption as

described and revised above. The comment letter and responses 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-5638, 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 of proposed exemption published on June 7, 1995 at 60 FR

30106.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,

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

KeyCorp 401(k) Savings Plan (the Plan), Located in Cleveland, Ohio

[Prohibited Transaction Exemption 95-78; Exemption Application No. D-

10023]

Exemption

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

the Act and the sanctions resulting from the

[[Page 46310]]

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 loan of

funds (the Loan) to the Plan by KeyCorp the sponsor of the Plan, with

respect to Guaranteed Investment Contract No. 62149 (the GIC) issued by

Confederation Life Insurance Company of Canada (Confederation), and the

potential repayment by the Plan of the Loan upon receipt of payments

under the GIC; provided the following conditions are satisfied: (a) No

interest and/or other expenses are paid by the Plan in connection with

the Loan; (b) All of the terms and conditions of the Loan are no less

favorable to the Plan than those which the Plan could obtain in an

arm's-length transaction with an unrelated party; (c) The Loan will be

no less than the amount described in paragraph 4 of the Notice of

Proposed Exemption; (d) The repayment of the Loan will not exceed the

total amount of the Loan; (e) The repayment of the Loan by the Plan

will be restricted to funds paid to the Plan under the GIC by

Confederation or other responsible third parties with respect to the

GIC; and (f) The repayment of the Loan will be waived to the extent the

amount of the Loan exceeds the proceeds the Plan receives from the GIC.

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 June 29, 1995 at 60 FR

33871.

FOR FURTHER INFORMATION CONTACT: Charles S. Edelstein of the

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

The Bank of New York (the Bank) Located in New York, New York

[Prohibited Transaction Exemption 95-79; Application No. D-10030]

Exemption

Section I--Exemption for the Acquisition, Holding and Disposition of

BNY Stock

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 the acquisition, holding or disposition of the

common stock of the Bank's parent corporation, The Bank of New York

Company, Inc. (BNY Stock), by Index or Model-Driven Funds, if the

following conditions and the General Conditions of Section II are met:

(a) The Index or Model-Driven Fund is based on an index which

represents the investment performance of a specific segment of the

public market for equity securities in the United States and/or foreign

countries. The organization creating and maintaining the index must be

(1) engaged in the business of providing financial information,

evaluation, advice or securities brokerage services to institutional

clients, (2) a publisher of financial news or information, or (3) a

public stock exchange or association of securities dealers. The index

must be created and maintained by an organization independent of the

Bank and its affiliates. The index must be a generally accepted

standardized index of securities which is not specifically tailored for

the use of the Bank or its affiliates.

(b) The acquisition or disposition of the BNY Stock is for the sole

purpose of maintaining strict quantitative conformity with the relevant

index upon which the Index or Model-Driven Fund is based.

(c) All acquisitions comply with Rule 10b-18 of the Securities and

Exchange Commission, including the limitations regarding the price paid

or received for such stock.

(d) Aggregate daily purchases of BNY Stock constitute no more than

the greater of: (1) 10 percent of the stock's average daily trading

volume for the previous five days; or (2) 10 percent of the stock's

trading volume on the date of the transaction.

(e) If the necessary number of shares of BNY Stock cannot be

acquired within 10 business days from the date of the event which

causes the particular Index or Model-Driven Funds to require BNY Stock,

the Bank appoints a fiduciary which is independent of the Bank and its

affiliates to design acquisition procedures and monitor the Bank's

compliance with such procedures.

(f) All purchases and sales of BNY Stock are executed on the

national exchange on which BNY Stock is primarily traded.

(g) No transactions involve purchases from, or sales to, the Bank

or any affiliate (including officers, directors and employees of the

Bank, as defined in Section III(c) below), or any party in interest

with respect to a plan which has invested in an Index or Model-Driven

Fund.

(h) No more than five (5) percent of the total amount of BNY Stock

issued and outstanding at any time is held in the aggregate by the

Index and Model-Driven Funds.

(i) BNY Stock constitutes no more than two (2) percent of the value

of any independent third-party index on which the investments of an

Index or Model-Driven Fund are based.

(j) A plan fiduciary independent of the Bank and its affiliates

authorizes the investment of such plan's assets in an Index or Model-

Driven Fund which purchases and/or holds BNY Stock.

(k) A fiduciary independent of the Bank and its affiliates directs

the voting of the BNY Stock held by an Index or Model-Driven Fund on

any matter in which shareholders of BNY Stock are required or permitted

to vote.

Section II--General Conditions

(a) The Bank maintains or causes to be maintained for a period of

six years from the date of the transaction the records necessary to

enable the persons described in paragraph (b) of this Section to

determine whether the conditions of the exemption have been met, except

that (1) a prohibited transaction will not be considered to have

occurred if, due to circumstances beyond the control of the Bank, the

records are lost or destroyed prior to the end of the six-year period,

and (2) no party in interest other than the Bank shall be subject to

the civil penalty that may be assessed under section 502(i) of the Act

or to the taxes imposed by section 4975(a) and (b) of the Code if the

records are not maintained or are not available for examination as

required by paragraph (b) below.

