Proposed Exemptions; ADP Fluor Daniel, Incorporated Retirement Savings Plan (the Plan)

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10307, et al.]

Proposed Exemptions; ADP Fluor Daniel, Incorporated Retirement

Savings 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 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

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 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 of 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.

ADP Fluor Daniel, Incorporated Retirement Savings Plan (The Plan)

Located in Tucson, Arizona

(Application No. D-10307)

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 32847, August 10, 1990). If the exemption is

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

the Act and the sanctions resulting from the application of section

4975(c)(1) (A) through (E) of the Code, shall not apply to the proposed

sale by the Plan of two limited partnership interests (the Units) to

ADP Fluor Daniel, Incorporated, a party in interest with respect to the

Plan, providing the following conditions are satisfied: (1) the sale is

a one-time transaction for cash; (2) the Plan pays no commissions nor

other expenses relating to the sale; and (3) the purchase price is the

greater of: (a) The fair market value of the Units as determined by a

qualified, independent appraiser, or (b) the original acquisition and

holding costs, plus attributable opportunity costs.

Summary of Facts and Representations

1. The Plan is a combination 401(K) and profit sharing plan

sponsored by ADP Fluor Daniel, Incorporated (ADP). ADP is an Arizona

corporation engaged in the business of international architecture and

engineering. As of December 31, 1994, the Plan had 250 participants and

assets with a fair market value of approximately $4,642,585.00.

2. Among the assets of the Plan are the Units, which are two shares

of the Central Corridor-Osborn Investors Limited Partnership (the

Limited Partnership), an Arizona limited partnership. The Plan's

percentage ownership represented by its Units in the Limited

Partnership is 3.11%. The Limited Partnership owns a 2.26 acre property

located at the southeast corner of Central Avenue and Osborn Road, in

Phoenix, Arizona. The Plan acquired the Units directly from the Limited

Partnership, an unrelated third party, in 1987. The decision to acquire

the Units was made by the Plan trustees; Richard Anderson, Philip Owen,

Dale Harman, Solomon Pan, and Michael Stanley (the Trustees).\1\ It is

represented that the Plan paid a total of $25,000 to acquire the Units

and subsequently made additional cash contributions and various other

payments totaling $34,800 between 1989 and 1996 in connection with the

holding of the Units. It is further represented that the Plan never

derived any income from the investment in the Units to offset the

expenditures made by the Plan related to the acquisition and holding of

the Units. In this regard, it is represented that the cumulative costs

paid by the Plan in connection with the acquisition and holding of the

Units is $59,800.

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\1\ The Department expresses no opinion herein on whether the

acquisition and holding of the Units by the Plan violated any of the

provisions of Part 4 of Title I of the Act.

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3. The Applicant represents that the Plan wishes to sell the Units

in order to divest itself of an asset which has and may continue to

depreciate in value. It is further represented that the Units which are

not publicly traded are incompatible with the Plan's new administrative

investment features, which permits participants to access daily

valuations and to individually direct the investments of their

accounts. Selling the Units to ADP will enable the Plan to convert an

illiquid, non-publicly traded real estate investment into cash,

[[Page 10075]]

which will then be allocated to the accounts of participants and

invested pursuant to the direction of those participants.

The Applicant obtained an independent appraisal of the units from

Gary Ringel, President of U.S.L. Valuation, Inc., a real estate

appraiser and consultant located in Scottsdale, Arizona. After

reviewing the pertinent data, Mr. Ringel estimated that the Units' fair

market value as of April 30, 1996 was $20,800.

4. The Applicant proposes to purchase the Units from the Plan for

$85,072, which will be allocated on a pro rate basis among the

participants' accounts that are invested in the Units. This amount

represents the greater of: (a) The fair market value of the Units as

determined by a qualified, independent appraiser, or (b) the Units'

original acquisition and holding costs to the Plan plus opportunity

costs attributable to the Units. It is represented, that because the

fair market value of the Units is less than their acquisition cost, ADP

will purchase the units for the latter amount. Taking into account the

purchase price of the Units ($25,000) and the associated holding costs

($25,272), the Plan will receive a rate of return approximately equal

to six percent for each of the eight years that the Plan has held the

Units.

