Proposed Exemptions; Mewbourne Oil Company, Inc. Plan (the Plan)

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10173, et al.]

Proposed Exemptions; Mewbourne Oil Company, Inc. Plan (the Plan)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the

Department of Labor (the Department) of proposed exemptions 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).

Written Comments and Hearing Requests

Unless otherwise stated in the Notice of Proposed Exemption, all

interested persons are invited to submit written comments, and with

respect to exemptions involving the fiduciary prohibitions of section

406(b) of the Act, requests for hearing 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

[[Page 37925]]

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, NW., Washington, DC

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, NW., Washington, DC 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 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.

Mewbourne Oil Company, Inc., Plan (the Plan) Located in Tyler,

Texas

[Application No. D-10173]

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 past contribution by Mewbourne Oil Company

(the Employer) to the Plan of a US Treasury Strip Bond (the Bond) and

the subsequent exchange by the Employer of the Bond for cash provided

that: (a) the contribution was a one-time transaction; (b) the Bond was

valued at the fair market value as of the date of the contribution; (c)

no commissions were paid in connection with the transaction; (d) the

Bond represented less than 25% of the fair market value of the Plan's

assets at the time of the contribution; and (e) the Bond was returned

to the Employer in exchange for cash in the amount of $173,759 plus

interest.

Effective Date: If the proposed exemption is granted, the exemption

will be effective February 11, 1994.

Summary of Facts and Representations

1. The Plan, established and maintained by Mewbourne Oil Company,

Inc., is a defined benefit plan that currently has 130 plan

participants and plan assets of $4.6 million as of August 25, 1995.

Joseph F. Odom, J. Roe Buckley and Curtis Mewbourne serve as the Plan

trustees.

2. On February 11, 1994, the Bond was transferred to the Plan from

a nonqualified corporate fund (the Transfer) which was established by

the Employer for the purpose of holding future contributions to the

Plan to satisfy the funding requirements for the year ending 1994. The

Bond was U.S. Treasury Zero Strips maturing in August 15, 2010 at

$525,000. At the time of the Transfer, the Plan trustees requested that

Merrill Lynch calculate the value of the Bond. Merrill Lynch

represented that it determined that the Bond had a value of $173,759 on

February 11, 1994. Merrill Lynch used the February 14, 1994 edition of

the Wall Street Journal's published value of $331.25 per $1000 bond to

calculate the Bond's value and adjusted this quote by $147 to reflect

the odd lot transfer to the Plan resulting in the $173,759 value.

3. The applicant represents that the contribution in kind of the

Bond was made in error. Ms. Mitzi Perry of Werntz & Associates, an

actuarial consultant for employee benefit plans, represented that in

late 1993, Mr. Curtis Mewbourne, President of the Mewbourne Oil

Company, Inc., contacted Ms. Perry regarding whether 1994 contributions

could be made from the nonqualified fund. Ms. Perry informed Mr.

Mewbourne that this could be done. Mr. Mewbourne assumed from his

conversation with Ms. Perry that he could transfer the Bond from the

nonqualified account to the Plan. As a result of his misunderstanding,

Mr. Mewbourne instructed Merrill Lynch to transfer the Bond to the Plan

on February 15, 1994.

4. At the end of the Plan year 1994, Ms. Perry reviewed the

financial information in preparation of the actuarial valuation and

discovered that the contributions for the year were made partially in

the cash amount of $126,000 and the Bond. Ms. Perry represents that she

immediately informed Mr. Mewbourne that the contribution of the Bond

was a prohibited transaction. Mr. Mewbourne took immediate steps to

correct the mistake under Ms. Perry's advisement. On January 30, 1995,

a cash contribution of $173,759 was made to the Plan in exchange for

the Bond. An additional $7,853 was paid to the Plan on January 31, 1995

reflecting interest earned based on the average investment earnings

rate for the Plan during the period from February 11, 1994 to January

31, 1995 during which the Plan held the Bond. The applicant represents

that no loss resulted to the Plan as a result of the transactions. In

this regard, the applicant represents that the Plan received more than

the fair market value of the Bond when the Employer exchanged the Bond

in the above described transaction. According to the applicant, Merrill

Lynch's valuation of the Bond as of January 31, 1995 equaled $157,988

reflecting the price that the Plan would have received had it sold the

Bond on January 31, 1995.

5. In summary, the applicant represents that the subject

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

Act because: (a) the contribution was a one-time transaction; (b) the

transaction occurred as a result of a misunderstanding between the Plan

trustees and the pension consultant; (c) when the mistake was

discovered, the Bond was removed from the Plan and replaced with cash

in the amount of the value of the Bond at the time of the Transfer plus

interest.

For Further Information Contact: Allison Padams of the Department,

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

[[Page 37926]]

Dillard's Marine & Sports Center, Inc., Profit Sharing Plan (the

Plan) Located in Anderson, South Carolina

[Application No. D-10214]

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 FR 32836, 32847, August 10, 1990). If the exemption

is granted, the restrictions of sections 406(a) and 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 loan of $47,962.50 (the

Loan) by the Plan from the individual account of William M. Dillard

Jr., to Dillard's Marine & Sports Center, Inc., the sponsoring employer

of the Plan (the Employer) and a party in interest with respect to the

Plan; provided that (1) the terms and conditions of the proposed Loan

are no less favorable to the Plan than those obtainable in an arm's-

length transaction with an unrelated third-party at the time the

proposed Loan is consummated; (2) the Loan will at all times be secured

by collateral having a value that exceeds 150 percent of its

outstanding principal; (3) the Loan will be at all times less than 25

percent of the balance in the individual account maintained in the Plan

for William M. Dillard, Jr.; and (4) an independent fiduciary will

approve and monitor the transaction and take whatever actions are

necessary to protect the interests of the Plan.

