Proposed Exemptions; PACCAR Inc. Savings Investment Plan, et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-09855, et al.]

Proposed Exemptions; PACCAR Inc. Savings Investment Plan, et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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

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 [[Page 8088]] 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 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.

PACCAR Inc Savings Investment Plan (the Plan) Located in Bellevue,

Washington

[Application No. D-09855]

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 F.R. 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 (1) the proposed guarantee (the

Guarantee) by PACCAR Inc (the Employer), the sponsor of the Plan, of

the Plan's investment in a guaranteed investment contract (the GIC)

issued by Confederation Life Insurance Company (Confederation Life),

including the potential extensions of credit to the Plan by the

Employer (the Advances) pursuant to the Guarantee; and (2) the

potential repayment of the Advances (the Repayments); provided that the

following conditions are satisfied:

(A) All terms and conditions of the transactions are no less

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

arm's length transaction with an unrelated party;

(B) The Repayments are made only from GIC Proceeds, defined as the

amounts actually received by the Plan (1) from Confederation Life or

any other entity making payment with respect to Confederation Life's

obligations under the terms of the GIC, or (2) from the sale or

transfer of the GIC to unrelated third parties;

(C) The Repayments will be made only after the Plan has recovered,

through the Advances plus GIC Proceeds, the amount guaranteed by the

Employer with respect to the GIC; and

(D) To the extent the Advances exceed GIC Proceeds, Repayment of

the difference will be waived.

Summary of Facts and Representations

Introduction

Confederation Life was recently placed in a receivership. As a

result, the Confederation Life GIC owned by the Plan is frozen, and the

future of Confederation Life is uncertain. The Employer, PACCAR Inc,

proposes to protect the Plan from loss on its investment in the GIC, by

guaranteeing the value of the GIC as of the commencement of the

receivership, as described below.

1. The Employer is a publicly-owned Delaware corporation engaged in

the production of class 8 trucks, winches, oil drilling equipment and

retail auto parts. Its principal place of business is Bellevue,

Washington. The Employer sponsors the Plan, which is a defined

contribution 401(k) plan, providing for individually-directed

participant accounts (the Accounts). As of September 21, 1994, the Plan

had 4,816 participants and, as of July 31, 1994, total assets of

approximately $211,979,510. The trustee of the Plan is Fidelity

Management Trust Company of Boston, Massachusetts (the Trustee). Plan

participants may invest their accounts in and among six investment

funds, including an income fund (the I Fund) which consists of

guaranteed investment contracts issued by insurance companies, a cash

short-term investment fund, and units in a group trust maintained by

the Trustee and designated as the Fidelity Managed Income Portfolio II

of the Fidelity Group Trust for Employee Benefit Plans (the MI

Portfolio).

2. Among the assets of the I Fund is the GIC, which is identified

as Confederation Life Guaranteed Investment Contract No. 62185, issued

to the Plan by Confederation Life on July 10, 1990 for a principal

deposit of $6 million. The GIC is a single-deposit, non-benefit-

responsive contract, with interest on principal at the annual rate of

9.67 percent, requiring payment to the Plan of $9.49 million on the

maturity date of June 30, 1995 (the Maturity Date). On August 12, 1994

(the Receivership Date), Confederation life was placed in receivership

(the Receivership) pursuant to rehabilitation proceedings by the State

of Michigan.1 Consequently, Confederation Life's assets and

operations were frozen, and payments on all its guaranteed investment

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

as of the Receivership Date. As of the Receivership Date, the total GIC

principal and accumulated interest was $8.752 million (the Receivership

Value), representing 17.92 percent of the assets of the I Fund.

\1\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.

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

3. In order to avoid liquidity problems in the I Fund, after the

Receivership was announced, the Employer and the Trustee froze the I

Fund assets invested in the GIC. The Employer represents that it

appears unlikely that Confederation Life will make timely payment to

the Plan upon the Maturity Date of the GIC. The Employer has notified

Plan participants that it will undertake measures to protect the

Accounts from adverse effects of any nonpayment of the GIC or from the

effects of a lengthy rehabilitation of Confederation Life. Accordingly,

the Employer proposes to guarantee the Plan's investment in the GIC

plus interest, by means of potential extensions of credit to the Plan,

and is requesting an exemption for these transactions under the terms

and conditions described herein.

