Grant of Individual Exemptions; Metropolitan Life Insurance Company

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 98-17; Exemption Application No. D-

10412, et al.]

Grant of Individual Exemptions; Metropolitan Life Insurance

Company

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

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

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, D.C. The notices also

invited interested persons to submit comments on the requested

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

interested person might submit a written request that a public hearing

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

have complied with the requirements of the notification to interested

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

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

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

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

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

of Labor.

Statutory Findings

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

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

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

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

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

and beneficiaries; and

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

beneficiaries of the plans.

Metropolitan Life Insurance Company (MetLife) Located in New York,

NY

[Prohibited Transaction Exemption 98-17; Exemption Application No. D-

10412]

Exemption

Section I. Covered Transactions

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

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

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

shall not apply, effective April 1, 1997, to (1) the purchase or

retention by an employee benefit plan (the Plan); and (2) the sale or

continuation by MetLife or an affiliate (collectively, MetLife) of a

synthetic guaranteed investment contract (the MetLife Trust GIC)

entered into between the Plan and MetLife under which MetLife

guarantees (the Guarantee) certain amounts (the Guaranteed Value).

This exemption is conditioned upon the following requirements as

set forth below in Section II.

Section II. General Conditions

(a) The decision to enter into a MetLife Trust GIC is made on

behalf of a participating Plan in writing by a fiduciary of such Plan

which is independent of MetLife.

(b) Only Plans with total assets having an aggregate market value

of at least $25 million are permitted to purchase MetLife Trust GICs;

provided however that--

(1) In the case of two or more Plans which are maintained by the

same employer, controlled group of corporations or employee

organization (the Related Plans), whose assets are commingled for

investment purposes in a single master trust or any other entity the

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

Asset Regulation), which entity has purchased a MetLife Trust GIC, the

foregoing $25 million requirement is deemed satisfied if such trust or

other entity has aggregate assets which are in excess of $25 million;

provided that, if the fiduciary responsible for making the investment

decision on behalf of such master trust or other entity is not the

employer or an affiliate of the employer, such fiduciary has total

assets under its management and control, exclusive of the $25 million

threshold amount attributable to plan investment in the commingled

entity, which are in excess of $50 million, or

(2) In the case of two or more Plans which are not maintained by

the same employer, controlled group of corporations or employee

organization (the Unrelated Plans), whose assets are commingled for

investment purposes in a group trust or any other form of entity the

assets of which are ``plan assets'' under the Plan Asset Regulation,

which entity has purchased a MetLife Trust GIC, the foregoing $25

million requirement is deemed satisfied if such trust or other entity

has aggregate assets which are in excess of $25 million; provided that

the fiduciary responsible for making the investment decision on behalf

of such group trust or other entity--

(i) Is neither the sponsoring employer, a member of the controlled

group of corporations, the employee organization, nor an affiliate,

(ii) Has full investment responsibility with respect to Plan assets

invested therein, and

(iii) Has total assets under its management and control, exclusive

of the $25 million threshold amount attributable to Plan investment in

the commingled entity, which are in excess of $50 million.

(c) Prior to the execution of the MetLife Trust GIC, the Plan

fiduciary receives a full and detailed written disclosure of all

material features concerning the MetLife Trust GIC, including--

(1) A Letter of Agreement between MetLife and the Plan fiduciary

which stipulates the relevant provisions of the GIC, the applicable

fees and the rights and obligations of the parties;

(2) Investment Guidelines defining the manner in which an

investment manager will manage a MetLife Trust GIC;

(3) A copy of the Investment Management Agreement between MetLife

and the Plan fiduciary;

(4) Information explaining in a manner calculated to be understood

by a Plan fiduciary that, if a MetLife affiliated manager underperforms

or if adverse market conditions occur, the interest rate that is

credited (the Credited Rate) to a MetLife Trust GIC account (the

Account) may be as low as 0 percent;

(5) The pertinent features of a MetLife conventional GIC (the

MetLife Conventional GIC) that a Plan fiduciary may obtain upon the

discontinuance of a MetLife Trust GIC, including an explanation that,

although a MetLife Conventional GIC will offer a guarantee of

principal, it may have a credited rate

[[Page 19956]]

as low as 0 percent for the duration of the contract; and

(6) Copies of the proposed exemption and grant notice with respect

to the exemptive relief provided herein.