Summary of Facts and Representations

1. The Employer, a South Carolina corporation, is a manufacturer

and wholesaler of sporting goods in several states in the eastern part

of the United States and also in Germany. There are three shareholders

who own the Employer. William M. Dillard, Jr., (Mr. Dillard) holds 63.3

percent of the issued and outstanding shares, his son, William N.

Dillard, III holds 3.8 percent, and Patrick H. Hickok holds 32.9

percent. The Employer currently employs 45 individuals.

2. The Plan is a defined contribution plan with individual accounts

for 33 participants and total assets of $450,682, as of March 31, 1996.

The applicant represented that the individual account in the Plan for

Mr. Dillard had assets of $297,450, as of March 31, 1996. The Plan

trustee is Mr. Dillard.

Richard L. King (Mr. King), a principal of Southeastern Trust

Company (Southeastern Trust), a charted trust company under the banking

laws of South Carolina, serves as investment manager for the Plan and

for Mr. Dillard's personal assets. Southeastern Trust also serves the

Plan as custodian of its assets. The applicant represents that Mr.

Dillard's individual account in the Plan and his personal assets when

combined are less than \1/2\ of 1 percent of the total assets

Southeastern Trust currently administers.

3. The applicant represents that the Loan will be made only from

Mr. Dillard's individual account in the Plan, at his sole direction,

and represents that the Loan will be used by the Employer to pay-off

and partially pay-off loans currently outstanding with commercial

lenders. The Loan will be collaterized by a first mortgage executed by

Mr. Dillard on real property leased to and used by the Employer, and

located at 113 Shockley Ferry Road, Anderson County, South Carolina.

The real property pledged as collateral for the Loan has been

appraised, as of January 4, 1996, by H. Clinton Taylor (Mr. Taylor),

State Certified General Real Estate Appraiser, South Carolina,

Certificate Number CG 189, located in Anderson County, South Carolina.

Mr. Taylor determined that the real property had a fair market value of

$180,000 of which $94,000 is attributable to land. The applicant

represents that at all times the collateral for the Loan will exceed

150 percent of its outstanding principal.

4. The Loan provides for the payment of interest at 9.75 percent

per annum over a period of 5 years with repayments by the Employer made

in quarterly installments of principal and interest in the amount of

$3,058.72. The terms of the Loan also provide that if the quarterly

installments are 15 days late the Employer will pay a penalty of 5

percent of the amount due and owing.

Also, repayment of the Loan may be accelerated by the Employer

without incurring a penalty.

Mr. Robert L. Tennyson, Commercial Real Estate, of the Wachovia

Bank of South Carolina, N.A., located in Greenville, South Carolina, in

a letter to Mr. King, dated December 21, 1995, represented that the

interest rate Wachovia would charge on a 5 year period loan, to be

repaid in quarterly installments, and secured by a first priority

mortgage equal to approximately 150 percent of the loan, would be

approximately 7.75 percent.

The applicant and Mr. King, as independent fiduciary, represent

that the Loan is in the interest of the Plan because the Loan will pay

a higher rate of interest than the current rate of return from the

other investments of the Plan. Also, the applicant and Mr. King

represent that the terms and conditions of the Loan provide more than

adequate protection for the rights of the participant and his

beneficiaries because of the excessive fair market value of the

collateral for the Loan. Mr. King further represents that as

independent fiduciary he will act in the best interests of the Plan and

will protect the interests of the Plan by foreclosing, if necessary,

under the terms of the note and mortgage executed by Mr. Dillard.

5. In summary, the applicant represents that the proposed

transaction will satisfy the provisions of section 408(a) of the Act

because (a) the Loan will be adequately secured at all times; (b) the

Loan at all times will be less than 25 percent of the balance in the

individual account maintained for Mr. Dillard; (c) the terms and

conditions of the Loan will be as favorable to the Plan as obtainable

from an unrelated party; and (d) Mr. Dillard, the only participant in

the Plan whose account is affected by this proposed transaction, has

determined that the proposed transaction would be in the interest of

his account in the Plan, and he desires that the proposed transaction

be undertaken.

Notice to Interested Persons: Since Mr. Dillard is the only person

in the Plan to be affected by the proposed transaction, it has been

determined that there is no need to distribute the notice of proposed

exemption to interested persons. Comments and requests for a public

hearing are due 30 days from the date of publication of this notice of

proposed exemption in the Federal Register.

For Further Information Contact: Mr. C.E. Beaver of the department,

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

Normike Industries, Inc., Profit Sharing Plan (the Plan), Located

in Plainville, Connecticut

[Application No. D-10239]

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

[[Page 37927]]

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 certain improved real property located in

Plainville, Connecticut (the Property) to Norman and Diane Stoll,

parties in interest with respect to the Plan; provided that the

following conditions are satisfied:

(A) All terms of the transaction 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) The Plan incurs no costs or expenses related to the

transaction;

(C) The Plan receives a cash purchase price for the Property in the

amount of no less than the greater of (1) the Property's fair market

value as of the date of the sale, or (2) $57,500;

(D) Before the transaction is consummated, the Plan has received

rental payments of no less than the Property's fair market rental value

for each month of the Plan's ownership of the Property in which the

Property was occupied by Normike Industries, Inc. (the Employer), the

sponsor of the Plan; and

(E) Within 60 days of the publication in the Federal Register of a

notice granting the exemption proposed herein, if granted, the Employer

makes final payment to the Internal Revenue Service of any remaining

unpaid excise taxes which are applicable under section 4975(a) of the

Code by reason of the Employer's lease of the Property from the Plan.

Summary of Facts and Representations

1. The Plan is a defined contribution profit-sharing plan with

three participants and total assets of $133,603 as of June 30, 1995.