4. The terms of the Employer's guarantee (the Guarantee) of the

Plan's investment in the GIC and the Employer's potential cash advances

(the Advances) pursuant to the Guarantee will be evidenced in a written

agreement between the Plan and the Employer.2

\2\The Department notes that this exemption, if granted, will

not affect the rights of any participant or beneficiary with respect

to claims under section 404 of the Act in connection with any aspect

of the GIC transactions.

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

The Guarantee

In making the Guarantee, the Employer is undertaking to ensure that

in the eventual resolution of the Receivership the Plan receives 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 a market rate. In accordance with this undertaking, the

amount which the Employer proposes to guarantee (the Guarantee Amount)

is the Receivership Value of the GIC, which is $8.752 million, less GIC

Proceeds (defined as the amounts 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,

[[Page 8089]] or from the sale or transfer of the GIC to unrelated

third parties) and advances made by the Employer (Advances, as

described below), plus interest on the net of the foregoing amount

after the Receivership Date at the rate earned by the MI Portfolio (the

Guarantee Rate), accrued on a daily basis. The Trustee's MI Portfolio

is a diversified portfolio of short-term and long-term conventional and

synthetic guaranteed investment contracts issued by insurance companies

and other institutions. The average yield on the MI Portfolio Assets

for the month of November, 1994, was 5.81 percent.

The Advances

Although the GIC is non-benefit-responsive, the Employer is

concerned that the Receivership may result in an increase in transfers

of Accounts out of the I Fund to other investment funds maintained by

the Plan, posing potential liquidity problems for the I Fund.

Accordingly, if as a result of Account transfers or withdrawals from

the I Fund the Guarantee Amount commences to represent more than 30

percent of the I Fund, the Employer will make Advances to the I Fund in

an amount sufficient to reduce the ratio to 30 percent.

Final Resolution

If the Receivership and any rehabilitation of Confederation Life

are resolved and completed prior to the end of the year 2000, within 60

days of the Plan's receipt of final payment from or on behalf of

Confederation Life with respect to the GIC, the Employer will honor the

Guarantee by making a final Advance to the I Fund in an amount

sufficient to cause the Guarantee Amount to equal zero. If the

Receivership and any rehabilitation extend beyond the year 2000, the

Employer will make a final Advance to the I Fund on the first business

day in the year 2001 in the amount of the Guarantee Amount.

Repayments

Repayment of the final Advance and all previous Advances will be

restricted to the GIC Proceeds. The Repayments will only be made after

such time as the Plan has recovered, through the Advances plus the GIC

Proceeds, the amount guaranteed by the Employer with respect to the

GIC, as described above. To the extent the total Advances exceed GIC

Proceeds, repayment will be waived.

5. In summary, the applicant represents that the proposed

transactions satisfy the criteria of section 408(a) of the Act for the

following reasons: (1) The Guarantee will enable the Employer to

complete its commitment to Plan participants to protect the Plan from

any loss of its investment in the GIC as of the Receivership Date; (2)

The Advances will protect the I Fund from threats to its liquidity

resulting from possible transfers and withdrawals of Accounts; (3) The

Repayments will be made only from GIC Proceeds, and only after the Plan

has recovered the amount guaranteed by the Employer; (4) After

resolution of the Receivership, the Plan will be made whole with

respect to the Guarantee by means of a final cash Advance; and (5) To

the extent the Advances exceed the GIC Proceeds, Repayment of the

difference will be waived.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,

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

Shippers Paper Products Company 401(k) Plan (the Plan) Located in

Glenview, IL

[Application No. D-09866]

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 sale by the Plan of Group Annuity

Contract, No. GA-4725 (the GAC) issued by Mutual Benefit Life Insurance

Company (Mutual Benefit) to Illinois Tool Works Inc., a party in

interest with respect to the Plan; provided the following conditions

are satisfied: (1) The sale is a one-time transaction for cash; (2) the

Plan receives no less than the fair market value of the GAC at the time

of the sale; (3) the Plan's trustee, acting as independent fiduciary

for the Plan, has determined that the proposed sale price is not less

than the current fair market value of the GAC; and (4) the Plan's

trustee has determined that the proposed transaction is appropriate for

and in the best interests of the Plan and its participants and

beneficiaries.

