Grant of Individual Exemptions; Peoples Security Life Insurance Company, et al.

DEPARTMENT OF LABOR

[Prohibited Transaction Exemption 95-09; Exemption Application No. D-

09462, et al.]

Grant of Individual Exemptions; Peoples Security Life Insurance

Company, et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

(the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, DC. The notices also

invited interested persons to submit comments on the requested

exemptions to the Department. In addition the notices stated that any

interested person might submit a written request that a public hearing

be held (where appropriate). The applicants have represented that they

have complied with the requirements of the notification to interested

persons. No public comments and no requests for a hearing, unless

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR

47713, October 17, 1978) transferred the authority of the Secretary of

the Treasury to issue exemptions of the type proposed to the Secretary

of Labor.

Statutory Findings

In accordance with section 408(a) of the Act and/or section

4975(c)(2) of the Code and the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their

participants and beneficiaries; and

(c) They are protective of the rights of the participants and

beneficiaries of the plans.

Peoples Security Life Insurance Company (Peoples) Located in Durham,

North Carolina

[Exemption Application No.: D-09462]

Commonwealth Life Insurance Company (Commonwealth) Located in

Louisville, Kentucky

[Prohibited Transaction Exemption 95-09; Exemption Application No.: D-

09463]

Exemption

The restrictions of section 406(a) of the Act and the sanctions

resulting from the application of section 4975(c)(1) (A) through (D) of

the Code, shall not apply, effective March 1, 1992, to: (1) The

extension of credit by Peoples or Commonwealth (the Applicants), the

sponsors of an investment product (the Group Annuity Contract or GAC)

in connection with a plan's investment in the GAC; and (2) the

reimbursement of Peoples or Commonwealth for benefit payments made to

investing plans from the cashflow generated by the investments in the

plans' Custodian Accounts which are set up by a plan pursuant to the

GAC, or (3) the reimbursement of Peoples or Commonwealth for benefit

payments made to investing plans from the proceeds generated by

liquidation of investments in the Custodial Accounts upon termination

of the Group Annuity Contract provided:

1. The decision to enter into the Group Annuity Contract will be

made [[Page 8094]] by a plan fiduciary who is independent of Peoples

and Commonwealth and any affiliates of such entities (the Independent

Fiduciary).

2. Prior to a plan's investment in the Group Annuity Contract, the

Independent Fiduciary for such plan receives full and detailed written

disclosures of all features of the Group Annuity Contract including all

applicable premium charges.

3. Neither Peoples nor Commonwealth or any of their affiliates has

discretionary authority or control with respect to the decision to

invest plan assets in the investment product described herein or

renders investment advice (within the meaning of 29 CFR 2510.3-21(a))

with respect to those assets.

4. Neither Peoples nor Commonwealth or any of their affiliates

exercises any discretion or renders investment advice on behalf of a

plan with respect to the ongoing acquisition, management or disposition

of Custodian Account assets.

5. For all transactions that occur after the date of publication of

the proposed and final exemptions, Peoples and Commonwealth provide

copies of the proposed and final exemptions as published in the Federal

Register to each plan which invests in a Group Annuity Contract.

6. The premiums charged by Peoples and Commonwealth for the GAC

(including early termination charges assessed in the event of early

contract termination) will not be in excess of ``reasonable

compensation'' within the meaning of section 408(b)(2) of the Act and

will constitute the only fees charged by Peoples or Commonwealth in

connection with such contract other than accrued interest on

unreimbursed benefit payments.

7. Peoples and Commonwealth maintain or cause to be maintained, for

a period of six years, the records necessary to enable the persons

described in paragraph (8) of this section to determine whether the

conditions of this exemption have been met, except that (a) a

prohibited transaction will not be considered to have occurred if, due

to circumstances beyond the control of Peoples or Commonwealth or its

agents, the records are lost or destroyed prior to the end of the six

year period, and (b) no party in interest other than Peoples or

Commonwealth 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 (8) below.

8(a). Except as provided in section (b) of the paragraph and

notwithstanding any provisions of subsections (a)(2) and (b) of section

504 of the Act, the records referred to in paragraph 7 of this section

shall be unconditionally available at their customary location during

normal business hours by:

(1) Any duly authorized employee or representative of the

Department or the Internal Revenue Service (the Service);

(2) Any fiduciary of an investing Plan or any duly authorized

representative of such fiduciary;

(3) Any contributing employer to an investing Plan or any duly

authorized employee or representative of such employee; and

(4) Any participant or beneficiary of an investing Plan, or any

duly authorized representative of such participant or beneficiary.

(b) None of the persons described above in subparagraph (2)-(4) of

this paragraph 8 shall be authorized to examine the trade secrets of

Peoples or Commonwealth or its affiliates or commercial or financial

information which is privileged or confidential.

For purposes of this exemption, affiliate means:

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

intermediaries, controlling, controlled by, or under common control

with such other person;

(b) Any officer, director or partner, in such other person; and

(c) Any corporation or partnership of which such other person is an

officer, director or partner.

Control means the power to exercise a controlling influence over

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

Written Comments

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

invited all interested persons to submit written comments on the

proposed exemption within 45 days from the date of publication of the

Notice in the Federal Register. All written comments were to have been

received by the Department by December 29, 1994. The Department

received one written comment submitted by the Applicants. The issue

addressed in the comment and the Department's response are summarized

as follows:

The application for exemption submitted by the Applicants requested

a March 1, 1992 effective date for the requested exemption. The

effective date was not specified in the notice of proposed exemption

published in the Federal Register on November 14, 1994 (59 FR 5655).

Accordingly, the Applicants request that the Department clarify that

the final exemption is effective as of March 1, 1992.