(d) Upon the selection by a Plan fiduciary of a MetLife Trust GIC,

a participant in a Plan that provides for participant investment

selection (the Section 404(c) Plan) is given a summary of the pertinent

features of the documents listed above in paragraphs (c)(1), (c)(2) and

(c)(5) of this Section II, which are deemed appropriate for

distribution to such participant, including a disclosure that the

MetLife Trust GIC may have a Credited Rate as low as 0 percent.

(e) Subsequent to a Plan's investment in a MetLife Trust GIC, the

Plan fiduciary and, if applicable, the Plan participant, upon such

participant's request, receive the following ongoing disclosures

regarding such investment:

(1) A monthly report consisting of a Guaranteed Value Statement,

which specifies the affected Plan's MetLife Trust GIC balance for the

prior month, contributions, withdrawals, transfers, interest earned,

the current month's ending balance for the MetLife Trust GIC, the

current interest rate and a summary of transactions;

(2) A quarterly report consisting of a Market Value Statement,

which specifies the prior quarter's ending market value for a Plan's

MetLife Trust GIC, contributions, withdrawals, the fees paid to

MetLife, investment income, realized capital gains and/or losses from

sales, changes in unrealized appreciation of assets, the current

quarter's ending market value and rate of return, and a summary of

transactions; and

(3) An annual portfolio listing or letter describing key events,

depending upon its arrangements with a Plan fiduciary.

(f) As to each Plan, the combined total of all fees and charges

imposed under a MetLife Trust GIC is not in excess of ``reasonable

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

(g) Each MetLife Trust GIC specifically provides an objective

method for determining the fair market value of the securities owned by

the Plan pursuant to such GIC.

(h) Each MetLife Trust GIC has a predefined maturity date or dates

selected by the Plan fiduciary and agreed to by MetLife. However, in no

event does a MetLife Trust GIC have a maturity date exceeding five

years. A Plan fiduciary may extend the maturity date for an additional

year upon an affirmative written decision made annually by such

fiduciary. Once a Plan fiduciary does not affirmatively extend the

maturity date, no future extensions will occur.

(i) Prior to a Plan fiduciary's decision regarding the extension of

a maturity date for a MetLife Trust GIC for one additional year,

MetLife informs such Plan fiduciary of the new reset rate for the

Credited Rate.

(j) MetLife maintains books and records of each MetLife Trust GIC

transaction for a period of six years. Such books and records are

subject to annual audit by independent, certified public accountants.

EFFECTIVE DATE: If granted, this exemption is effective as of April 1,

1996.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption, refer to

the notice of proposed exemption (the Notice) published on October 20,

1997 at 62 FR 54471.

Written comments

The Department received one written comment with respect to the

Notice and no requests for a public hearing. The comment, which was

submitted by MetLife, suggested modifications to the operative language

of the Notice and recommended certain changes to the Summary of Facts

and Representations (the Summary) of the Notice. Presented below are

the modifications requested by MetLife and the Department's

accompanying responses. Also presented are amendments to the Notice

made by the Department.

1. Operative Language Changes

a. Exemptive Language

MetLife notes that under the caption ``Proposed Exemption,'' the

exemptive language of the Notice does not provide exemptive relief for

any payment by MetLife to a Plan pursuant to MetLife's Guarantee.

Because a Plan would be required to receive payment under a MetLife

Trust GIC arrangement if certain conditions are met, MetLife assumes

the Department would consider such payment as part of the exempted

arrangement.

The Department agrees that the payment by MetLife to a Plan

pursuant to the Guarantee is subsumed under the transactions exempted.

Therefore, the Department does not believe any modification to the

exemptive language is warranted.

b. Condition (b)

Condition (b) of the Notice requires a Plan investing in a MetLife

Trust GIC to have assets that are in excess of $25 million.1

MetLife states that in some situations, a Plan fiduciary may act on

behalf of a trust in which a number of Plans participate. Although the

trust may have assets in excess of $25 million, MetLife indicates that

the individual Plans may not have total assets which would satisfy the

minimum threshold amount.