The Applicant represents that the subject transaction is in the

interest of the Plan because if the Plan sold the Units on the open

market, the Plan would receive substantially less than the amount the

Applicant is willing to pay. In addition, the Plan could not at this

time sell the Units to an unrelated third party at other than a

substantial discount.

5. In summary, the Applicant represents that the subject

transaction satisfies the statutory criteria for an exemption under

section 408 of the Act for the following reasons: (1) The sale will be

a one-time transaction for cash; (2) the Plan will not pay commissions

nor other expenses relating to the sale; (3) the sale will enhance the

liquidity of the assets of the Plan; and (4) the purchase price will be

the greater of: (a) the fair market value of the Units as determined by

a qualified, independent appraiser, or (b) the original acquisition and

holding costs of the Units plus attributable opportunity costs.

Tax Consequences of Transaction

The Department of the Treasury has determined that if a transaction

between a qualified employee benefit plan and its sponsoring employer

(or affiliate thereof) results in the plan either paying less than or

receiving more than fair market value, such excess may be considered to

be a contribution by the sponsoring employer to the plan and therefore

must be examined under applicable provisions of the Code, including

sections 401(a)(4), 404 and 415.

Notice to Interested Persons

Notice of the proposed exemption shall be given to all interested

persons by personal delivery and by first-class mail within 10 days of

publication of the notice of pendency 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/or request a hearing with respect to the

proposed exemption. Comments and requests for a hearing are due within

40 days of the date of publication of the notice in the Federal

Register.

FOR FURTHER INFORMATION CONTACT: Ms. Janet L. Schmidt of the

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

TA Associates, Inc. (TA Associates) Located in Boston, MA

(Application No. D-10314)

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) 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, effective December 29, 1993, to the making, by an employee

benefit plan (the Plan), of capital contributions to any venture

capital fund (the TA Fund) that is organized, sponsored and/or managed

by TA Associates and/or any of its affiliates (collectively, TA)

pursuant to a contractual obligation by a Plan having an interest in

the TA Fund.\2\

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\2\ As discussed herein, TA Funds are expected to be organized

as venture capital operating companies that are managed by TA.

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This proposed exemption is subject to the following conditions:

(a) At the time the Plan undertakes the obligation to make such

capital contributions (the Determination Date), the TA Fund is not a

party in interest with respect to the Plan.

(b) The decision to make a capital contribution to a TA Fund is

made on behalf of the Plan by a Plan fiduciary which is independent of

and unrelated to TA and the portfolio company whose interest is

acquired by the TA Fund.

(c) TA does not otherwise provide investment advice to the Plan

within the meaning of Regulation section 29 CFR 2510.3-21(c) with

respect to such Plan's assets that are invested in the TA Fund.

(d) At the Determination Date, the Plan has aggregate assets that

are in excess of $50 million. In the case of multiple Plans which are

invested through a master or group trust in a TA Fund, the assets of

which are ``plan assets'' under 29 CFR 2510.3-101 (the Plan Asset

Regulation), the $50 million threshold applies to the aggregate assets

of such trust.

(e) Subsequent to the Determination Date, the TA Fund is a party in

interest with respect to the Plan solely by reason of a relationship to

a portfolio company which is a service provider to a Plan, as described

in section 3(14) (H) or (I) of the Act, including a fiduciary with

respect to such Plan.

(f) At the Determination Date, the capital commitment of the Plan

(together with the capital commitments of any other Plans maintained by

the same employer or employee organization) with respect to the TA

Fund, does not exceed 15 percent of the total capital commitments with

respect to such TA Fund.

(g) At the Determination Date, the percentage of the Plan's assets

committed to be invested in the TA Fund does not exceed 5 percent of

the Plan's total assets.

(h) At the Determination Date, a Plan's aggregate capital

commitment to all TA Funds does not exceed 25 percent of the Plan's

total assets.

(i) The Plan receives the following initial and ongoing disclosures

with respect to the TA Fund:

(1) A copy of the private placement memorandum applicable to the TA

Fund or another comparable document containing substantially the same

information;

(2) A copy of the limited partnership or other agreement

establishing the TA Fund;

(3) A copy of the subscription agreement applicable to the TA Fund,

if any;

(4) Copies of the proposed exemption and grant notice related to

the exemptive relief described herein; and

(5) Periodic, but no less frequently than annually, reports

relating to the overall financial position and operational results of

the TA Fund

[[Page 10076]]

including copies of the TA Fund's annual financial statements.