The Plan is sponsored by the Employer, Normike Industries, Inc., a

closely-held Connecticut corporation engaged in the precision jig

grinding of parts for tool and die manufacturing. The trustees of the

Plan are Norman Stoll and his spouse, Diane Stoll (the Stolls), each of

whom is also a participant in the Plan. Mr. Stoll is also president of

the Employer.

2. Among the assets in the Plan is the Property, an industrial

condominium unit located at 1 Town Line Road, Town Line Tradesman

Center in Plainville, Connecticut. The Plan purchased the Property from

an unrelated party on December 11, 1993 for a purchase price of

$57,500.\1\ The Stolls represent that they caused the Plan to purchase

the Property with the intention of leasing it to the Employer, and they

represent that they were not aware that such an arrangement might be in

violation of the prohibited transactions provisions of the Act. In

January and February of 1994 the Employer undertook to improve and

refurbish the Property to enable the Employer to move its operations

into the Property. A lease effective March 1, 1994 (the Lease) was

executed between the Plan and the Employer under which the Employer

agreed to lease the Property from the Plan for an initial term

commencing March 1, 1994 and ending April 30, 1997, with an option to

renew for an additional five years. The Lease provides for fixed rent

of $9,000 per annum, payable monthly, for the first two years and

$12,000 per annum, payable monthly, for the remainder of the Lease's

initial term. During any renewal term, the rent would increase pursuant

to a ``cost of living'' factor utilizing the consumer price index. The

Stolls represent that they determined the rental amounts on the basis

of a survey of the rental market at the time of the Lease execution.

The Lease also required the Employer to pay all real estate taxes and

utility charges. The Stolls represent that other Lease terms are

standard provisions in commercial real property leases. The Stolls

represent that the total rental payments received by the Plan pursuant

to the Lease have resulted in an annual rate of return of seventeen

percent on the Plan's investment in the Property.

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\1\ The Department notes that the decisions to acquire and hold

the Property are governed by the fiduciary responsibility

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

regard, the Department herein is not proposing relief for any

violations of Part 4 of the Act which may have arisen as a result of

the acquisition and holding of the Property.

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3. The Stolls represent that after they were advised by the

Employer's accountant that the Lease may constitute a prohibited

transaction under the Act, they met with legal counsel in December 1995

to discuss the alternatives available to address the issue. The Stolls

determined that the Lease should be terminated and that the Plan should

liquidate the Property. The Stolls are proposing to purchase the

Property from the Plan and are requesting an exemption for the purchase

transaction under the terms and conditions described herein.

4. The Stolls propose to purchase the Property from the Plan for

the greater of (a) the Property's fair market value as of the sale

date, or (b) the purchase price originally paid by the Plan. The

Property was appraised for its fair market value by C. Kevin Bokoske, a

professional real estate appraiser who determined that the Property had

a fair market value of $55,000 as of January 26, 1996. Accordingly, the

Stolls propose a purchase price of $57,500, which is the amount the

Plan paid for the Property in 1993. The Employer will pay all expenses

related to the transaction and the purchase price will be paid in cash.

The Stolls represent that the sale transaction will be consummated as

soon as possible after the publication in the Federal Register of a

notice granting the exemption proposed herein, if granted. The Stolls

represent that the commercial and industrial real estate market in

which the Property is situated is very inactive and is described as a

``buyer's market'' in which purchasers are able to aggressively

negotiate the price of the property. In the context of the depressed

market, the Stolls represent that their willingness to pay a purchase

price equal to the Plan's original investment, in excess of the fair

market value, renders the proposed transaction more favorable to the

Plan than the terms which the Plan could obtain from unrelated buyers.

5. The Stolls have agreed that if it is determined that the total

of rental payments paid to the Plan under the Lease are less than the

fair market rental value of the Property for the period of the

Employer's occupancy, commensurate with the sale transaction the Stolls

will remit to the Plan the difference between the fair market rent and

the rent actually paid. An assessment of the Property's fair rental

value has been conducted by the real estate appraisal firm of Aldieri

Associates, Inc. (AAI), of Bristol, Connecticut. In a report dated June

25, 1996, AAI states that the Property had a fair market rental value

of $10,000 per annum for 1994, 1995 and 1996. As a condition of the

exemption proposed herein, the Stolls are required to pay the Plan the

difference between the total rent actually paid through the sale date

and the total rents due at the rate of $10,000 per annum.

6. The Department is not proposing exemptive relief for the

Employer's lease of the Property from the Plan pursuant to the Lease.

The Employer recognizes that the Employer's lease of the Property

effective March 1, 1994 through the sale date constitutes a prohibited

transaction under the Act and Code for which no exemptive relief is

proposed herein. The Stolls represent that in January 1996 the Employer

paid to the Internal Revenue Service (the Service) the excise taxes

arising under section 4975(a) of the Code by reason of the Lease for

the plan years ending June 30, 1994 and June 30, 1995. The Stolls have

agreed that within 60 days of the

[[Page 37928]]

publication in the Federal Register of a notice granting the exemption

proposed herein, the Employer will make final payment to the Service of

any remaining unpaid excise taxes applicable under section 4975(a) of

the Code by reason of Lease the through the date of the sale.

7. In summary, the applicants represent that the proposed

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

following reasons: (a) The transaction will enable the termination of

an ongoing prohibited transaction, the Lease; (b) the Plan will receive

cash for the Property in the amount of no less than its original

purchase price and no less than its fair market value as of the sale

date; (c) the sale will be a one-time cash transaction and the Plan

will incur no expenses related to the sale; (d) as part of the

transaction, the Plan will receive the difference between the rents

actually paid under the Lease and the rents due in accordance with the

AAI appraisal; and (e) the Employer will be required to pay all excise

taxes applicable under section 4975(a) of the Code with respect to the

Lease which remain unpaid at the time of the sale transaction.