Summary of Facts and Representations

1. The Plan is sponsored by the Shippers Paper Products Company,

which is an wholly-owned subsidiary of Illinois Tool Works Inc. (the

Applicant). The Plan is a defined contribution plan with a salary

reduction feature. There were 91 participants as of October 20, 1994.

As of September 30, 1994, the Plan's total assets were $635,695.00. The

Plan is administered by the Employee Benefits Committee of the Board of

Directors of the Applicant (the Committee). The Plan's trustee,

Northern Trust Company (the Trustee), manages the investment of Plan

funds at the direction of the Committee. The GAC, which is the sole

asset of the Plan, was effective as of July 1, 1985.\3\ The Applicant

represents that the GAC was scheduled to terminate only after

disbursement of the final annuity payment thereunder and, therefore,

had no stated maturity date. The terms of the GAC provided for a

minimum annual interest rate of 4.0%.

\3\The Department notes that the decisions to acquire and hold

the GAC are governed by the fiduciary responsibility requirements of

Part 4, Subtitle B, Title I of the Act. In this regard, the

Department is not herein proposing relief for any violations of Part

4 which may have arisen as a result of the acquisition and holding

of the GAC issued by Mutual Benefit.

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

2. On July 16, 1991, Mutual Benefit was placed into rehabilitation

proceedings by the New Jersey Commissioner of Insurance. As a result of

these proceedings, the Plan's assets have been frozen.\4\ The Applicant

represents that it wishes to enter into the proposed transaction in

order to protect the accounts of Plan participants and beneficiaries

from the risk of investment loss associated with the GAC. The Applicant

further represents that the Plan needs to sell its interest in

[[Page 8090]] the GAC in order to give the Plan more investment

flexibility to direct the investment of participant account balances to

safer and more prudent investments. The Applicant also represents that

the Plan will not incur any expenses with respect to the sale of the

GAC.

\4\Following the cessation of payments by Mutual Benefit with

respect to the GAC, Shippers Paper Products Company made the

decision to make periodic advances to the Plan to enable the payment

of distributions to terminating and retiring participants and the

payment of certain in-service withdrawals to current participants.

The Applicant represents that, as of November 30, 1994, the periodic

advances to the Plan totaled approximately $178,595. The Applicant

also represents that the terms of those periodic advances satisfy

the conditions of PTE 80-26 (45 FR 28545, April 29, 1980). This

conditional class exemption permits a party in interest to make an

interest-free loan to an employee benefit plan, and the repayment of

such loan. Specifically, the exemption states, in relevant part,

that effective January 1, 1975, the restrictions of section

406(a)(1)(B) and (D) and section 406(b)(2) of the Act and the taxes

imposed by section 4975(a) and (b) of the Code by reason of section

4975(c)(1)(B) and (D) of the Code, shall not apply to the lending of

money from a party in interest to an employee benefit plan, nor to

the repayment of such loan in accordance with its terms, if no

interest or other fee is charged to the plan, the loan is unsecured,

and the loan proceeds are used only for the payment of ordinary

operating expenses of the plan, including the payment of benefits in

accordance with the terms of the plan. In this proposed exemption

the Department expresses no opinion as to whether the periodic

advances satisfy the provisions of PTE 80-26.

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

3. The Applicant proposes to protect the interests of the affected

participants by purchasing the GAC from the Plan. The purchase price

for the GAC will be the contract balance of the GAC as of September 30,

1994, as determined by Mutual Benefit using the following interest

rates: (1) Interest is credited at the rate of 10.35% for the period

from July 1, 1986 through June 30, 1990; (2) interest is credited at

the rate of 8.7% for the period from July 1, 1990 through June 30,

1991; (3) interest is credited at the rate of 8.35% for the period from

July 1, 1991 through December 31, 1991. These are the rates of interest

actually earned under the GAC until December 31, 1991. After December

31, 1991, pursuant to the terms of the proposed plan of rehabilitation

set forth by the Superior Court of New Jersey, interest is credited at

a rate equal to 5.75% for 1992, 5.25% for 1993, and at a rate equal to

5.10% for 1994. The purchase price will be adjusted to reflect any

contract distributions and additional interest earned from September

30, 1994 to the date the actual purchase takes place.\5\ From January

1, 1995 through December 31, 1999, the GAC will earn interest based on

Mutual Benefit's actual investment performance, with a minimum annual

rate of 3.5%.