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\1\ MetLife represents that in instances of a start-up

situation, a Plan might not have assets totaling $25 million.

Nevertheless, MetLife explains that it would still allow the Plan to

invest in a MetLife Trust GIC as long as the Plan reached the $25

million threshold within the year.

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Therefore, MetLife requests that the Department clarify that the

scope of the Notice be expanded to include a fiduciary (e.g., an

independent investment manager) acting on behalf of a trust with assets

in excess of $25 million regardless of the asset totals of the

individual Plans participating in the trust. In MetLife's view, such

trust fiduciary would have the same level of sophistication as a

fiduciary of a Plan with assets in excess of $25 million. If this

change is made, MetLife also requests that various references in the

Notice to Plan sponsors should be construed to include fiduciaries of

trusts and references to Plans should be construed to include trusts.

In response to these comments, the Department acknowledges that the

use of the term ``Plan'' in the Notice should be construed to include

trusts and other commingled investment vehicles which have assets

(either individually or aggregated within the investment vehicle) in

excess of $25 million. Further, the term ``Plan fiduciaries'' and

``Plan sponsors'' should be construed to include fiduciaries of such

trusts or commingled investment vehicles.

In addition, in recognition of the fact that individual Plans

investing in a commingled entity may not be able to meet the $25

million threshold amount on their own in order to acquire a MetLife

Trust GIC, the Department has decided to permit the aggregation of Plan

assets within the pooled vehicle in order to satisfy the threshold

amount. However, to ensure the sophistication of the fiduciary who is

making the decision on behalf of Plans to invest in a MetLife Trust

GIC, the Department has imposed certain additional requirements for

pooled arrangements involving the assets of either related Plans (i.e.,

the Related Plans) or unrelated Plans (i.e., the Unrelated Plans).

These additional requirements are described as follows:

(1) Related Plans. With respect to two or more plans, which are

maintained by the same employer, controlled group of corporations or

employee organization,

[[Page 19957]]

whose assets are invested in a master trust or any other form of plan

asset look-through entity, which entity has purchased a MetLife Trust

GIC from MetLife, the Department notes that the $25 million threshold

may be satisfied by aggregating the assets of the investing Plans

within the pooled vehicle. In this regard, the Department also notes

that an employer may retain an independent investment manager to manage

all or a portion of plan assets invested in a master trust. Under these

circumstances, the fiduciary must have total assets under its

management and control, exclusive of the $25 million threshold amount

attributable to plan investment in the commingled entity, which are in

excess of $50 million.

(2) Unrelated Plans. For two or more plans which are not maintained

by the same employer, controlled group of corporations or employee

organization, whose assets are invested in a group trust or other plan

asset look-through entity, which entity has purchased a MetLife Trust

GIC, the $25 million threshold will apply to the aggregate assets of

such entity so long as the fiduciary responsible for making the

investment decision on behalf of the group trust or other plan asset

look-through entity is not the sponsoring employer, a member of the

controlled group of corporations, the employee organization, or an

affiliate, and such fiduciary has full investment responsibility

2 with respect to the plan assets invested therein. Also,

the fiduciary must have total assets under its management and control,

exclusive of the $25 million threshold amount attributable to plan

investment in the commingled entity, which are in excess of $50

million.

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\2\ For purposes of this exemption, the term ``full investment

responsibility'' means that the fiduciary responsible for making the

investment decision has and exercises discretionary management

authority over all of the assets of the group trust or other plan

assets look-through entity.

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Accordingly, Condition (b) of Section II has been revised to read

as follows:

``(b) Only Plans with total assets having an aggregate market

value of at least $25 million are permitted to purchase MetLife

Trust GICs; provided however that--

(1) In the case of two or more Plans which are maintained by the

same employer, controlled group of corporations or employee

organization (the Related Plans), whose assets are commingled for

investment purposes in a single master trust or any other entity the

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

Plan Asset Regulation), which entity has purchased a MetLife Trust

GIC, the foregoing $25 million requirement is deemed satisfied if

such trust or other entity has aggregate assets which are in excess

of $25 million; provided that, if the fiduciary responsible for

making the investment decision on behalf of such master trust or

other entity is not the employer or an affiliate of the employer,

such fiduciary has total assets under its management and control,

exclusive of the $25 million threshold amount attributable to plan

investment in the commingled entity, which are in excess of $50

million, or

(2) In the case of two or more Plans which are not maintained by

the same employer, controlled group of corporations or employee

organization (the Unrelated Plans), whose assets are commingled for

investment purposes in a group trust or any other form of entity the

assets of which are ``plan assets'' under the Plan Asset Regulation,

which entity has purchased a MetLife Trust GIC, the foregoing $25

million requirement is deemed satisfied if such trust or other

entity has aggregate assets which are in excess of $25 million;

provided that the fiduciary responsible for making the investment

decision on behalf of such group trust or other entity--

(i) Is neither the sponsoring employer, a member of the

controlled group of corporations, the employee organization, nor an

affiliate,

(ii) Has full investment responsibility with respect to Plan assets

invested therein, and

(iii) Has total assets under its management and control,

exclusive of the $25 million threshold amount attributable to Plan

investment in the commingled entity, which are in excess of $50

million.''

c. Conditions (d) and (e)

MetLife believes the disclosure requirements in the Notice for

participants in Section 404(c) Plans go beyond the scope of the

disclosure requirements of section 404(c) of the Act and the

Department's accompanying regulation (the Section 404(c)

Regulation).3 MetLife explains that funding vehicles, such

as the MetLife Trust GIC, are typically part of a Plan's larger

``stable value'' or ``fixed income'' funding option. MetLife believes

that to mandate disclosure for one funding vehicle within a Plan's

stable value portfolio may create an administrative hardship for a Plan

fiduciary as well as present a competitive barrier for MetLife.

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\3\ 29 CFR 2550.404(c)-1.

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As an alternative, MetLife suggests that the existing provisions of

the Section 404(c) Regulation govern the disclosure provided or made

available to a Section 404(c) Plan if a MetLife GIC Trust is included

in the Plan's offerings. According to MetLife, under the Section 404(c)

Regulation, participants must be provided with descriptions of each

designated investment alternative but not with descriptions of separate

investments forming a part of the investment alternative. The documents

a participant may obtain upon request pursuant to section 2550.404c-

1(b)(2)(i)(B)(2)(ii) of the Section 404(c) Regulation include financial

statements and reports and any other materials relating to investment

alternatives available under the Plan to the extent provided to the

Plan. MetLife further explains that the Section 404(c) Regulation

imposes no additional obligation on the administrator to furnish or

make available materials relating to the companies in which the equity

fund invests. Therefore, MetLife wishes to have the Notice amended to

state that the disclosure required for participants in a Section 404(c)

Plan which offers a MetLife Trust GIC as an investment option,

particularly where the MetLife Trust GIC is one of a number of

contracts within a designated investment alternative, is that required

by the Section 404(c) Regulation and other existing regulations.

The Department notes that when an investment option, such as a

MetLife Trust GIC, is offered by a fiduciary under a Section 404(c)

Plan to participants as part of the Plan's stable value portfolio and a

party in interest to an investing Plan is providing the investment, the

acquisition of the contract by the plan fiduciary is beyond the scope

of the Section 404(c) Regulation. In providing exemption relief for

this type of transaction in a participant-directed plan, the Department

typically requires, among other things, that the Plan fiduciary provide

the participant with full and complete disclosures regarding the nature

of the investment. These disclosures will ensure that the directing

Plan participant has given informed consent to the investment and

continues to be apprised about the ramifications of the investment.