(b)(1) Except as provided in paragraph (b)(2) and notwithstanding

any provisions of section 504 (a)(2) and (b) of the Act, the records

referred to in paragraph (a) of this Section are available at their

customary location for examination during normal business hours by--

(A) Any duly authorized employee or representative of the

Department of Labor or the Internal Revenue Service,

(B) Any fiduciary of a plan participating in an Index or Model-

Driven Fund who has authority to acquire or dispose of the interests of

the plan, or any duly authorized employee or representative of such

fiduciary,

(C) Any contributing employer with respect to any plan

participating in an Index or Model-Driven Fund or any duly authorized

employee or representative of such employer, and

(D) Any participant or beneficiary of any plan participating in an

Index or Model-Driven Fund, or any duly authorized employee or

representative of such participant or beneficiary.

(2) None of the persons described in paragraph (b)(1)(B) through

(D) shall be authorized to examine trade secrets of the Bank, any of

its affiliates, or commercial or financial information which is

privileged or confidential.

[[Page 46311]]

Section III--Definitions

(a) Index Fund--Any investment fund, account or portfolio

sponsored, maintained and/or trusteed by the Bank, or an affiliate of

the Bank, in which one or more investors invest which is designed to

replicate the capitalization-weighted composition of a stock index

which satisfies the conditions of Section I(a) and (i).

(b) Model-Driven Fund--Any investment fund, account or portfolio

sponsored, maintained and/or trusteed by the Bank, or an affiliate of

the Bank, in which one or more investors invest which is based on

computer models using prescribed objective criteria to transform an

independent third-party stock index which satisfies the conditions of

Section I (a) and (i).

(c) Affiliate--Any person directly or indirectly, through one or

more intermediaries, controlling, controlled by, or under common

control with such person; any officer, director, partner, employee,

relative (as defined in section 3(15) of the Act), a brother, a sister,

or a spouse of a brother or a sister of such person; and any

corporation or partnership of which such person is an officer,

director, or partner.

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 July 12, 1995, at 60 FR

35944.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department,

telephone (202) 219-8194. (This is not a toll-free number.)

Rollover Individual Retirement Accounts for Joseph Shepard, Located in

Jacksonville, Florida; William Haspel, Located in Bethesda, Maryland;

and Richard Geisendaffer, Paul Petryszak, William Kroh and Rolf Graage,

Located in Baltimore, Maryland (Collectively, the IRAs)

[Prohibited Transaction Exemption 95-80; Exemption Application Nos. D-

10054-10059]

Exemption

The sanctions resulting from the application of section 4975 of the

Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall

not apply to the past sale by the IRAs of all the common stock (the

Stock) of Purchase Port Services, Inc. (PPS) held by the IRAs to PPS,

provided that the following conditions were satisfied: (1) The sale of

Stock by each IRA was a one-time transaction for cash; (2) no

commissions or other expenses were paid by the IRAs in connection with

the sale; and (3) the IRAs received the greater of: (a) the fair market

value of the Stock as determined by a qualified independent appraiser

as of May 31, 1995, or (b) the fair market value of the Stock as of the

time of the sale.2

2 Pursuant to 29 CFR 2510.3-2(d), the IRAs are not within the

jurisdiction of Title I of the Act. However, there is jurisdiction

under Title II of the Act pursuant to section 4975 of the Code.

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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 July 21, 1995 at 60 FR

37688.

EFFECTIVE DATE: This exemption is effective July 28, 1995.

WRITTEN COMMENT: The Department received one written comment with

respect to the proposed exemption, which was submitted by the

applicants. The applicants had represented (see notice of proposed

exemption, rep. 4) when they filed their exemption application that

``Business and income tax considerations have compelled PPS to consider

making an election to be treated as a `Subchapter S' Corporation under

section 1362(a) of the Code.'' The applicants noted in their comment

letter that subsequent to the filing of the exemption request, PPS

determined that, rather than electing Subchapter S Corporation status

itself, PPS would merge into its subsidiary, Hobelmann Port Services,

Inc. (HPS), and that HPS would elect Subchapter S Corporation status.

That merger was concluded effective July 31, 1995, and HPS elected

Subchapter S Corporation status effective August 1, 1995. The

applicants represent that the decision to make HPS rather than PPS the

entity to elect Subchapter S status was made for business purposes

unrelated to the redemption of the IRAs' shares, and is not material to

the requested exemption.

The applicants also requested that the exemption be made effective

July 28, 1995, instead of July 31, 1995, as had been proposed. The sale

of shares from the IRAs to PPS occurred on July 28, 1995 to allow

sufficient time before July 31, 1995 to complete other steps relating

to the Subchapter S Corporation election. The applicants represent that

the sale was made in accordance with all of the conditions set forth in

the proposed exemption.

The Department has considered the entire record, including the

comment submitted by the applicants, and has determined to grant the

exemption effective July 28, 1995.

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

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

General Information

The attention of interested persons is directed to the following:

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

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

does not relieve a fiduciary or other party in interest 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, D.C., this 31st day of August, 1995.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 95-22042 Filed 9-5-95; 8:45 am]

BILLING CODE 4510-29-P