\5\The Applicant represents that, following the sale of the GAC

to the Applicant, the Plan will repay any amounts due Shippers Paper

Products Company in connection with the periodic advances discussed

above.

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

4. The Trustee has reviewed the proposed transaction on behalf of

the Plan. The Trustee represents that it has determined that the

proposed purchase price for the GAC is at least equal to the fair

market value of the GAC. In addition, the Trustee represents that it

has determined that the proposed transaction is appropriate for the

Plan and in the best interests of its participants and beneficiaries.

5. In summary, the Applicant represents that the proposed

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

because: (1) The Plan will receive cash for the GAC in the amount of

the contract balance of the GAC, as determined by Mutual Benefit as of

the date of the sale; (2) the transaction will enable the Plan and its

participants and beneficiaries to avoid any risk associated with the

continued holding of the GAC, and to exercise all of their rights under

the Plan to request distributions and withdrawals from the Plan; and

(3) the Plan's trustee, acting as the Plan's independent fiduciary, has

determined that the sale at the proposed price is in the best interests

of the participants and beneficiaries of the Plan, and that the

proposed price is not less than the fair market value of the GAC.

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

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

Manke Lumber Company, Inc. Profit Sharing Plan (the Plan) Located in

Tacoma, Washington

[Exemption Application No. D-09897]

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, 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 the Plan

of certain real property (the Property) to Manke Family Resources,

Limited Partnership (MFR).

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 with an unrelated party; (2) the Sale is a one-time cash

transaction; and (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 greater of: (a) The fair market

value of the Property on the date of the Sale; or (b) the Plan's

aggregate costs of acquiring and holding the Property.

Summary of Facts and Representations

1. Manke Lumber Company, Inc. (Manke) sponsors the Plan, a profit

sharing plan which was established on May 1, 1971. The Plan was

amended, effective May 1, 1988, to include 401(k) features which allow

participants to direct the investments of their accounts. As of April

30, 1993, approximately eighty-eight percent of Plan assets were held

as general assets while the remaining twelve percent were subject to

participant direction. As of the same date, the Plan had assets

totalling $9,360,468 and approximately 520 participants.

West One Trust Company (the Trustee) serves as the trustee of the

Plan and has the sole investment discretion with respect to the

Property and certain other non-liquid assets. Piper Capital Management,

a registered investment adviser, has investment management discretion

over the marketable securities and other liquid assets of the Plan.

Under the terms of the Plan, Manke appoints an Advisory Committee (the

Advisory Committee) which is responsible for setting the funding policy

for the Plan. The Advisory Committee does not have any investment

discretion. As of January 9, 1995, the Advisory Committee consisted of

two Manke employees--J. Randal Jordan and Milton Farvour.

2. Manke is a Washington corporation engaged in the manufacturing

and sale of lumber and other wood products. In addition, Manke also

owns and manages timberland. The principal shareholders of Manke

include Charles Manke, Virgil Manke and James Manke, who also comprise

the Board of Directors (the Directors) and are the officers of Manke.

MFR is a Washington limited partnership engaged in the business of

owning, utilizing and developing timberland and personal property

related to the timber business. Tacoma Timber Co. (Tacoma Timber), a

Washington corporation, serves as the general partner of MFR. Both MFR

and Tacoma Timber are wholly owned by sons and daughters of the

Directors, who are parties in interest with respect to the Plan. In

addition, the owners of MFR and Tacoma Timber also own small amounts of

Manke stock.

3. Among the general assets of the Plan is the Property, which

consists of approximately 275 acres of land and timber located in

Clallam County, Washington. The Property lies contiguous to a forty

acre parcel of property owned by Manke. The Plan acquired the Property

on September 25, 1975 for $200,709 from Raymond B. Fife, an unrelated

party. Since its acquisition, the Plan has held the Property as

timberland, and it has not been utilized by, or leased to, any related

or unrelated party. As of December 9, 1994, the Plan had expended a

total of $14,384 in connection with the Property for taxes and other

expenses such as surveying and insurance.

4. Steven D. Lodge of Shorett & Riely, a real estate appraising and

consulting firm located in Seattle, Washington, appraised the Property.

