Grant of Individual Exemptions; General Electric

[[Page 21501]]

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 96-34; Exemption Application No. D-

09880, et al.]

Grant of Individual Exemptions; General Electric

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.

General Electric Pension Trust (the Trust), Located in Fairfield,

Connecticut

[Prohibited Transaction Exemption 96-34; Application No. D-09880]

Exemption

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

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

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

shall not apply effective August 3, 1994, to the past and continued

lease (the Lease) by the Trust of office space in a commercial office

building located at 201 Mission Street in San Francisco, California

(the Property), to GE Capital Aviation Services, Inc. (GE Aviation), a

party in interest with respect to employee benefit plans participating

in the Trust, provided the following conditions are met:

(a) All terms and conditions of the Lease are at least as favorable

to the Trust as those which the Trust could have obtained in an arm's-

length transaction with an unrelated party at the time the Lease was

executed;

(b) The rent paid by GE Aviation to the Trust under the Lease is

not less than the fair market rental value of the office space, as

established by an independent qualified real estate appraiser;

(c) David P. Rhoades (Mr. Rhoades), acting as a qualified,

independent fiduciary for the Trust (the Independent Fiduciary),

reviewed all terms and conditions of the Lease prior to the

transaction, as well as any subsequent modifications to the Lease, and

determined that such terms and conditions would be in the best

interests of the Trust at the time of the transaction; and

(d) The Independent Fiduciary represents the interests of the Trust

for all purposes under the Lease as a qualified, independent fiduciary

for the Trust, monitors the performance of the parties under the terms

and conditions of the Lease and the exemption, and takes whatever

action is necessary to safeguard the interests of the Trust throughout

the duration of the Lease.

EFFECTIVE DATE: The exemption is effective for the period from August

3, 1994, until the scheduled termination date of the Lease, as it may

be renewed or extended by the parties subject to the review and

approval of the Independent Fiduciary, or, if earlier, the date the

Lease is actually terminated by the parties.

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 15, 1995, at 60 FR

31512.

NOTICE TO INTERESTED PERSONS: The applicant represents that it was

unable to notify interested persons within the time period specified in

the Federal Register notice published on June 15, 1995. However,

pursuant to an agreement between the applicant and the Department, the

Trust notified all interested persons (including active employees,

former employees and retirees of General Electric Company (GE) and its

affiliates) no later than March 11, 1996.\1\ Interested persons were

advised that they had until April 10, 1996 to comment and/or request a

hearing on the proposed exemption.

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\1\ The applicant represents that notice of the proposed

exemption was provided to the active employees of GE and its

affiliates who are participants and beneficiaries of the plans

participating in the Trust by posting a notice (along with a copy of

the proposed exemption as published in the Federal Register) at GE

locations, in areas that are customarily used for notices to

employees with regard to employee benefits or labor relations

matters, on or before March 11, 1996. Former employees and retirees,

along with other employees, were notified by means of publication of

a notice in the 1994 Summary Annual Reports which were distributed

to such persons during September and October 1995 via first class

mail.

WRITTEN COMMENTS AND MODIFICATIONS: By letter dated November 27, 1995,

the applicant submitted the following comments and requests for

modifications regarding the notice of proposed exemption (the

Proposal).

The Effective Date paragraph in the Proposal states that the

exemption, if granted, will be effective until the scheduled

termination date of the Lease (i.e. September 16, 1999) or, if earlier,

the date the Lease is actually terminated by the parties.

The applicant states that Paragraph 10 of the Summary of Facts and

Representations in the Proposal (the Summary) contemplates that Mr.

Rhoades, as the independent fiduciary acting for the Trust (i.e. the

Independent Fiduciary), will oversee, review and approve any renewals

or extensions of the Lease, if such renewals or extensions are in the

best interests of the Trust. The applicant states further that

Condition (c) of the Proposal indicates that the Independent Fiduciary

will be responsible for reviewing any subsequent modifications to the

Lease and determining that such

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modifications would be in the best interests of the Trust.

The applicant represents that it is likely that the parties will

negotiate whether to renew or extend the Lease at its termination, and

such a renewal or extension may be in the best interests of the Trust

depending on the then-current real estate market. Therefore, the Trust

requests that the exemption be effective until the termination of the

Lease, as it may be renewed or extended by the parties subject to the

review and approval of the Independent Fiduciary.