After considering MetLife's comment, the Department has decided

that a Section 404(c) Plan participant should, at a minimum, receive

from the appropriate fiduciary, summaries of the pertinent features of:

the Letter of Agreement between MetLife and the Plan fiduciary,

particularly the disclosure that the MetLife Trust GIC may have a

Credited Rate as low as 0 percent; the Investment Guidelines and the

MetLife Conventional GIC. However, the Department has decided to delete

paragraphs (2) and (3) of Condition (d) of the proposal relating to

disclosure of the operative language of the proposed and/or final

exemptions. Therefore, Condition (d), which has been redesignated

herein as Section II(d), has been revised to read as follows:

[[Page 19958]]

(d) Upon the selection by a Plan fiduciary of a MetLife Trust

GIC, a participant in a Plan that provides for participant

investment selection (the Section 404(c) Plan) is given a summary of

the pertinent features of the documents listed above in paragraphs

(c)(1), (c)(2) and (c)(5) of this Section II, which are deemed

appropriate for distribution to such participant, including a

disclosure that the MetLife Trust GIC may have a Credited Rate as

low as 0 percent.4

\4\ Paragraphs (c)(1), (c)(2) and (c)(5) of Section II pertain

to the Letter of Agreement, the Investment Guidelines and the

pertinent features of the MetLife Conventional GIC.

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Condition (e) of the Notice pertains to ongoing disclosures that

will be provided to a Plan fiduciary and, if applicable, Plan

participants in a Section 404(c) Plan subsequent to a Plan's investment

in a MetLife Trust GIC. Such written disclosures include monthly,

quarterly, or annual reports. These documents may also be made

available to a Plan participant upon such participant's request.

However, after careful consideration of MetLife's comment, the

Department has decided not to modify Condition (e). The Department

believes that the condition, as proposed, provides flexibility to the

Plan fiduciary by not requiring that mandatory disclosures

automatically be provided to each participant. Rather, the participant

may obtain copies of such reports at his or her request.

d. Condition (h)

Condition (h) of the Notice provides that each MetLife Trust GIC

will have a predefined maturity date or dates selected by a Plan

fiduciary and agreed to by MetLife. Upon further consideration of

Condition (h), the Department believes it is appropriate to restrict

the maximum number of years that a MetLife Trust GIC may remain in

effect before the Plan can realize the Guaranteed Value. Therefore,

MetLife has agreed to cap the maturity date for a MetLife Trust GIC at

five years. This, together with the ability of a fiduciary to annually

affirmatively extend the maturity date for an additional year, should

ensure that the Plan will have greater investment flexibility and will

enable the utilization of third-party benchmark indices having 4-6 year

durations. (For a discussion of the revised procedure for extending or

locking in the maturity date for a MetLife Trust GIC under Condition

(h), see Part 2.c. below of this grant notice).

Thus, based upon the foregoing, the Department has revised

Condition (h) of the Notice as follows:

(h) Each MetLife Trust GIC has a predefined maturity date or

dates selected by the Plan fiduciary and agreed to by MetLife.

However, in no event does a MetLife Trust GIC have a maturity date

exceeding five years. A Plan fiduciary may extend the maturity date

for an additional year upon an affirmative written decision made

annually by such fiduciary. Once a Plan fiduciary does not

affirmatively extend the maturity date, no future extensions will

occur.

e. Condition (i)

Condition (i) of the Notice states that MetLife will inform a Plan

fiduciary of the new reset rate for the Credited Rate prior to the

fiduciary's affirmation of the maturity date. To reflect the fact that

MetLife will inform a Plan fiduciary of the new reset rate for the

Credited Rate prior to a Plan fiduciary's decision to extend a maturity

date for a MetLife Trust GIC for one year or to decline such extension,

the Department has revised Condition (i).

(i) Prior to a Plan fiduciary's decision regarding the extension

of a maturity date for a MetLife Trust GIC for one additional year,

MetLife informs such Plan fiduciary of the new reset rate for the

Credited Rate.

2. Changes to the Summary

With the exception of MetLife's suggested change to the Credited

Rate formula, which is discussed below in Part 2.b., the Department has

made the following substantive modifications to the Summary.

a. Representation 7

MetLife states a possible interpretation of the language of

Representation 7 would not allow for the designation of an investment

manager other than MetLife or an affiliated sub-manager other than

State Street Research and Management Company (State Street Research).

Because MetLife wishes to be able to designate other investment

managers and affiliated sub-managers by mutual agreement with the Plan

sponsor, even though there is presently no affiliate to designate as a

sub-manager, MetLife requests that the second sentence in

Representation 7 be redrafted as follows:

However, by mutual agreement with the Plan sponsor, MetLife may

designate State Street Research or another affiliated investment

manager as investment manager or sub-manager with respect to some or

all of the assets in an Account.