Mr. Lodge is a Washington State-certified General Real Estate Appraiser

and has fifteen years of [[Page 8091]] experience in appraising real

estate. Mr. Lodge represents that both he and Shorett & Riely are

independent of, and unrelated to, Manke, MFR, Tacoma Timber and the

Directors.

Because the timber located on the Property has a substantial value

apart from the underlying land, Mr. Lodge valued the two components of

the Property, the timber and the land, separately and then as one.

Based upon a report prepared by Washington Timberland Management, Inc.,

which estimates harvestable area, timber volume and timber value, Mr.

Lodge placed the fair market value of the timber at $1,519,283 as of

April 30, 1994. In addition, based upon comparable sales of properties

located in the Tacoma area, Mr. Lodge placed the fair market value of

the land within a range of $220,456 and $385,798 as of April 30, 1994.

Finally, as of result of these two valuations, Mr. Lodge placed the

fair market value of the Property at $1,700,000 as of April 30, 1994.

5. The Trustee attempted to sell the Property on October 7, 1994 in

a written/oral bid auction sale. Beginning on September 2, 1994, the

Trustee circulated a written bid proposal, to approximately 100

prospective bidders. The written bid proposal set the minimum bid at

$2,000,000 in cash. None of the prospective bidders submitted an oral

or written bid in response to the written bid proposal, and, as a

result, the Property was not sold. Despite this, the Trustee believes

that a new proposal will result in a sale of the Property and,

therefore, proposes to attempt to sell the Property again through a

written/oral bid auction sale.

Because of its need for timberland, MFR desires to purchase the

Property from the Plan provided that it is the highest bidder. MFR

represents that the Sale price will be at least the greater of: (a) The

fair market value of the Property on the date of the Sale; or (b) the

Plan's aggregate costs of acquiring and holding the Property.

Accordingly, the Advisory Committee of the Plan requests an

administrative exemption from the Department to permit the Sale of the

Property under the terms and conditions described herein. The Sale will

be a one-time cash transaction, and the Plan will not be required to

pay any fees, commissions or expenses in connection with the Sale.

6. The Trustee has indicated that the bid auction sale for the

Property will be conducted sometime in 1995. In preparation of such

auction, the Advisory Committee represents that the Trustee will

circulate a written bid proposal to approximately 100 prospective

bidders which will allow them to bid either in writing prior to the

auction or orally at the action. The minimum bid set forth in the bid

proposal will be at least the Property's fair market value as of the

date of such proposal. The Property will be sold to the highest bidder,

which may or may not be MFR, only if the highest bid exceeds the

minimum bid set by the Trustee. Acceptance of the highest bidder's

offer is subject to final acceptance and approval by the Trustee's

Trust Committee. For purposes of condition #4 of this proposed

exemption, the fair market value of the Property on the date of the

Sale will be determined in the following manner. If the Trustee

receives two or more bids from unrelated individuals or entities, the

highest bid will be deemed to be the Property's fair market value on

the date of the Sale. If the Trustee receives less than two bids from

unrelated individuals or entities, the fair market value on the date of

the Sale will be determined by an independent, qualified appraiser. In

this event, MFR's bid cannot be less than the fair market value of the

Property as determined by the independent, qualified appraiser on the

date of the Sale.

7. In summary, it is represented that the transaction will satisfy

the statutory criteria of section 408(a) of the Act 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; (b) the Sale

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

to pay any commissions, costs or other expenses in connection with the

Sale; and (d) the Plan will receive a sales price equal to the greater

of: (1) The fair market value of the Property on the date of the Sale;

or (2) the Plan's aggregate costs of acquiring and holding the

Property.

FOR FURTHER INFORMATION CONTACT: Kathryn Parr of the Department,

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

Virginia Fibre Corporation Employees Retirement Savings Plan (the Plan)

Located in Amherst, Virginia

[Application No. D-09901]

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, effective February 1, 1995, to (1) The

proposed purchase from the Plan (the Purchase) by the Virginia Fibre

Corporation (the Employer), the sponsor of the Plan, of a guaranteed

investment contract (the GIC) issued by the Confederation Life

Insurance Company (Confederation Life); or, in the alternative, (2) the

proposed interest-free loan to the Plan by the Employer (the Loan) with

respect to the GIC, including repayment of the Loan; provided that the

following conditions are satisfied:

(A) All terms and conditions of the transactions are at least as

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

arm's-length transaction with an unrelated party;

(B) In the event of the Purchase, the Plan receives a cash

purchase price which is no less than the greater of (1) The fair

market value of the GIC as of the sale date, or (2) the GIC's

Maturity Payment, as described below;

(C) In the event of the Loan: (1) The Loan is in the amount of

the GIC's Maturity Payment, as described below; (2) the Loan is

repaid only from GIC Proceeds, defined as the amounts paid by or on

behalf of Confederation Life or any other entity making payment with

respect to Confederation Life's obligations under the GIC; (3) the

Plan incurs no expenses or interest with respect to the Loan; and

(4) repayment of the Loan is waived to the extent the Loan exceeds

the GIC Proceeds.

EFFECTIVE DATE: This exemption, if granted, will be effective as of

Febraury 1, 1995.

Summary of Facts and Representations

1. The Employer is a Virginia corporation engaged in the

manufacture of corrugating medium and liner board, with its principal

place of business in Amherst, Virginia, and is wholly owned by the

Grief Bros. Corporation, located in Delaware, Ohio. The Plan is a

defined contribution 401(k) plan with 240 participants and total assets

of approximately $5,510,972 as of September 30, 1994. The Plan's assets

are held, managed and invested by its trustee, Society National Bank in

Cleveland, Ohio.

2. The Plan provides for individual participant accounts (the

Accounts) and participant-directed investment of the Accounts. The Plan

participants may direct the investment of their Accounts among various

investment options offered by the Trustee, including the Virginia Fibre

MAGIC Fund (the M Fund), which invests in, among other things,

guaranteed investment contracts issued by insurance companies. Of the

Plan's 280 participants, 168 Accounts are invested in the M Fund. Among

the [[Page 8092]] assets in the M Fund is the GIC, a single-deposit,

non-benefit-responsive guaranteed investment contract issued to the

Plan on February 2, 1990 by Confederation Life, a Canadian life

insurance company doing business in the United States through

subsidiaries in Michigan and Georgia. The GIC was purchased by the Plan

for an initial principal deposit of $250,000 (the GIC Principal), which

earns interest at the rate of 9.18 percent per annum (the Contract

Rate). The GIC terms provide for annual interest payments (the Annual

Payments) on February 1 each year, commencing 1991 through 1995. All

Annual Payments through 1994 have been made by Confederation Life and

received by the Plan. The GIC provides for no pre-maturity withdrawals

of principal, and has a maturity date of February 1, 1995 (the Maturity

Date). Upon the Maturity Date, the Plan is due a final Annual Payment

plus the total GIC Principal, for a total of $272,950 (the Maturity

Payment).

3. On August 12, 1994, Confederation life was placed in

receivership (the Receivership) pursuant to rehabilitation proceedings

by the State of Michigan.\6\ Consequently, Confederation Life's assets

and operations were frozen, and payments on all its guaranteed

investment contracts were suspended effective as of the Receivership

commencement. The Employer represents that under the prevailing

circumstances, it is unlikely that the Maturity Payment will be made to

the Plan when due on February 1, 1995. The Employer is also concerned

that the Plan may never recover the full Maturity Payment in its

entirety. The Employer desires to protect Plan participants and

beneficiaries from any loss resulting from the Receivership, by

purchasing the GIC from the Plan, if allowable, or by lending the Plan

the amount of the Maturity Payment, if the purchase is not allowable.

The Employer is requesting an exemption for such transactions 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.

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

4. The Employer prefers to purchase the GIC from the Plan on

February 1, 1995 for the amount of the Maturity Payment due the Plan on

that date. However, the terms of the GIC include a prohibition against

assignment of the GIC. The Employer and the Trustee represent that they

have initiated the process of obtaining a release from this contractual

prohibition. If a release is obtained to enable the GIC's transfer to

the Employer, the Employer will purchase the GIC on February 1, 1995

for cash in the amount of the Maturity Payment due on that date. The

Plan will incur no expenses with respect to this proposed sale

transaction.