For Further Information Contact: Ronald Willett of the Department,

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

Pacific Mutual Life Insurance Company (PM), Located in Newport

Beach, California

[Application No. D-10258]

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 section 406(a) 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 (D) of the Code, shall not

apply to the sale to employee benefit plans (the Plans) of a synthetic

guaranteed investment contract (the Buy/Hold Synthetic GIC) offered by

PM, which is a party in interest with respect to the Plans, provided

the following conditions are satisfied: (a) Prior to the execution of

such Buy/Hold Synthetic GIC, an independent fiduciary of such Plan

receives a full and detailed written disclosure of all material

features of the Buy/Hold Synthetic GIC, including all applicable fees

and charges; (b) following receipt of such disclosure, the Plan's

independent fiduciary approves in writing the execution of the Buy/Hold

Synthetic GIC on behalf of the Plan; (c) all fees and charges imposed

under such Buy/Hold Synthetic GIC are reasonable; (d) each Buy/Hold

Synthetic GIC will specifically provide for an objective means for

determining the fair market value of the securities owned by the Plan

pursuant to the Buy/Hold Synthetic GIC; (e) each Buy/Hold Synthetic GIC

will specifically provide for an objective means for determining the

interest rates to be credited periodically under the contract; (f) PM

will maintain books and records of all transactions which will be

subject to annual audit by independent certified public accountants

selected by and responsible solely to the Plan; and (g) the Buy/Hold

Synthetic GICs will only be marketed to Plans or collective investment

funds which have at least $50 million in assets.

Effective Date: If the proposed exemption is granted, the exemption

will be effective September 2, 1993.

Summary of Facts and Representations

1. PM is a mutual life insurance company incorporated under the

laws of the State of California. PM is also a Registered Investment

Adviser under the Investment Adviser's Act of 1940. PM is currently

rated as follows: A.M. Best--A+; Standard & Poor's--AA+; Duff &

Phelps--AA+; and Moody's--Aa3. As of December 31, 1995, PM had assets

of approximately $18 billion and net policy reserves of approximately

$10.8 billion. A significant portion of PM's business consists of

writing insurance and annuity contracts, guaranteed investment

contracts, and other types of funding agreements for numerous pension

plans subject to the Act.

2. PM has requested the exemption proposed herein with respect to a

``Buy/Hold'' Synthetic GIC, which is a variation on traditional

guaranteed investment contracts (GICs). PM's Buy/Hold Synthetic GIC

will be marketed to Plans (including, without limitation, defined

contribution plans). PM will negotiate the terms of the Buy/Hold

Synthetic GIC with the appropriate fiduciary of such a Plan, which is

generally expected to be the Plan's named fiduciary and not an

independent investment professional.2

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\2\ The Department notes that section 404(a)(1) of the Act

requires, among other things, that a fiduciary of a plan must act

prudently, solely in the interest of the plan's participants and

beneficiaries, and for the exclusive purpose of providing benefits

to participants and beneficiaries when making investment decisions

on behalf of a plan. The Department notes that in order to act

prudently in making investment decisions, plan fiduciaries must

consider, among other factors, the availability, risks and potential

return of alternative investments for the plan.

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PM represents that the Buy/Hold Synthetic GIC provides purchasers

with the advantages of a traditional GIC, while providing purchasers

with greater security with respect to their investment than a

traditional GIC. Under PM's Buy/Hold Synthetic GIC, each Plan retains

legal title to all of its investments and has the benefit of a contract

which guarantees that all employee initiated benefit payments and

transfers will be paid at the Contract Value Record (see rep. 4,

below).

3. Like traditional GICs, PM's duties and obligations with respect

to the Buy/Hold Synthetic GIC are governed by the terms of an insurance

contract (the Contract) between the Plan and PM. The Contract is issued

pursuant to applicable state insurance law and is subject to the

jurisdiction of the appropriate state Department of Insurance. While

certain terms and conditions of each Contract will be negotiable by the

Plan and PM, once the Contract has been executed PM will have no

discretion over any of the terms. The Buy/Hold Synthetic GIC is issued

by PM in the ordinary course of its business. PM represents that it

will only market the Buy/Hold Synthetic GIC to Plans (or to collective

investment funds established for the investment of assets of more than

one Plan) which have at least $50 million in assets. The Buy/Hold

Synthetic GIC is described in greater detail below.

4. Each Buy/Hold Synthetic GIC will consist of two components. One

component is the underlying security or portfolio of investment assets

(the Investment Assets), title to which will remain with the Plan. The

underlying Investment Assets will primarily be high grade, fixed income

securities, which will be selected and managed by a Plan fiduciary

independent of PM. The value of the investment assets will be

determined by objective standards. While the Investment Assets do not

come under PM's administration or control, they affect the second

component of each Contract, as will be discussed more fully below. The

second component under each Buy/Hold Synthetic GIC will be an

accounting record (the Contract Value Record or Book Value Record)

established by PM to record the Plan's interest under the Synthetic

GIC. This is the amount available to Plan participants in the event

they elect to withdraw funds pursuant to provisions of the Plan. The

Contract Value Record will initially be equal to the value of the

Investment

[[Page 37929]]

Assets at the inception of the Contract. Thereafter, the Contract Value

Record will be credited with a rate of interest (the Credited Rate)

that will be reset periodically (monthly, quarterly, semi-annually or

annually) in accordance with an objective formula established under the

Contract (see rep. 7, below). No element of the Credited Rate formula

is within PM's discretion.