In addition, in the third sentence of Representation 7, MetLife

requests that the words ``investment manager or'' be inserted before

the word ``sub-manager.''

b. Representation 12

MetLife requests that certain technical changes be made to the

description of the Credited Rate because it believes the references to

the duration and yield-to-maturity in the text imply that the source

for these two inputs is the Account rather than a third-party benchmark

index. Therefore, MetLife requests that in part (a) of the second

sentence of the first paragraph of Representation 12, the words ``of

assets in the Account'' be deleted and the following paragraphs be

inserted after part (c) of the representation:

If a Plan fiduciary has determined to extend a maturity date (as

described in Representation 13), the Yield-to-Maturity component

will be the yield-to-maturity of an external index (as described in

Representation 8) unless specifically requested by the Plan with

MetLife's consent. MetLife represents that it will not calculate the

yield-to-maturity of the index. Rather, such calculation will be

made by the index provider. Once a Plan fiduciary has determined not

to extend a maturity date, the Yield-to-Maturity component will be

the yield of a Treasury security with a comparable duration relative

to the assets in the Account.

The Credited Rate will not be affected by the length of time

that MetLife has managed a MetLife Trust GIC Account.

In addition, MetLife requests that the last sentence of the second

paragraph of Representation 12 be deleted and replaced with the

following language:

The amortization period or Duration will be no longer than the

period specified in the MetLife Trust GIC. If a Plan fiduciary has

determined to extend a maturity date (as described in Representation

13), it typically will be the duration of the index (as described in

Representation 8) unless specifically requested by the Plan with

MetLife's consent. MetLife further represents that the duration of

the index will be calculated by the index provider. Once a Plan has

determined not to extend a maturity date, the Duration is the period

from the effective date of the Credited Rate reset until the

maturity date or the average maturity date.

c. Representation 13

Representation 13 of the Summary describes the manner in which the

maturity date mechanism for a MetLife Trust GIC will operate. Under the

procedure set forth in Representation 13, a MetLife Trust GIC may

continue indefinitely since there are no restrictions placed on the

number of years the instrument may remain in effect. Also, during an

annual notification period, MetLife is required to afford the Plan

fiduciary an opportunity to ``affirm'' the maturity date in writing. If

the Plan fiduciary does nothing, the MetLife Trust GIC will continue

for another year and the notification procedure will be repeated each

year. Assuming, however, the Plan fiduciary ``affirms'' the maturity

date, the MetLife Trust GIC will mature

[[Page 19959]]

within the prescribed time frame selected by the Plan fiduciary from

the anniversary date of such MetLife Trust GIC.

In order to provide additional safeguards, the Department has

decided to revise this procedure in its entirety. Specifically, the

Department has proposed that the Plan fiduciary make an affirmative

decision to extend the maturity date for a MetLife Trust GIC.

Additionally, the Department has determined that a MetLife Trust GIC

will never have a maturity date that is in excess of five years. A

MetLife Trust GIC may be extended, however, on an annual basis, for

only one year as long as the Plan fiduciary provides advance written

notice to MetLife agreeing to the extension. If, however, the Plan

fiduciary does not inform MetLife, in writing, prior to the anniversary

date of the intention to extend the maturity date, the date will not be

extended by one year and the MetLife Trust GIC will mature within the

maximum five year time frame. As noted above, MetLife will repeat the

notification procedure over successive annual periods if the Plan

fiduciary determines that each such extension is appropriate. Should

the Plan fiduciary decide not to extend the maturity date on an

anniversary date, no further annual notifications will be required of

MetLife.

Besides the foregoing changes, the Department emphasizes the fact

that the Guaranteed Value for a MetLife Trust GIC will not always

reflect the amount of the initial contribution but may be adjusted for

contributions and withdrawals.

Therefore, Representation 13 has been revised to read as follows:

13. Although each MetLife Trust GIC will have a defined maturity

date or dates selected by the Plan fiduciary and agreed to by

MetLife, in no event will a MetLife Trust GIC have a maturity date

exceeding five years. However, such date may be extended if

specifically requested, in writing, by the Plan fiduciary. Each such

extension of the maturity date will be subject to a one year

limitation as described below.