The applicant represents further that if Mr. Rhoades, the current

Independent Fiduciary, is no longer able to serve in that capacity, the

Trust would retain a replacement Independent Fiduciary with the same

qualifications as Mr. Rhoades and his firm. The replacement Independent

Fiduciary would be required to make the same representations made by

Mr. Rhoades regarding experience, independence from the GE and its

affiliates, and understanding the duties, liabilities and

responsibilities such person would have as a fiduciary under the Act.

In addition, the replacement Independent Fiduciary would be required to

enter into the same form of Independent Fiduciary Agreement used by Mr.

Rhoades.

In response to the applicant's comments, the Department has

modified the Effective Date paragraph in the Proposal by inserting,

after the reference to the scheduled termination date of the Lease, the

phrase ``... as it may be renewed or extended by the parties subject to

the review and approval of the Independent Fiduciary''. The Department

has also modified Conditions (c) and (d) of the Proposal by inserting

``Independent Fiduciary'' as a capitalized term in reference to Mr.

Rhoades, which is meant to incorporate the applicant's concerns

regarding the possibility of a replacement for Mr. Rhoades in the

future.

The Department received two comment letters and various telephone

calls from employees of GE who did not fully understand the Proposal's

effect on benefits provided to participants and beneficiaries of the GE

Pension Plan and other plans in the GE Trust (the GE Plans). In this

regard, the applicant states that a special telephone line was

established by GE to respond to such inquiries by participants and

beneficiaries of the GE Plans. The applicant represents that GE

received over 150 telephone calls in response to the Proposal and that

additional information was provided to interested persons when

requested.

The Department also received two comment letters from interested

persons who oppose the granting of an exemption. One of the commenters

objects to the transaction because the commenter believes that the

Lease involves ``....the risking of GE Pension funds to be used in lieu

of operating capital from the various GE businesses'' and exposes the

GE Trust to ``high risks''. The other commenter does not approve of the

Proposal but did not express any reasons for objecting to the

transaction and could not be reached for further comments.

The applicant has responded to these comments by letter dated April

24, 1996. The applicant represents that the subject transaction does

not involve the use of assets of the GE Pension Plan in lieu of

operating capital of GE. Rather, the applicant states that the

transaction involves the lease of space in an office building currently

owned by the Trust to a GE subsidiary (i.e. GE Aviation) at terms

equivalent to an arm's-length transaction, as reviewed and approved by

a qualified independent fiduciary. The applicant notes that if the GE

subsidiary had not entered into the Lease, the office space likely

would have remained vacant for a longer period, resulting in loss of

income to the Trust (including the GE Pension Plan). Therefore, the

applicant maintains that the transaction is in the best interests of

the Trust and does not in any way expose the Trust to higher risks than

it would have been exposed to absent this transaction. The applicant

concludes that there are sufficient safeguards in place to protect the

interests of the Trust and its participants and beneficiaries.

No other comments, and no requests for a hearing, were received by

the Department from interested persons.

Therefore, the Department has determined to grant the proposed

exemption as modified herein.

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

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

NBD Bancorp, Located in Detroit, Michigan

[Prohibited Transaction Exemption 96-35 Exemption Application No. D-

09986]

Exemption

The restrictions of sections 406(b)(2) of the Act shall not apply

to the merger of the INB Principal Stability Fund (the PS Fund) into

the NBD Stable Asset Income Fund (the SAI Fund); \2\ provided the

following requirements are satisfied:

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\2\ For purposes of this exemption, the PS Fund and the SAI Fund

described herein are collectively referred to as the Funds.

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(1) On the date the merger is executed, the assets in the PS Fund

and the assets in the SAI Fund will be valued in the same manner, under

identical guidelines, by the same individuals;

(2) Upon completion of the merger of the PS Fund into the SAI Fund,

the aggregate fair market value of the interests of the employee

benefit plans (the Plans) participating in the SAI Fund immediately

following the merger, together with any cash received in lieu of

fractional units, equals the aggregate fair market value of each

participating Plans' interest in such Funds immediately before the

merger;

(3) The assets of each of the participating Plans are invested in

the same type of investments both before and after the proposed merger;

(4) Neither NBD Bancorp nor any of its affiliates receives fees or

commissions in connection with the merger;

(5) The Plans will pay no sales commissions or fees, as a result of

the transaction; and

(6) A fiduciary who is acting on behalf of each affected Plan and

who is independent of and unrelated to NBD Bancorp and any of its

affiliates receives advance written notice of the merger of the PS Fund

into the SAI Fund.