The Department concurs with the Applicants' comment and notes that,

in order for the exemption to apply to a covered transaction, all of

the conditions in the exemption except condition 5 (relating to the

provision of copies of the proposed and final exemption to plan

investors) must have been met.

FOR FURTHER INFORMATION CONTACT: Lyssa E. Hall of the Department,

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

CNA Employees' Retirement Trust (the Trust) Located in Chicago,

Illinois

[Prohibited Transaction Exemption 95-10; Exemption Application Nos. D-

09539 through D-09544]

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, effective January 17, 1992, to fifteen past sales and

purchases by the Trust of twelve issues of short-term commercial paper

(the CNA Transactions), as identified in the Notice of Proposed

Exemption, involving the Continental Casualty Company, the Continental

Assurance Company, the Continental Assurance Company Guaranteed

Investment Fund, the Valley Forge Life Insurance Company, Valley Forge

Insurance Company, and the American Casualty Company of Reading,

Pennsylvania (collectively, the CNA Companies), each of which is a

party in interest with respect to the CNA Employees' Retirement Plan,

whose assets are held by the Trust; provided that the following

conditions are satisfied:

(A) In each of the CNA Transactions, the Trust paid no more, or

received no less, than the fair market value of the commercial paper

involved in the transaction;

(B) The CNA Transactions constituted, in the aggregate, less

than four percent of all commercial paper transactions of the Trust

during 1992; and

(C) The CNA Companies have undertaken efforts to prevent any

recurrence of direct or indirect transactions involving the Trust

and the CNA Companies, including the appointment of an independent

investment manager of all the Trust's commercial paper investments.

EFFECTIVE DATE: This exemption is effective as of January 17, 1992.

For a more complete statement of the facts and representations

supporting the [[Page 8095]] Department's decision to grant this

exemption, refer to the notice of proposed exemption published on

November 28, 1994 at 59 FR 60843.

Written Comments

The Department received one written comment, which included a

request for a hearing. The comment did not address substantively the

transactions which were the subject of the proposed exemption.

Subsection (b) of 29 CFR 2570.46, in the prohibited transaction

exemption procedure, states that the Department will grant a request

for a hearing where a hearing is necessary to fully explore material

factual issues identified by the person requesting the hearing. The

Department has determined that no issues have been identified which

would require the convening of a hearing, and, accordingly, has

determined not to hold a public hearing.

After careful consideration of the entire record, the Department

has determined to grant the exemption.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,

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

Hospital Supplies, Inc. Pension Plan (the Plan) Located in Radnor,

Pennsylvania

[Prohibited Transaction Exemption 95-11; Application No. D-09727]

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 cash sale of two adjacent parcels of real

property (the Properties) by the Plan to Armond J. Civera, Jr. (Mr.

Civera),1 a disqualified person with respect to the Plan, provided

that the following conditions are satisfied:

\1\Because Mr. Civera is the only participant in the Plan and

the Employer is wholly owned by Mr. Civera there is no jurisdiction

with respect to the Plan under Title I of the Act pursuant to CFR

2510.3-3(b) and (c). However, there is jurisdiction under Title II

of the Act pursuant to section 4975 of the Code.

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(a) The sale will be a one-time cash transaction;

(b) The Plan will receive for each Property the current fair market

value established at the time of the sale by an independent qualified

appraiser;

(c) The Plan will pay no expenses associated with the sale.

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 January 4, 1995 at 60 FR

486/487.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department

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

Clarence E. Coker, Jr. and the Clarendon Family Practice, PA Employee

Retirement Plan (the Plan) Located in Manning, South Carolina

[Prohibited Transaction Application 95-12; Exemption Application No. D-

09736]

Exemption

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

Act and the sanctions resulting from the application of section 4975 of

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

shall not apply to the sale of approximately eight acres of unimproved

land (the Land) by the Plan to Dr. Clarence E. Coker, Jr., (Dr. Coker),

a party in interest with respect to the Plan; provided that the

following conditions are satisfied:

(a) The sale will be a one-time cash transaction;

(b) The Plan will receive the higher of: (1) the original

acquisition cost;2 or (2) the current fair market value plus a

certain premium related to the adjacency of the Land to other real

property owned by Dr. Coker, established at the time of the sale by an

independent qualified appraiser; and

\2\The original acquisition cost is determined as follows:

(original purchase price+aggregate real estate taxes)-aggregate

rental income=original acquisition cost.

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(c) The Plan will pay no expenses associated with the sale. 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 December 19, 1994 at 59 FR 65396/65397.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department

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

Alucobond Technologies, Incorporated Employees' Savings Plan (the Plan)

Located in St. Louis, Missouri

[Prohibited Transaction Exemption 95-13; Application No. D-09834]

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 interest-free loan to the Plan (the Loan) by

Alucobond Technologies, Incorporated (the Employer), a party in

interest with respect to the Plan, and (2) the Plan's potential

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

Guaranteed Investment Contract No. CG01285A3A (the GIC) issued by

Executive Life Insurance Company (Executive Life); provided the

following conditions are satisfied:

(A) No interest or expenses are paid by the Plan in connection with

the transaction;

(B) The Loan will be repaid only out of amounts paid to the Plan by

Executive Life, its successors, or any other responsible third party;

and

(C) Repayment of the Loan is waived with respect to the amount by

which the Loan exceeds GIC proceeds.

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 December 19, 1994 at 59

FR 65393.

FOR FURTHER INFORMATION CONTACT: Virginia J. Miller 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 [[Page 8096]] material terms of

the transaction which is the subject of the exemption.

Signed at Washington, D.C., this 7th day of February, 1995.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, Department of Labor.

[FR Doc. 95-3406 Filed 2-9-95; 8:45 am]

BILLING CODE 4510-29-P