In addition, solely with respect to certain Contracts issued before

August 11, 1995, PM has established a deposit account (the Deposit

Account), consisting of certain cash contributions made to PM by the

Plan under the terms of the Contract. The applicant represents that,

under California law as in effect prior to August 11, 1995, a Deposit

Account may have been required to have the Contract qualify as an

insurance contract under the law of that State. The applicant further

represents that after such date, a Deposit Account is no longer

required under California law.

5. Under the Buy/Hold Synthetic GIC the Investment Assets will be a

single security or a fixed portfolio of securities which will be

established at the inception of the Contract and held until maturity.

6. The Buy/Hold Synthetic GIC will be supported by one or more

specific fixed income securities that are bought in the primary or

secondary market and held until the Contract matures. High quality

mortgage-backed securities will be the primary security utilized,

although other high quality securities may be used to support a Buy/

Hold Synthetic GIC. Regardless of whether a mortgage-backed or other

type of security is utilized, all Investment Assets will have

predictable yield and cash flow characteristics. As principal and

interest payments are made on the Investment Assets, such amounts will

be made available to the Plans for reinvestment outside of the Buy/Hold

Synthetic GIC at the direction of a fiduciary independent of PM.

Investment Assets will be sold or otherwise distributed to the Plan

only upon termination of the Contract or, under circumstances set forth

in the Contract, to provide amounts for benefit payments due to Plan

participants or for participant-directed transfers to other investments

under the Plan.

7. PM represents that the attractive feature of the Buy/ Hold

Synthetic GIC to a Plan is that PM assumes certain obligations with

respect to the availability of funds for benefit withdrawals and

transfers and the return realized from the Investment Assets.

Mechanically, this is accomplished through the establishment of a

Contract Value Record.

The Contract Value Record reflects a guarantee of principal and the

Credited Rate, pursuant to the formula established in the Contract. The

Credited Rate is equal to the projected internal rate of return 3

of the underlying Investment Assets and is guaranteed never to be below

0%. The Credited Rate of interest is reset periodically, so that it

will at all times reflect the projected rate of return for the

Investment Assets (determined without regard to any return from the

reinvestment of dividends and other proceeds on such Investment Assets,

which will be so reinvested outside the Buy/Hold Synthetic GIC). Each

component of this formula will be set forth in the Contract and be

explained to the independent fiduciary who decides whether to purchase

the Buy/Hold Synthetic GIC on behalf of any Plan. PM will have no

discretion in setting this Credited Rate.

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

3 The term ``internal rate of return'' means the rate of

return on the Investment Assets determined without regard to any

return from the reinvestment of dividends and other proceeds on such

Investment Assets, which will be so reinvested outside the Buy/Hold

Synthetic GIC.

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

All participant initiated benefit payments and transfers are

guaranteed to be paid at the Contract Value Record. The Contract Value

Record will be reduced each month dollar for dollar for the benefit and

transfer payments made to the Plan and for the amount of principal

payments and coupon interest received by the Plan from the underlying

Investment Assets. The Contract matures when the Contract Value Record

is equal to 5% of its original balance. PM guarantees that the Plan

will receive the greater of the Investment Assets or the Contract Value

Record on the maturity date (see rep. 9, below). Since the Contract

Value Record's Credited Rate will be equal to the underlying Investment

Assets' projected internal rate of return, any difference between the

value of the Investment Assets and the Contract Value Record should be

insignificant on the maturity date. Thus, any payment PM will have to

make to support the Contract Value Record should be negligible.

8. A Plan's fiduciary may also elect to terminate the Buy/Hold

Synthetic GIC at any time. If the Plan's fiduciary terminates the

Contract, the Plan will have complete control over the Investment

Assets (i.e., they may be invested without any contractual constraints)

and PM will have no further obligations with respect to the Contract

Value Payment (see rep. 10, below). In the ordinary course, if the

Contract is terminated within three years of its effective date, an

early termination charge, intended to enable PM to recoup its costs and

determined under a fixed objective formula to be set forth in the

Contract, may apply.

9. Under the Buy/Hold Synthetic GIC, PM guarantees the availability

of funds for participant initiated withdrawals up to the amount of the

Contract Value Record balance as of any date. Neither PM, the Plan nor

the Plan's fiduciaries will have any discretion over when a withdrawal

may be made from the Contract. The Contract will not be accessed for

withdrawals until other specified sources of funds (e.g., contributions

to the Plan's fixed income fund under which the Buy/Hold Synthetic GIC

is held, current investment income, maturing proceeds, and cash

equivalents) have been depleted. If the Plan does make withdrawals from

the Contract, they will be made from the following sources in the order

listed until exhausted:

(a) Available cash attributable to the underlying Investment Assets

including all cash flow available from the Investment Assets; and

(b) Cash realized from the sale of the Investment Assets. The

percentage of the securities sold will be equal to the percentage the

Contract Value Record is decreased to recognize the benefit payment.

This means that if 10% of the Contract Value Record is to be accessed

to meet a withdrawal, 10% of the Investment Assets will be sold.