(j) With respect to capital contributions made to a TA Fund by a

Plan after the date of issuance of the final exemption, TA maintains or

causes to be maintained for a period of six years from the date of the

transaction the records necessary to enable the persons described in

paragraph (k) to determine whether the conditions of this exemption

have been met, except that--

(1) A prohibited transaction will not be considered to have

occurred, if due to circumstances beyond the control of TA, the records

are lost or destroyed prior to the end of the six year period; and

(2) No party in interest, other than TA, shall be subject to the

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

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

records are not maintained, or are not available for examination as

required by paragraph (k).

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

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

the records referred to in paragraph (j) are unconditionally available

at their customary location for examination during normal business

hours by--

(A) Any duly authorized employee or representative of the

Department or the Internal Revenue Service;

(B) Any fiduciary of a Plan who has an interest in the TA Fund and

has the authority to acquire or dispose of the interest of the Plan in

the TA Fund, or any duly authorized employee or representative of such

fiduciary; and

(C) Any participant or beneficiary of any Plans or duly authorized

employee or representative of such participant or beneficiary.

(2) None of the persons described in paragraph (k)(1)(B) and

(k)(1)(C) shall be authorized to examine trade secrets of TA or

commercial or financial information which is privileged or

confidential.

EFFECTIVE DATE: If granted, this proposed exemption will be effective

December 29, 1993.

Summary of Facts and Representations

1. TA is a Delaware corporation involved in the venture capital

industry since 1968. TA has organized, sponsored and/or managed 21

venture capital funds, involving total capital commitments of

approximately $1.46 billion. The investors in the TA Funds are

primarily wealthy individuals and sophisticated investors, including

employee benefit plans that are subject to the Act, private

foundations, government plans, endowments and other tax exempt

organizations. The applicant represents that venture capital funds,

such as the TA Funds, allow Plans, particularly those having

significant asset bases, to achieve greater diversification by asset

class. As such, many of the investors in existing TA Funds and many

potential investors in future TA Funds will be Plan investors that are

covered by the Act.

2. Each TA Fund is organized and operated so that the assets of

such TA Fund will not be deemed to be plan assets under the Plan Asset

Regulation. In most cases, this results from the fact that the TA Fund

is operated in a manner which causes such fund to qualify as a venture

capital operating company.\3\ In some cases, it may be the result of

the fact that the equity participation in the TA Fund by benefit plan

investors is not significant (i.e., more than 75 percent or more of the

equity interest in the entity is held by non-benefit plan

investors).\4\

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\3\ Regulation section 29 CFR 2510.3-101(c) of the Plan Asset

Regulation defines the term ``operating company'' as an entity that

is primarily engaged, directly or through a majority-owned

subsidiary or subsidiaries, in the production or sale of a product

or service other than the investment of capital. The term

``operating company'' includes a ``venture capital operating

company.''

Regulation section 29 CFR 2510.3-101(d) provides, in part, that

an entity is a ``venture capital operating company'' if at least 50

percent of its assets are invested in venture capital investments,

and the entity, in the ordinary course of its business, actually

exercises management rights with respect to one or more operating

companies in which it invests. Regulation section 29 CFR 2510.3-

101(d)(3) explains that a venture capital investment is an

investment in an operating company (other than a venture capital

operating company) as to which the investor has or obtains

management rights. The term ``management rights'' is defined under

regulation section 29 CFR 2510.3-101(d)(3)(ii) to mean contractual

rights directly between the investor and an operating company to

substantially participate in, or substantially influence the conduct

of, the management of the operating company.

\4\ Regulation section 2510.3-101(f)(1) states, in pertinent

part, that equity participation in an entity by benefit plan

investors is ``significant'' on any date, if immediately after the

most recent acquisition of any equity interest in the entity, 25

percent or more of the value of any class of equity interests in the

entity is held by benefit plan investors.