One month before the anniversary date of the MetLife Trust GIC,

MetLife will notify the Plan fiduciary, in writing, of the impending

anniversary of such MetLife Trust GIC, as well as the new reset rate

for the Credited Rate, and afford the fiduciary the opportunity to

notify MetLife that it will extend the maturity date. If the Plan

fiduciary does not inform MetLife, in writing, prior to the

anniversary date of the intention to extend the maturity date, the

date will not be extended by one year and the original maturity date

will remain in effect. If, on the other hand, the Plan fiduciary

informs MetLife, in writing, prior to the anniversary date of the

intention to extend the maturity date, the date will be extended for

one additional year only. A Plan fiduciary which elects to extend

the maturity date in this manner will be given another opportunity

to do so one month before the next anniversary date of the MetLife

Trust GIC.

The notification procedure will be repeated, and the opportunity

to extend the maturity date for one more year will be given prior to

each subsequent anniversary date, provided the fiduciary has elected

to extend the maturity date before the immediately preceding

anniversary date. Each extension elected by the fiduciary will be

for only one year beyond the maturity date, including any extensions

previously in effect. Thus, at no time will a MetLife Trust GIC have

a maturity date that is more than five years from the anniversary

date.

Upon the maturity of a MetLife Trust GIC, MetLife represents

that if the Market Value of the assets invested in the MetLife Trust

GIC is less than the Guaranteed Value (as described in

Representation 11), it will make up the difference.9

\9\ MetLife notes that the procedures governing the maturity

date of a MetLife Trust GIC will not affect the ability of a Plan

fiduciary to discontinue such investment as described in

Representation 19.''

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d. Representation 20(b). MetLife represents that although the

conversion of a MetLife Trust GIC to a MetLife Conventional GIC has

been discussed with the Department primarily in the context of

Guaranteed Value exceeding Market Value, it wishes to clarify that the

MetLife Conventional GIC may still be selected regardless of the

relative levels of Guaranteed and Market Values. In some cases, MetLife

notes that a Plan fiduciary holding a MetLife Trust GIC with Market

Value in excess of Guaranteed Value may consider the MetLife

Conventional GIC the most prudent alternative available. If this

fiduciary believes that interest rates are about to decline, such

fiduciary may decide to lock in the gain by selecting this investment

option. Because ``any market value loss or gain * * * will be amortized

over the period ending with the final maturity date of the MetLife

Conventional GIC,'' MetLife explains that the Plan fiduciary will have

secured an above market rate of return guaranteed for an extended fixed

period.

Therefore, to cover the full range of situations in which a MetLife

Conventional GIC will be offered, MetLife requests that the words ``at

a time when there are losses and'' be deleted in the first sentence of

Representation 20(b). Similarly, and for clarification, MetLife

requests that the following sentence be substituted for the first

sentence of Footnote 16:

The Department notes that the decision by a Plan fiduciary to

convert a MetLife Trust GIC into a MetLife Conventional GIC is

subject to the provisions of section 404 of the Act, as are all Plan

investment decisions.

Finally, the Department notes that MetLife's comments with respect

to the Notice also contained certain minor clarifications to

information included in the Summary. Rather than restate these

modifications in this grant notice, the Department wishes to

acknowledge all of the technical clarifications made by MetLife to the

information in question.

For further information regarding MetLife's comment letter or other

matters discussed herein, interested persons are encouraged to obtain

copies of the two exemption application files (Exemption Application

No. D-10241 and Exemption Application No. D-10412) the Department is

maintaining in this case. The complete application files, as well as

all supplemental submissions received by the Department, are made

available for public inspection in the Public Documents Room of the

Pension and Welfare Benefits Administration, Room N-5638, U.S.

Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.

20210.

