Grant of Amendment to Prohibited Transaction Exemption (PTE) 97- 35 Involving the Amalgamated Bank of New York (the Bank) Located in New York, NY

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 98-35; Exemption Application Nos. D-

10546]

Grant of Amendment to Prohibited Transaction Exemption (PTE) 97-

35 Involving the Amalgamated Bank of New York (the Bank) Located in New

York, NY

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of

Labor.

ACTION: Grant of Amendment to PTE 97-35.

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SUMMARY: This document contains a final exemption which amends PTE 97-

35 (62 FR 41088, July 31, 1997), an individual administrative exemption

involving the provision of banking services by the Bank to 22 employee

benefit plans (the Plans) listed in the exemption, all of which are

affiliated with the Union of Needletrades, Industrial and Textile

Employees (UNITE), which is the majority and controlling shareholder in

the Bank. These transactions are described in a notice of pendency that

was published in the Federal Register on March 30, 1998 at 63 FR 15228.

EFFECTIVE DATE: This exemption is effective as of July 1, 1995, except

for: (1) Plan investments in the LEI Fund, for which the effective date

is January 3, 1998; (2) Plan investments in the LongView 500 Index

Fund, for which the effective date is December 8, 1997; and (3)

transactions involving the UNITE Staff Retirement Plan, for which the

effective date is July 8, 1998.

FOR FURTHER INFORMATION CONTACT: Mr. Ron Willett, Office of Exemption

Determinations, Pension and Welfare Benefits Administration, U.S.

Department of Labor, Washington, D.C. 20210, telephone (202) 219-8881.

(This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On March 30, 1998, the Department of Labor

(the Department) published a notice of proposed exemption (the Notice)

in the Federal Register (63 FR 15228) to amend PTE 97-35. PTE 97-35

provides an exemption from certain prohibited transaction restrictions

of sections 406(a), 406(b)(1) and (b)(2) of the Employee Retirement

Income Security Act of 1974 as amended (the Act), and from the

sanctions resulting from the application of section 4975 of the

Internal Revenue Code of 1986 as amended (the Code), by reason of

section 4975(c)(1)(A) through (E) of the Code. The Notice was requested

in an application filed on behalf of the Bank pursuant to section

408(a) of the Act and section 4975(c)(2) of the Code, and in accordance

with the procedures set forth in 29 CFR Part 2570, Subpart B(55 FR

32836, August 10, 1990) (the Procedures). Effective December 31, 1978,

section 102 of Reorganization Plan No. 4 of 1978 (5 USC App.1, 1996)

transferred the authority of the Secretary of the Treasury to issue

exemptions of the type requested to the Secretary of Labor.

Accordingly, this exemption is being issued solely by the Department.

WRITTEN COMMENTS: The Notice gave interested persons the opportunity to

comment and to request a public hearing on the matters described

therein. The Department received one written comment and no hearing

requests from interested persons following the dissemination of the

Notice and supplemental statement.

The written comment received by the Department was submitted on

behalf of the Bank concerning the effective date of a portion of the

requested exemption, as proposed in the Notice. In this regard, the

Notice proposed that the effective date for the final exemption be

described as follows:

Effective Date: This exemption will be effective as of July 1,

1995, except for: (1) Plan investments in the LEI Fund, for which

the effective date will be January 3, 1998; (2) Plan investments in

the LongView 500 Index Fund, for which the effective date will be

the date on which the final amended exemption, if granted, is

published in the Federal Register; and (3) transactions involving

the UNITE Staff Retirement Plan, for which the effective date will

be the date on which the final amended exemption, if granted, is

published in the Federal Register.

The Bank states that in its exemption application a request was

made for the final exemption to be effective as of the date the

application was filed with the Department (i.e., December 4, 1997) with

respect to Plan investments in the LongView 500 Fund (the 500 Fund),

because the Bank had expected that Plan investments in the 500 Fund

would occur shortly after such filing. However, in the Notice, the

proposed effective date with respect to Plan investments in the 500

Fund was inadvertantly described as the date on which the final

exemption, if granted, would be published in the Federal Register. In

its comment, the Bank explains that the actual date of the first

investment made by a Plan in the 500 Fund was December 8, 1997, when

the ILGWU Death Benefit Plan (one of the Plans covered by PTE 97-35)

made such an investment. Therefore, the Bank requests that the final

exemption for Plan investments in the 500 Fund be effective as of

December 8, 1997. In the final exemption, the Department has stated the

effective date in accordance with the Bank's request, by inserting a

reference to the appropriate date in both the definition of ``Banking

Services'' in Section IV(c) and the effective date paragraph for this

Grant notice.