A fiduciary of the Plan independent of PM will generally determine

which of the Investment Assets will be sold, except that PM may require

that the Plan sell the asset in the size category required to effect

the withdrawal that has the highest ratio of market value to book

value. If any Investment Assets have to be sold to effect any

withdrawal, the Contract will specify that the value of the Investment

Assets will be determined based upon the highest of three competitive

bids for such Investment Assets received from parties independent of PM

and the Plan. If the proceeds realized by the sale of the underlying

securities are less than the portion of the Contract Value Record

decreased to recognize the benefit payment, PM will make up the

difference. If the proceeds to be realized by the sale of the

underlying securities are greater than the portion of the Contract

Value Record expected to be decreased to recognize the benefit payment,

it is expected that the Plan's fiduciary would exercise its right to

terminate the Contract and take full control over the Investment

Assets. This

[[Page 37930]]

is because, as the Buy/Hold Synthetic GIC is designed, the value of the

Contract Value Record and the Investment Assets are supposed to be

equal at maturity. If at any given point in time the value of the

Investment Assets exceeds the value of the Contract Value Record, it

would generally reflect an unanticipated increase in the market value

of the underlying Investment Assets, the benefit of which could likely

be lost if the Investment Assets were held to maturity. If the

fiduciary does not terminate the Contract when the proceeds realized by

the sale of the underlying securities are greater than the portion of

the Contract Value Record decreased to recognize the benefit payment,

the Plan will have to pay PM an additional fee equal to such

difference. This additional fee is intended to protect PM from the

additional risks associated with the sale of assets with superior

performance, while underperforming assets are left subject to PM's

obligation to make a Contract Value Payment (see rep. 10, below).

10. Upon maturation of the Contract, the value of the Investment

Assets will be determined by taking the highest of at least three

competitive bids from unrelated third parties. If the Contract Value

Record exceeds the value of the Investment Assets at the time the

Contract matures, PM will make a one-time payment to the Plan equal to

such excess (the Contract Value Payment). Any Contract Value Payment

will be paid from PM's General Account. If the value of the Investment

Assets equals or exceeds the Contract Value Record, no Contract Value

Payment will be made, and such excess belongs exclusively to the Plan.

As and when such Investment Assets mature, the Plan's fiduciaries

will reinvest the proceeds of the Investment Assets as they see fit

(outside the Buy/Hold Synthetic GIC Contract). Accordingly, the value

of the Investment Assets will decline over time as dividends, interest

and other proceeds are paid out on the Investment Assets. The Contract

Value Record will be correspondingly reduced as amounts are distributed

from the arrangement. By reason of these distributions, it is expected

that the Contract Value Record will decrease significantly from its

initial value by the time the Contract matures. Given this reduction in

the Contract Value Record and the fact that the Contract Value Record's

Credited Rate is calculated based upon the expected return of the

Investment Assets, any Contract Value Payment at maturity should be de

minimis.

11. PM represents that it believes that the Synthetic GIC is

superior to traditional GICs in that each Buy/Hold Synthetic GIC serves

the dual functions of: (a) affording a Plan substantially greater

protection against the risk that it will lose its investment; and (b)

providing the Plan with an opportunity for a greater rate of return

than a traditional GIC. PM represents that it guarantees that all

participant initiated benefit payments and transfers will be paid at

the Contract Value Record. This means that, despite fluctuations in the

market value of the Investment Assets, each participant in the Plan is

protected against any loss of principal by PM's contractual commitment.

The Investment Assets to be held under the Contract will be

determined at the inception of the Contract. These Investment Assets

will be disposed of only upon termination of the Contract or upon the

occurrence of certain events specified in the Contract (see rep. 9,

above). The Plan holds legal title to the Investment Assets. Subject to

the Plan's obligations to pay PM's fees, any appreciation in value of

the Investment Assets, as well as current interest and principal

payments, belong to the Plan. The only risk to the Investment Assets

posed by the financial condition of PM relates to the amount

representing the excess, if any, of the balance on the Contract Value

Record over the actual value of the Investment Assets. PM represents

that the Buy/Hold Synthetic GIC provides greater security than a

traditional GIC wherein a plan places a substantial amount of its

assets at risk based on the credit worthiness of the issuer of the GIC.

12. PM will maintain full and complete records and books reflecting

the various accounts maintained in accordance with the Buy/Hold

Synthetic GICs. Upon written request from a Plan, PM will also make its

records pertaining to the Synthetic GICs available during normal

business hours for audit by independent certified public accountants

hired by the Plan's fiduciary.

13. The applicant makes the following representations with respect

to the valuation of assets under the Synthetic GICs. Under the Buy/Hold

Synthetic GIC, the time at which the value of the Investment Assets is

relevant to PM's obligations is at the time of any withdrawal,

including upon termination of the entire arrangement. At such time, the

value of the Investment Assets will be determined based upon the

highest of three competitive bids for such Investment Assets received

from an independent party (see rep. 10, above).

14. PM and the Plan's fiduciary will agree to an expense charge

(determined at the inception of the Contract) payable to PM with

respect to the Buy/Hold Synthetic GIC that will be stated as a fixed

percentage of the average value of the Contract Value Record during the

preceding calendar quarter. This charge covers four elements: (a) A

benefit risk charge, (b) a maturity risk charge, (c) an expense charge

and (d) a profit charge. The benefit risk charge is a fee for assuming

the risk of loss associated with benefit responsive withdrawals. It

will be developed on a Plan specific basis after a review of the Plan's

benefit payment cash flow history and the structure of the Plan itself

(i.e., the frequency at which withdrawals and investment transfers are

permitted, and the structure of alternate investment opportunities).

This charge may be supplemented under certain circumstances if the

effect of certain withdrawals increases PM's potential exposure (see

rep. 9, above). The maturity risk charge will be based on a review of

the volatility of, and the guidelines for the investment of, the

Investment Assets. The expense and profit charges will be assessed

based on the expected expenses related to the arrangement and the

payment to PM of a reasonable profit. The expense charge will be based

on an annual rate to be determined by negotiations between PM and the

Plan's fiduciary at the inception of the Contract, stated as a fixed

percentage and multiplied by an average balance of the value of the

Investment Assets determined pursuant to a fixed formula under the

Contract. Such negotiated charge would remain in effect for the initial

period until the maturity date agreed to by the Plan and PM, subject to

PM's right to make changes to such charge upon 30 days' advance notice

if and solely to the extent that there has been a material change to

the provisions or administration of the Plan which adversely affects

deposits or withdrawals, or another action by the Plan's sponsor which

results in significant withdrawals (such as, but not limited to, plant

closings, divestitures, a partial termination of the Plan, the

implementation of an early retirement incentive program and the Plan

sponsor's bankruptcy) from the Contract.