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3. The TA Funds have typically been structured as limited

partnerships with TA serving as general partner and, in some cases,

having an interest as limited partner. (TA Funds organized in the

future may be organized as limited liability companies.) The TA Funds

are managed by TA which receives a pre-specified management fee as well

as a pre-specified incentive allocation after investors have received

distributions in excess of their capital contributions plus a pre-

specified minimum rate of return. Because the TA Funds are expected to

be organized as venture capital operating companies, the applicant

represents that none of the TA Funds will hold ``plan assets'' and that

the compensation paid to TA by the TA Funds will not be subject to the

prohibitions under the Act.\5\

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\5\ The Department is providing no opinion with regard to

whether a TA Fund is a venture capital operating company or whether

the equity participation by Plans investing in a TA Fund is not

significant. In addition, the Department is not expressing any views

with respect to the compensation that is paid to TA by a TA Fund.

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TA's most recent fund, Advent VII, has aggregate capital

commitments of approximately $303 million from 83 individual and

institutional investors. Of the institutional investors, 14 investors

are Plans that are covered under the provisions of the Act. These Plans

have made a total capital commitment to Advent VII of $95 million.

4. Each investor in a TA Fund, including each Plan investor, enters

into a binding commitment to make capital contributions to the TA Fund

in an amount specified by the investor. Although an investor's capital

commitments are not required to be made at the outset, capital is drawn

down over time as the TA Fund identifies and makes its venture capital

and other investments. Generally, capital is called down in

installments ranging from 5 percent to 10 percent of the total

commitment. In most cases, all of the capital commitments will have

been drawn down within 3 to 5 years of the establishment of the TA

Fund.

5. In recent years, the TA Funds have expanded their focus to

include a wide variety of portfolio companies.\6\ Specifically, the TA

Funds have acquired, and expect to acquire, interests in portfolio

companies which are involved, either directly or through subsidiaries,

in various aspects of the financial services industry. TA believes this

broader scope is necessary to enable the TA Funds to maximize

investment opportunities and investment returns. In TA's view, business

opportunities can arise in connection with start-up or later-stage

companies (including spin-offs and management buy-outs of existing

business operations) in

[[Page 10077]]

virtually any type of business rather than exclusively in the hi-

technology area.

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\6\ According to the applicant, the term ``portfolio company''

refers to each of the operating companies in which a venture capital

fund has made an investment. Thus, for example, when a venture

capital fund, such as a TA Fund, makes an investment in a start-up,

high tech company, that company becomes one of the venture capital

fund's portfolio companies and will remain so as long as the venture

capital fund retains its investment in that high tech company.

Similarly, if a venture capital fund acquires an interest in an

investment management firm, the investment management firm will

become a portfolio company of the venture capital fund.

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6. As part of this diversification trend, TA Funds have been and

will be acquiring interests in portfolio companies that are involved in

providing money management services, brokerage services or other types

of services which may be utilized by Plans and institutional investors.

The portfolio company may be, or may become, a party in interest with

respect to one or more Plans which hold an interest in the TA Fund when

such portfolio company, or any subsidiary thereof performs services for

a Plan. The services may include fiduciary services (e.g., management

of assets of the Plan other than those invested in a TA Fund). In no

event will the portfolio company or its subsidiary act in a fiduciary

capacity with respect to the assets of the Plan that are invested in

the TA Fund.

If the TA Fund owns, directly or indirectly, a 10 percent or more

interest in a service provider, TA notes that the Fund will become a

party in interest with respect to such Plan under section 3(14) (H) and

(I) of the Act.\7\ Since a TA Fund frequently purchases a 10 percent or

more interest in a portfolio company, TA represents that it is possible

that a TA Fund could become a 10 percent or more owner of a service

provider and a party in interest with respect to each Plan as to which

the portfolio company (or one of its subsidiaries) is a service

provider. Once a TA Fund becomes a party in interest with respect to a

Plan, TA states that the Plan would be prohibited from engaging in any

transaction with that TA Fund.

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\7\ In this regard, it is noted that the corresponding section

of the Code relating to disqualified persons (see section 4975(e)(2)

(H) and (I) does not contain a similar provision which would make

the owner of 10 percent or more of a service provider a disqualified

person with respect to a Plan. Nevertheless, because the service

provider is a disqualified person under section 4975(e)(2)(B) of the

Code, TA has requested that the exemption extend to both the Code

and the Act in order to avoid any potential concerns regarding the

possibility of indirect prohibited transactions.