Based on the entire application record, including the Bank's

written comment regarding the Notice, the Department has determined to

grant the amendment to PTE 97-35 with the modification to the effective

date requested by the Bank.

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 section 4975(c)(2) of the Code does

not relieve a fiduciary or other party in interest or disqualified

person from certain other provisions of the Act and 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 require, among other things, a fiduciary to

discharge his or her 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 requirements of section 401(a) of the Code that the plan

operate for the exclusive benefit of the employees of the employer

maintaining the plan and their beneficiaries;

[[Page 36944]]

(2) The exemption will not extend to transactions prohibited under

section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;

(3) In accordance with section 408(a) of the Act and 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 finds that the exemption is

administratively feasible, in the interests of the plans and their

participants and beneficiaries and protective of the rights of the

participant and beneficiaries;

(4) This exemption will be supplemental to, and not in derogation

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

or administrative exemptions. 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

(5) This exemption is subject to the express condition that the

Summary of Facts and Representations set forth in the proposed

exemption relating to PTE 97-35, as amended by this grant notice,

accurately describe, where relevant, the material terms of the

transactions consummated pursuant to that exemption.

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 cited

above, the Department hereby amends PTE 97-35.

Section I--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 July 1, 1995 [except as otherwise indicated

herein], to--

(A) The provision of banking services (Banking Services, as defined

in section IV(C)) by the Amalgamated Bank of New York (the Bank) to

certain employee benefit plans (the Plans, as defined in section

IV(E)), which are maintained on behalf of members of the former

International Ladies Garment Workers Union (ILGWU), which merged on

July 1, 1995 with the Amalgamated Clothing and Textile Workers Union to

form the Union of Needletrades, Industrial and Textile Employees

(UNITE);

(B) The purchase by the Plans of certificates of deposit (CDs)

issued by the Bank; and

(C) The deposit of Plans' assets in money market or other deposit

accounts established by the Bank; provided that the applicable

conditions of Section II and Section III are met.

Section II--Conditions

(A) The terms under which the Banking Services are provided by the

Bank to the Plans, and those under which the Plans purchase CDs from

the Bank or maintain deposit accounts with the Bank, are at least as

favorable to the Plans as those which the Plans could obtain in arm's-

length transactions with unrelated parties.

(B) The interests of each of the Plans with respect to the Bank's

provision of Banking Services to the Plans, the purchase of CDs from

the Bank by any of the Plans, and the deposit of Plan assets in deposit

accounts established by the Bank, are represented by an Independent

Fiduciary (as defined in section IV(D)).

(C) On a periodic basis, not less frequently than annually, an

Authorizing Plan Fiduciary (as defined below in section IV(A)) with

respect to each Plan authorizes the representation of the Plan's

interests by the Independent Fiduciary and determines that the Banking

Services and any CDs and depository accounts utilized by the Plan are

necessary and appropriate for the establishment or operation of the

Plan.

(D) With respect to the purchase by any of the Plans of

certificates of deposit (CDs) issued by the Bank or the deposit of Plan

assets in a money market account or other deposit account established

at the Bank: (1) Such transaction complies with the conditions of

section 408(b)(4) of the Act; (2) Any CD offered to the Plans by the

Bank is also offered by the Bank in the ordinary course of its business

with unrelated customers; and (3) Each CD purchased from the Bank by a

Plan pays the maximum rate of interest for CDs of the same size and

maturity being offered by the Bank to unrelated customers at the time

of the transaction.

(E) The compensation received by the Bank for the provision of

Banking Services to the Plan is not in excess of reasonable

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

(F) Following the merger of the ILGWU into UNITE, the Independent

Fiduciary made an initial written determination that (1) the Bank's

provision of Banking Services to the Plans, (2) the deposit of Plan

assets in depository accounts maintained by the Bank, and (3) the

purchase by the Plans of CDs from the Bank, are in the best interests

and protective of the participants and beneficiaries of each of the

Plans.