Based on its review of competitive practices, PM represents that

the aggregate charges with respect to each of the Synthetic GICs are,

and are expected to continue to be, comparable to the charges made by

other Buy/Hold Synthetic GIC providers.

[[Page 37931]]

15. PM represents that to date, the Buy/Hold Synthetic GIC has been

purchased by a number of Plans, with the first such purchase occurring

as of September 2, 1993. PM has accordingly requested that the

exemption proposed herein be made retroactive to that date. PM

represents that it entered into the Buy/Hold Synthetic GICs with the

good faith belief that the transactions involved therein were, to the

extent they constituted prohibited transactions, exempted by Prohibited

Transaction Exemption 84-24 (PTE 84-24, 49 FR 13208, April 3,

1984).4 However, because PM is unable to conclude affirmatively

that at all times from and after September 2, 1993, the Buy/Hold

Synthetic GICs constituted insurance contracts within the meaning of

PTE 84-24, PM has requested the exemption proposed herein.

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4 In this proposed exemption, the Department expresses no

opinion as to whether the subject transactions would be exempt under

PTE 84-24.

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

16. In summary, the applicant represents that the subject

transactions satisfy the criteria contained in section 408(a) of the

Act because: (a) The decision to enter into a Buy/Hold Synthetic GIC

will be made on behalf of a Plan by a fiduciary of the Plan who is

independent of PM, after receipt of full and detailed disclosure of all

material features of the Contract, including all applicable fees and

charges; (b) following receipt of such disclosure, the Plan's

independent fiduciary approves in writing the execution of the Buy/Hold

Synthetic GIC on behalf of the Plan; (c) all fees and charges under the

Buy/Hold Synthetic GICs are reasonable; (d) each Buy/Hold Synthetic GIC

will specifically provide for an objective means for determining the

fair market value of the securities owned by the Plan pursuant to the

Buy/Hold Synthetic GIC; (e) PM will maintain books and records of all

transactions which will be subject to annual audit by certified public

accountants selected by and responsible solely to the Plan; and (f) the

Buy/Hold Synthetic GICs will only be marketed to Plans or collective

investment funds which have at least $50 million in assets.

For Further Information Contact: Gary H. Lefkowitz of the

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

Mei Technology Corporation 401(k) Plan (the Plan), Located in

Lexington, MA

[Application No. D-10281]

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) and 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 sections 4975(c)(1) (A) through (E) of

the Code shall not apply to the proposed cash sale (the Sale) of

Guaranteed Annuity Contract No. GA-7192, Certificate Nos. 0001-0004

(collectively, the GAC), issued by Mutual Benefit Life Insurance

Company (Mutual Benefit) located in Newark, New Jersey, by the Plan to

Mei Technology Corporation (the Employer), the sponsor of the Plan and

party in interest with respect to the Plan; provided that (1) the Sale

is a one-time transaction for cash; (2) the Plan experiences no loss

nor incurs any expenses from the Sale; and (3) the Plan receives as

consideration from the Sale an amount, as expressed below in paragraph

No. 5, that is equal to the total amount expended by the Plan when

acquiring the GAC, less withdrawals and/or proceeds paid from the GAC,

plus interest as described in paragraph 5 of this Notice of Proposed

Exemption.

Summary of Facts and Representations

1. Mei Technology Corporation is a Massachusetts corporation having

its principal offices in Lexington, Massachusetts. The Plan is a

defined contribution profit sharing plan with individual accounts for

the participants, which is intended to satisfy the qualification

requirements of sections 401(a) and 401(k) of the Code. The Employer

may make discretionary matching contributions and/or profit sharing

contributions to the Plan. As of March 31, 1996, the estimated number

of Plan participants and beneficiaries was 252. Forty-five participants

may be effected by the requested exemption. As of January 4, 1996,

total assets of the Plan equaled $3,751,431.97, with approximately 10%

of total Plan assets as of that date invested in the Guaranteed

Certificate Account (Guaranteed Account) under the GAC. The remaining

90% of Plan assets ($3,362,314.95) were invested in designated mutual

funds offered under the Plan and in participant loans.

The Trustee of the Plan for all assets other than the GAC and

participant loans is Scudder Trust Company of Boston Massachusetts.

Those assets are invested in mutual funds available under the Plan at

the participant's direction. Elaine B. Mei and Peng-Siu Mei, Office

Manager and President of the Employer, are Trustees for the

Nondesignated Investments Trust, which holds the GAC and participant

loans.

2. The Nondesignated Investments Trust holds the GAC which was

issued on or about April 12, 1987. The effective date of the GAC is

October 1, 1987. For the period October 1987 through July 1991,

participants could direct their 401(k) contributions into any of six

investment accounts offered under the GAC. The Guaranteed Account is

the subject of this exemption; all other amounts under the GAC have

been withdrawn.

Amounts deposited to the Guaranteed Account were accumulated in an

individual certificate; the certificate identified the portion of the

Account covered by a particular Certificate Rider and interest rate.

Contributions were made to Certificate No. 0001 of the Guaranteed

Account from October 1, 1987 to September 30, 1988. In accordance with

the terms of Certificate No. 0001, interest was to be credited at the

rate of 7.05% per annum until its maturity on September 30, 1991, at

which time assets were to be paid out to the Plan and made available

for reinvestment in accordance with participants' instructions. For the

period October, 1988 through 1991, deposits were made to Certificate

Nos. 0002-0004 with the following terms: No. 002, deposit dates of

October 1, 1988 through September 30, 1989, interest rate of 8.15% and

maturity date of September 30, 1992; No. 003, deposit dates of October

1, 1989 through September 30, 1990, interest rate of 7.90% and maturity

date of September 30, 1993; No. 004, deposit dates of October 1, 1990

through September 30, 1991 (actual deposits terminated by the Employer

in July, 1991, see below), interest rate of 7.70% and maturity date of

September 30, 1994.