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If a TA Fund were to become a party in interest with respect to a

Plan, TA is concerned that a capital contribution made by the Plan

subsequent to the TA Fund's becoming a party in interest would violate

section 406(a)(1)(D) of the Act notwithstanding the fact that the

capital contribution is being made pursuant to a pre-existing binding

contractual commitment made by the Plan at a time when the TA Fund was

not a party in interest. Therefore, to resolve these potential

technical violations of the Act, TA has requested an administrative

exemption from the Department.

7. If granted, the proposed exemption will be effective December

29, 1993. On that date, one of the TA Funds acquired 100 percent of the

interest in a portfolio company which owned or subsequently acquired

several investment managers. At least one of the investment managers

provided services to a Plan that was also an investor in the TA Fund.

As a result, TA believes that prohibited transactions may have occurred

when the Plan subsequently funded its remaining capital contributions

to the TA Fund.

It is represented that the discovery of the prohibited transactions

was made by TA and not by the investment manager. The only role that

the investment manager played in these determinations was its provision

to TA of a list of clients which enabled TA to compare the investment

manager's clients with the list of investors in the affected TA Fund.

It is represented that the investment manager did not have any

responsibility with respect to the assets of the Plan that were

invested in the TA Fund.

8. The requested exemption is subject to a number of conditions

that will apply both retroactively and prospectively. First, the TA

Fund's party in interest status will, in all cases, arise on the

Determination Date, i.e., after the Plan has made a binding commitment

to invest in the TA Fund, including its commitment to make future

capital contributions to the TA Fund. Second, the decision to undertake

the obligation to make a binding commitment must be made on behalf of

the Plan by a Plan fiduciary which is independent of and unrelated to

TA and the portfolio company. Third, TA must not otherwise provide

investment advice to the Plan within the meaning of Regulation section

29 CFR 2510.3-21(c) with respect to such Plan's assets that are

invested in the TA Fund. Fourth, at the Determination Date, the Plan

must have aggregate assets that are in excess of $50 million. In the

case of multiple Plans which are invested through a master or group

trust in an entity, the $50 million threshold will apply to the

aggregate assets of such trust or entity. Fifth, as of the

Determination Date, the capital commitment of the Plan (together with

the capital commitments of any other Plans maintained by the same

employer or employee organization) with respect to the TA Fund, must

not exceed 15 percent of the total capital commitments with respect to

such TA Fund. Sixth, at the Determination Date, the percentage of the

Plan's assets committed to be invested in the TA Fund must not exceed 5

percent of the Plan's total assets. Seventh, at the Determination Date,

a Plan's aggregate capital commitment with respect to all TA Funds must

not exceed 25 percent of such Plan's total assets. TA represents that

the transaction which occurred on December 29, 1993 met all of the

foregoing substantive conditions.

9. The conditions of the exemption also require that each Plan

receive the following initial and ongoing written disclosures from TA:

(a) A copy of the private placement memorandum applicable to the TA

Fund or another comparable document containing substantially the same

information; (b) a copy of the limited partnership or other agreement

establishing the TA Fund; (c) a copy of the subscription agreement

applicable to the TA Fund, if any; (d) copies of the proposed exemption

and grant notice related to the exemptive relief described herein; and

(e) periodic, but no less frequently than annually, reports relating to

the overall financial position and operational results of the TA Fund

including copies of the TA Fund's annual financial statements. In

addition, with respect to capital contributions made to a TA Fund by a

Plan after the date of issuance of the final exemption, TA will

maintain or cause to be maintained for a period of six years from the

date of each transaction, records of each Plan investing in a TA Fund

and each portfolio company comprising a TA Fund. Such records will

enable the Department and other persons to determine whether the terms

and conditions of the exemption are being met.