Accordingly, after consideration of the entire record, including

MetLife's comment letter, the Department has determined to grant the

exemption as modified herein.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,

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

Consolidated Associations of Railroad Employees Health Care Plan

(the Plan) Located in Topeka, Kansas

[Prohibited Transaction Exemption 98-18; Exemption Application No. L-

10527]

Exemption

The restrictions of section 406(a) of the Act shall not apply,

effective June 10, 1997 to: (1) the current leasing (the Lease) of

certain real property (the Property) by the Plan to Century Health

Solutions, Inc. (Century), a party in interest with respect to the

Plan; (2) the proposed new leasing of substantially the same Property

by the Plan to Century (or its successor in name) effective April 1,

1998 (the New Lease); and (3) the possible future sale of the Property

by the Plan to Century (or its successor in name) pursuant to a right

of first refusal under the terms of the Lease, provided the following

conditions are satisfied: (a) the Property represents no more than 25%

of the value of the Plan's assets; (b) the terms of the Lease are, and

will remain, at least as favorable to the Plan as those obtainable in

an arm's-length transaction with an unrelated party; (c) the fair

market rental value is

[[Page 19960]]

determined on an annual basis by a qualified, independent appraiser;

(d) the Plan's independent fiduciary has determined that the

transaction is appropriate for the Plan and in the best interests of

the Plan's participants and beneficiaries; (e) the Plan's independent

fiduciary will continue to monitor the transaction and the conditions

of the exemption and take whatever action is necessary to enforce the

Plan's rights under the Lease; and (f) the Plan's independent fiduciary

acts to ensure that any sale of the Property by the Plan to Century is

properly effected under the terms of the Lease, pursuant to Century's

right of first refusal in the event the Plan receives a bona fide offer

from a third party to purchase the Property, and Century is not in

default on any of its obligations under the Lease.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption, refer to

the notice of proposed exemption published on February 26, 1998 at 63

FR 9867.

Written Comments

The only written comments received by the Department with respect

to the proposed exemption were submitted by the applicant, which sought

clarification with respect to two points. First, the applicant

represented that the New Lease would likely be for fewer square feet of

the Property than under the Lease, and sought clarification that the

exemption as proposed would still apply to the New Lease. With respect

to the New Lease, the Department notes that the exemption would apply

to a lease of fewer square feet in the same Property provided all

conditions of the exemption are satisfied. Secondly, the applicant

requested clarification that the exemption would still apply if Century

reorganized as a for-profit corporation, or changed its name, or both.

The applicant represented that this change in name will never occur in

connection with a sale of the underlying assets of Century to an

unrelated third party. The applicant requested that the operative

language of the exemption be modified to extend relief to Century or

its successor in name. The operative language of the exemption has been

amended accordingly to reflect the possible name change.

The Department has considered the entire record, including the

comment submitted by the applicant, and has determined to grant the

exemption as proposed, with the one change as described above.

EFFECTIVE DATE: This exemption is effective June 10, 1997.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,

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

Thornton, Hegg, Reif, Johnston & Dolan Profit Sharing Plan and

Trust (the Plan) Located in Alexandria, Minnesota

[Prohibited Transaction Exemption No. 98-19; Application No. D-10563]

Exemption

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 sale (the Sale) by the Plan of certain real

property (the Property) to Robert M. Hegg, (Mr. Hegg), a party in

interest with respect to the Plan; provided the following conditions

are satisfied:

(A) The terms and conditions of the transaction are no less

favorable to the Plan than those which the Plan would receive in an

arm's-length transaction with an unrelated party;

(B) The Sale is a one-time transaction for cash;

(C) The Plan incurs no expenses from the Sale; and

(D) The Plan receives as consideration from the Sale the greater of

either the fair market value of the Property as determined by a

qualified, independent appraiser on the date of the Sale, or an amount

equal to the funds expended by the Plan in acquiring and maintaining

the Property, less any income produced by the Property.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption, refer to

the Notice of Proposed Exemption published on February 26, 1998, at 63

FR 9868.

FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department,

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

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest or disqualified

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(B) of the Act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are supplemental to and not in derogation of,

any other provisions of the Act and/or the Code, including statutory or

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

exemption is not dispositive of whether the transaction is in fact a

prohibited transaction; and

(3) The availability of these exemptions is subject to the express

condition that the material facts and representations contained in each

application accurately describes all material terms of the transaction

which is the subject of the exemption.

Signed at Washington, D.C., this 17th day of April, 1998.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 98-10693 Filed 4-21-98; 8:45 am]

BILLING CODE 4510-29-P