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 March 5, 1996, at 61 FR

8670.

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

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

Spreckels Industries, Inc. Employee Stock Ownership Plan (the ESOP);

Spreckels Industries, Inc. Incentive Savings Plan for Union Hourly

Employees (the Hourly Plan); and

Spreckels Industries, Inc. Employees' Incentive Savings Plan (the

Incentive Plan; Collectively, the Plans), Located in Pleasanton,

California

[Prohibited Transaction Exemption 96-36, Exemption Application Nos. D-

09999 through D-10001]

Exemption

The restrictions of sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2),

407(a), 406(b)(1), and 406(b)(2) of the Act and the sanctions resulting

from the

[[Page 21503]]

application of section 4975 of the Code, by reason of section

4975(c)(1) (A) and (E) of the Code, shall not apply to the acquisition,

holding or exercise by the Plans of certain warrants (the Warrants) for

the purchase of Class A new common stock (the New Common Stock) of

Spreckels Industries, Inc. (the Employer), a party in interest with

respect to the Plans; provided that the following conditions are

satisfied:

(a) An independent fiduciary (the I/F) will manage the Warrants and

monitor the value of the Warrants at all times and will be empowered to

assign, transfer, sell, and exercise the Warrants in order to serve the

best interest of the Plans and their participants and beneficiaries;

(b) The fair market value of the Warrants will at no time exceed

twenty-five percent (25%) of the value of the total assets of the

Hourly Plan or the Incentive Plan;

(c) The Warrants that the Plans will acquire resulted from a

bankruptcy proceeding, in which all holders of the Class A old common

stock in Spreckels Industries, Inc. were treated in a like manner,

including the Plans;

(d) The Plans will not incur any expenses or fees in connection

with the proposed transactions;

(e) Any assignment, sale, or other transfer of the Warrants will

not involve a party in interest with respect to the Plans, as defined

in section 3(14) of the Act, unless such transfer is to the Employer,

pursuant to an exercise of the Warrants; and

(f) The I/F will determine the fair market value of the Warrants

upon acquisition by the Plans, and an independent qualified appraiser

will determine the fair market value of the Warrants on a periodic

basis (but not less frequently than annually).

Written Comments

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

Labor (the Department) invited all interested persons to submit written

comments and requests for a hearing on the proposed exemption within

forty-five (45) days of the date of the publication of the Notice in

the Federal Register on January 31, 1996. All comments and requests for

hearing were due by March 18, 1996.

During the comment period, the Department received no requests for

hearing. However, the Department did receive a comment letter from the

applicant, dated April 8, 1996, which informed the Department of

changes in the facts as represented in the proposed exemption. In this

regard, the Employer has engaged Consulting Fiduciaries, Inc. (CFI) to

replace L. Scott Maclise (Mr. Maclise), a registered investment advisor

with Linsco/Private Ledger Financial Services, who was appointed to

serve as the I/F on behalf of the Plans for the purposes of the

exemption. In the comment letter, the Employer requested concurrence

from the Department that the exemption would be granted notwithstanding

the replacement of Mr. Maclise as the I/F for the Plans.

Attached to the comment letter, the applicant included: (1) A copy

of a letter, dated April 2, 1996, which details the agreement between

the Employer and CFI concerning the engagement of CFI to provide

certain services as independent fiduciary on behalf of the Plans; and

(2) a letter, dated April 2, 1996, from CFI to the Department in which

CFI made certain representations. In this regard, CFI has accepted

appointment as I/F on behalf of the Plans for the purposes of the

transactions which are the subject of this exemption and, except in the

event of discharge or resignation as described in the agreement with

the Employer, will serve throughout the duration of the transactions.