3. On July 16, 1991, the Commissioner of Insurance for the State of

New Jersey placed Mutual Benefit in conservatorship and rehabilitation,

causing Mutual Benefit to suspend all payments on Mutual Benefit

accounts,

[[Page 37932]]

including the GAC.5 As a result of the proceedings, the assets of

the Plan invested in the Guaranteed Account of the GAC were frozen. A

Third Amended Plan of Rehabilitation (the Approved Rehabilitation Plan)

was filed and approved by the Superior Court of New Jersey on January

28, 1994. Under the Approved Rehabilitation Plan, group annuity

contracts were divided into various groups, those covered by a state

guaranty association, those not covered by a state guaranty

association, those covered by the New York State guaranty association

and partially covered contracts.

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

5 The Department notes that the decision by the named

fiduciaries to offer the GAC as an investment vehicle is governed by

the fiduciary responsibility requirements of Part 4, Subtitle B,

Title I of the Act. The Department is not proposing relief herein

for any violations of Part 4 of the Act which may have arisen as a

result of the acquisition and holding by the Plan of the GAC issued

by Mutual Benefit.

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In March 1994, the Employer was notified that the Plan's GAC was

deemed to be not covered by a state guaranty association (Wrapped

Contracts, see below). Wrapped Contracts are backed by a consortium of

insurance companies, see below. In March 1994, the Nondesignated

Investment Trustees were given the choice to ``opt in'' or ``opt out''

of the Approved Rehabilitation Plan. ``Opting in'' resulted in

accepting a restructured contract subject to certain terms including:

(a) distributions of the remaining Guaranteed Account from a Wrapped

Contract are very restricted; ordinary distributions will be made in

five annual installments beginning in the year 2000. However, the

industry group which supports the Wrapped Contracts has the right to

delay any of these installment payments for a period of seven years if

there are liquidity problems; and (b) investment return provisions were

modified so that the Wrapped Contracts will be credited with the

contract rate of interest through 1991; 4% in 1992, 3.5% in 1993- 94

and 3.55% in 1995. After 1994 no minimum rate of interest is

guaranteed; interest is determined by formula each year based on the

investment performance of the MBL Life Assurance Corporation

(MBLLAC).6 MBLLAC has determined that the 1996 rate will be 5.25%.

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

6 MBLLAC was incorporated as part of the Rehabilitation

Plan; subsequently substantially all of Mutual Benefit Life

Insurance Company's asset base was transferred to MBLLAC.

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

``Opting out'' would have resulted in a payment of 55% of the GAC's

value based on its original terms, with a payment to be made over a

period of up to 27 months. After evaluating the two options the

Trustees chose the ``opt in'' election on behalf of the Plan.

4. The value of the GAC as of March 31, 1996 was $396,803.62, as

determined by MBLLAC. This amount represents the principal amounts

deposited pursuant to Certificates 0001-0004, less withdrawals and/or

proceeds paid from the account, plus (i) the interest that accrued

under the Certificates to December 31, 1991, and (ii) the interest that

had accrued until March 31, 1996 at the Approved Rehabilitation Plan

rates stated above.

The applicant represents that it desires to enter into the proposed

transaction in order to protect the participants in the Plan from the

risks of investment loss associated with the GAC. Further, the

applicant represents that the Plan needs to sell its interest in the

GAC in order to give participants more investment flexibility to direct

the investments of the respective account balances to other

investments. In addition, the applicant represents that the sale will

allow participants to be able to exercise all of their rights under the

Plan to request distributions, loans, withdrawals and investment

transfers, with respect to amounts currently invested in the GAC which

are not liquid.

5. In order to eliminate the risk associated with the continued

investment in the GAC and to allow the Plan to distribute or otherwise

invest assets currently invested in the GAC, the Employer proposes to

purchase the GAC from the Plan for cash in an amount equal to its book

value on the date of the Sale, as specified in the Rehabilitation Plan

(i.e., the principal amounts deposited pursuant to Certificates 0001-

0004, less withdrawals and/or proceeds paid from the account, plus: (i)

the interest that accrued under the Certificates to December 31, 1991,

and (ii) the interest that has accrued until the date of the Sale at

the Approved Rehabilitation Plan rates stated in paragraph 3 above).

The applicant represents that the elimination of the risks inherent in

the GAC investment would be in the best interest of the Plan and its

participants and would serve to protect their rights under the Plan.

The Plan will incur no expense nor loss from the proposed transaction.

6. In summary, the applicant represents that the proposed

transaction will satisfy the criteria for an exemption under section

408(a) of the Act for the following reasons: (a) the Plan will receive

cash in a one-time transaction for the Mutual Benefit GAC, in an amount

equal to the book value, as specified in paragraph 5; (b) the proposed

Sale will enable the Plan and its participants and beneficiaries to

avoid any risk that would be associated with the continued holding of

the GAC, and will permit the directing of assets to safer investments;

(c) the Plan will not incur any expenses with respect to the proposed

transaction; and (d) the Nondesignated Investments Trustees have

determined that the proposed transaction is in the best interest of the

Plan and its participants and would serve to protect their rights under

the Plan.

For Further Information Contact: Ms. Marianne H. Cole 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 accurately describe all

material terms of

[[Page 37933]]

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, DC, this 17 day of July, 1996.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 96-18540 Filed 7-19-96; 8:45 am]

BILLING CODE 4510-29-P