10. If the exemption is not granted, TA represents that it and the

TA Funds would be required to make one of several adjustments designed

to avoid the prohibited transaction concern that is the subject of this

request. However, TA states that it does not believe these adjustments

would be in the best interest of existing or prospective Plan

investors. In this regard, TA represents that it might attempt to avoid

the problem by not acquiring any portfolio companies which are,

directly or indirectly, service providers to any of a TA Fund's Plan

investors. However, TA does not consider this alternative satisfactory

because it would limit the TA Fund's potential range of investments and

diminish the expected investment return of such Fund. Moreover, TA

points out that a portfolio company which is not a service provider at

the time of the TA Fund's investment might become a service provider at

some time in the future. Under these circumstances, TA

[[Page 10078]]

represents that it would be impractical to restrict the activities of

all portfolio companies in which the TA Fund invests to assure that no

such portfolio company would ever become a service provider to any TA

Fund's Plan investors. According to TA, such restriction would be

contrary to the best interest of the TA Funds and their investors,

particularly, their Plan investors.

As another alternative, TA represents that it could limit the

offering of interests in the TA Funds to those Plans which could take

advantage of Prohibited Transaction Exemption (PTE) 84-14 (49 FR 9494

March 13, 1984), the Class Exemption for Plan Asset Transactions

Determined by Independent Qualified Professional Asset Managers (QPAMs)

or PTE 96-23 (61 FR 15975, April 10, 1996), the Class Exemption for

Plan Asset Transactions Determined by In-House Asset Managers

(INHAMs).\8\ However, TA believes that such an approach would be unduly

restrictive and not in the best interest of the Plans since relatively

few Plans could take advantage of PTE 96-23. Also Plans would be forced

to hire a QPAM and incur an additional expense in order to invest in a

TA Fund if the Plan's named fiduciary would otherwise make that

decision itself.

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\8\ PTE 84-14 permits various parties which are related to

employee benefit plans to engage in transactions involving plan

assets, if among other conditions, the assets are managed by QPAMs

(i.e., banks, savings and loan associations, insurance companies or

investment advisers registered under the Investment Advisers Act of

1940), which are independent of the parties in interest and meet

certain financial standards. PTE 96-23 permits various transactions

involving employee benefit plans whose assets are managed by INHAMs

and party in interest service providers.

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11. In summary, it is represented that the proposed exemption has

satisfied or will satisfy the statutory conditions for an exemption

under section 408(a) of the Act because: (a) At the Determination Date,

the TA Fund's party in interest status has or will, in all cases, arise

after the Plan has made its binding commitment to invest in the TA

Fund, including its commitment to make future capital contributions to

the TA Fund; (b) the decision by a Plan to make capital contributions

to the TA Fund has been and will be made on behalf of the Plan by a

Plan fiduciary which is independent of and unrelated to TA and the

portfolio company that is acquired by the TA Fund; (c) TA will not

otherwise provide investment advice to the Plan within the meaning of

29 CFR 2510.3-21(c) of the Act with respect to such Plan's assets that

are invested in the TA Fund; (d) as of the Determination Date, the

capital commitment of the Plan (together with the capital commitment of

any other related Plans maintained by the same employer or employee

organization) has not and will not exceed more than 15 percent of the

total outstanding capital commitments with respect to the TA Fund; (d)

at the Determination Date, the percentage of the Plan's assets

committed to be invested in the TA Fund does not and will not exceed 5

percent of the Plan's total assets and the Plan's aggregate commitment

to all TA Funds has not and will not exceed 25 percent of the Plan's

total assets; (e) a Plan investing in a TA Fund has or will have assets

that are in excess of $50 million; and (f) TA has or will make written

disclosures to the Plan regarding the TA Fund both at the time of the

initial commitment to invest in such Fund as well as on an ongoing

basis.

Notice to Interested Persons

Those persons who may be interested in the pendency of the

requested exemption include fiduciaries of Plans whose assets are

currently invested in a TA Fund. Accordingly, the Department has

determined that the only practical form of providing notice to such

Plan fiduciaries is the distribution, by TA, of a copy of the proposed

exemption by first class mail within 30 days of the date of publication

of the pendency notice in the Federal Register. The notice will include

a copy of the notice of proposed exemption, as published in the Federal

Register, as well as a supplemental statement, as required, pursuant to

29 CFR 2570.43(b)(2), which shall inform interested persons of their

right to comment on the pending exemption. Comments with respect to the

proposed exemption are due 60 days after the date of publication of the

proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady 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 believe 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 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 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 28th day of February 1997.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 97-5430 Filed 3-4-97; 8:45 am]

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