CFI represents that it is qualified to serve as I/F, in that it is

a registered investment adviser under the Investment Advisers Act of

1940 and provides professional, independent fiduciary decision making,

consultation, and alternative dispute resolution services to plans,

plan sponsors, trustees, and investment advisers. Further, CFI is

experienced in representing clients as a fiduciary in stock

transactions.

CFI represents that it has the power to negotiate and act

independently of the Employer and its officers, directors,

shareholders, agents and representatives with respect to the

transactions which are the subject of this exemption. In this regard,

CFI is not affiliated with the Employer and the income CFI receives

from the Employer is expected to represent less than one percent (1%)

on an annualized basis of its income over the life of its engagement as

I/F.

CFI represents that it understands its duties as I/F under the Act

and the Code and will assume all duties, responsibilities, and

obligations imposed on it as I/F of the Plans in connection with the

transactions which are the subject of this exemption. In this regard,

CFI represents that it will take whatever acts are necessary to review,

analyze, negotiate, monitor, and approve or disapprove the transactions

and will be responsible for the Plans' acquisition and holding of the

Warrants. Bearing in mind its fiduciary duties under the Act, CFI

represents that it will determine whether the transactions: (a) Are

prudent and for the exclusive purpose of providing benefits to

participants; (b) are fair to the Plans from a financial point of view;

and (c) are in accordance with the terms and conditions as set forth in

the Notice.

CFI will decide on behalf of the Plans (a) whether or not the Plans

should acquire and hold the Warrants; and (b) when, if at all, the

Warrants should be exercised to acquire New Common Stock or sold and

the proceeds used to acquire such stock. With respect to the

acquisition of the Warrants, CFI represents that it will conduct due

diligence to evaluate whether the Plans should enter into the

transactions which are the subject of this exemption. CFI represents

that it bears full power to manage and monitor the value of the

Warrants at all times. In this regard, CFI represents that it will

determine the fair market value of the Warrants upon acquisition by the

Plans.

With respect to the holding of the Warrants by the Plans, CFI

represents that such holding will not impair the diversification,

prudence, or liquidity of the Plans. In this regard, CFI represents

that it will be responsible, as appropriate, for insuring that the

Warrants will be appraised on a periodic basis (but not less frequently

than annually).

CFI represents that it is empowered to assign, transfer, sell, and

exercise the Warrants in order to serve the best interests of

participants and beneficiaries of the Plan. In this regard, CFI

represents that it will not in any way transfer, assign, or sell the

Warrants to a ``party in interest'' within the meaning of section 3(14)

of the Act or section 4975(e)(2) of the Code, unless such a transfer is

to the Employer pursuant to an exercise of such Warrants.

After giving full consideration to the entire record, including the

written comment from the applicant, the Department has decided to grant

the exemption, as described and concurred in above. In this regard, the

comment letter submitted by the applicant to the Department has 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 Welfare Benefits

Administration, Room N-5638, U.S. Department of Labor, 200 Constitution

Avenue, N.W., Washington, D.C. 20210.

For a more complete statement of the facts and representations

supporting the

[[Page 21504]]

Department's decision to grant this exemption refer to the Notice

published on January 31, 1996 at 61 FR 3470.

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

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

Budge Clinic Profit Sharing Plan and Trust (the Plan), Located in

Logan, Utah

[Prohibited Transaction Exemption 96-37; Exemption Application No. D-

10142]

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 certain improved real property located

in Logan, Utah (the Property) by the Plan to IHC Health Services, Inc.,

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

following conditions are satisfied:

(A) All terms and conditions of the transaction 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 Plan receives a cash purchase price for the Property which

is no less than the fair market value of the Property as of the sale

date; and

(C) The Plan does not incur any expenses or suffer any loss with

respect to the transaction.

For a more complete statement of the facts and representations

supporting this exemption, refer to the notice of proposed exemption

published on March 12, 1996 at 61 FR 10015.

FOR FURTHER INFORMATION CONTACT: Ronald Willett 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 accurately describes all material terms of the transaction

which is the subject of the exemption.

Signed at Washington, D.C., this 6th day of May, 1996.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, Department of Labor.

[FR Doc. 96-11744 Filed 5-9-96; 8:45 am]

BILLING CODE 4510-29-P