In the event the parties are unable to obtain a release from the

prohibition on assignability of the GIC, on February 1, 1995 the

Employer will make a cash loan to the Plan (the Loan) in the amount of

the Maturity Payment due on that date. The Loan will be interest-free,

and the Plan will incur no expenses related to the Loan. Repayment of

the Loan will be restricted to the amounts which the Plan receives from

Confederation Life or any other entity making payment with respect to

Confederation Life's obligations under the GIC (the GIC Proceeds). To

the extent the Loan exceeds the GIC Proceeds, repayment of the Loan

will be waived.

5. In summary, the applicant represents that the proposed

transactions satisfy the criteria of section 408(a) of the Act for the

following reasons: (1) The transactions will protect the Plan from any

loss on the GIC's full Maturity Payment which might result from the

Receivership; (2) The Employer's proposed purchase of the GIC will be a

one-time transaction for cash in which the Plan receives no less than

the greater of the fair market value of the GIC or the Maturity

Payment; (3) If a release is not obtained to enable the purchase of the

GIC, the Plan will still receive the Maturity Payment when due, in the

form of the Loan; (4) If the Loan is made, its repayment will be

restricted to GIC Proceeds; (5) To the extent the Loan exceeds GIC

Proceeds, the repayment of the Loan will be waived; and (6) The Plan

will pay no interest or incur any expenses with respect to the proposed

transactions.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,

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

Profit Sharing Plan for Employees of Annis, Mitchell, Cockey, Edwards &

Roehn, P.A. (the Plan) Located in Tampa, Florida

[Application No. D-09906]

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 sale by the Plan to Annis,

Mitchell, Cockey, Edwards & Roehn, P.A. (the Employer), of the Plan's

interest (the Interest) in a limited partnership, for $40,000 in cash,

provided the following conditions are satisfied: (a) The sale is a one-

time transaction for cash; (b) no commissions or other expenses are

paid by the Plan in connection with the sale; and (c) the Plan receives

not less than the fair market value of the Interest as of the date of

the sale as determined by a qualified, independent expert.

Summary of Facts and Representations

1. The Plan is a defined contribution, profit sharing plan which

currently has approximately 105 participants. As of September 30, 1994,

the aggregate fair market value of the Plan's assets was $3,378,407.

The Employer is a professional association engaged in the practice of

law in Tampa, Florida.

2. On June 30, 1988 the Plan acquired the Interest, which is a one-

half unit of limited partnership interest in Hunter's Ridge Associates,

Ltd. (the Partnership). The business of the Partnership is to acquire,

own, operate, improve and otherwise deal with an apartment complex

located in Winter Park, Florida. The Partnership units were not

registered with the Securities and Exchange Commission or the Florida

Division of Securities, but rather were privately placed. The total

number of units offered and sold was 35. No shareholder or employee of

the Employer individually purchased an interest in the Partnership.

3. The Plan has now been modified to permit individual investment

selections by the Plan participants. The Plan's investment in the

Interest is illiquid, difficult to accurately value and hard to

allocate among participants. In order to improve the Plan's liquidity

and to reduce accounting costs for the Plan attributable to this

investment, the Plan would like to sell the Interest to the Employer.

4. If the exemption proposed herein is granted, the Plan will

assign the Interest to the Employer as a substitute investor in the

Partnership, in exchange for a lump sum cash payment equivalent to the

current fair market value of the Interest from the Employer.

Participants' accounts will receive an allocation in cash exactly equal

to the most recent valuation of the Interest. No broker fees

[[Page 8093]] or administrative fees will be incurred by the Plan since

the Employer will absorb the cost of the transfer.

5. Mr. Richard D. Schofield, a registered real estate broker who

has been in the real estate business for 17 years, is the general

partner of the Partnership. Mr. Schofield represents that as of January

5, 1995, the Interest would be appraised as having a fair market value

at its original cost, or $40,000. This is the purchase price that the

Employer proposes to pay to the Plan for the Interest.

6. In summary, the applicant represents that the proposed

transaction satisfies the criteria contained in section 408(a) of the

Act because: (a) The sale is a one-time transaction for cash; (b) the

Plan will pay no commissions or fees in connection with the

transaction; (c) the Plan will receive not less than the current fair

market value of the Interest at the time of the sale; and (d) the fair

market value for the Interest has been determined by Mr. Schofield, a

qualified, independent expert who is the general partner of the

Partnership.

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 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.

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

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, Department of Labor.

[FR Doc. 95-3407 Filed 2-9-95; 8:45 am]

BILLING CODE 4510-29-P