(G) On a periodic basis, not less frequently than quarterly, the

Bank provides the Independent Fiduciary with a written report (the

Periodic Report) which includes the following items with respect to the

period since the previous Periodic Report: (1) a listing of Banking

Services provided to, all outstanding CDs purchased by, and deposit

accounts maintained for each Plan; (2) a listing of all fees paid by

the Plans to the Bank for the Banking Services, (3) the performance of

the Bank with respect to all investment management services, (4) a

description of any changes in the Banking Services, (5) an explanation

of any problems experienced by the Bank in providing the Banking

Services, (6) a description of any material adverse events affecting

the Bank, and (7) any additional information requested by the

Independent Fiduciary in the discharge of its obligations under this

exemption.

(H) On a periodic basis, not less frequently than annually, the

Independent Fiduciary reviews the Banking Services provided to each

Plan by the Bank, the compensation received by the Bank for such

services, any purchases by the Plan of CDs from the Bank, and any

deposits of assets in deposit accounts maintained by the Bank, and

makes the following written determinations:

(1) The continuation of the Bank's provision of Banking Services to

the Plan for compensation is in the best interests and protective of

the participants and beneficiaries of the Plan;

(2) The Bank is a solvent financial institution and has the

capability to perform the services;

(3) The fees charged by the Bank are reasonable and appropriate;

(4) The services, the depository accounts, and the CDs are offered

to the Plan on the same terms under which the Bank offers the services

to unrelated Bank customers in the ordinary course of business; and

(5) Where the Banking Services include an investment management

service, that the rate of return is not less favorable to the Plan than

the rates on comparable investments involving unrelated parties.

(I) Copies of the Bank's periodic reports to the Independent

Fiduciary are furnished to the Authorizing Plan Fiduciaries on a

periodic basis, not less frequently than annually and not later than 90

days after the period to which they apply.

(J) The Independent Fiduciary is authorized to continue, amend, or

terminate, without any penalty to any Plan (other than the payment of

[[Page 36945]]

penalties required under federal or state banking regulations upon

premature redemption of a CD), any arrangement involving: (1) the

provision of Banking Services by the Bank to any of the Plans, (2) the

deposit of Plan assets in a deposit account maintained by the Bank, or

(3) any purchases by a Plan of CDs from the Bank;

(K) The Authorizing Plan Fiduciary may terminate, without penalty

to the Plan (other than the payment of penalties required under federal

or state banking regulations upon premature redemption of a CD), the

Plan's participation in any arrangement involving: (1) the

representation of the Plan's interests by the Independent Fiduciary,

(2) the provision of Banking Services by the Bank to the Plan, (3) the

deposit of Plan assets in a deposit account maintained by the Bank, or

(4) the purchase by the Plan of CDs from the Bank.

Section III--Recordkeeping

(A) For a period of six years, the Bank and the Independent

Fiduciary will maintain or cause to be maintained all written reports

and other memoranda evidencing analyses and determinations made in

satisfaction of conditions of this exemption, except that: (a) a

prohibited transaction will not be considered to have occurred if, due

to circumstances beyond the control of the Independent Fiduciary and

the Bank, the records are lost or destroyed before the end of the six-

year period; and (b) no party in interest other than the Bank and the

Independent Fiduciary 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 (B)

below;

(B)(1) Except as provided in section (2) of this paragraph (B) and

notwithstanding any provisions of subsections (a)(2) and (b) of section

504 of the Act, the records referred to in paragraph (A) of this

Section III shall be unconditionally available at their customary

location during normal business hours for inspection by: (a) any duly

authorized employee or representative of the U.S. Department of Labor

or the Internal Revenue Service, (b) any employer participating in the

Plans or any duly authorized employee or representative of such

employer, and (c) any participant or beneficiary of the Plans or any

duly authorized representative of such participant or beneficiary.

(2) None of the persons described in subsections (b) and (c) of

section (1) above shall be authorized to examine trade secrets of the

Independent Fiduciary or the Bank, or any of their affiliates, or any

commercial, financial, or other information that is privileged or

confidential.

Section IV--Definitions

(A) ``Authorizing Plan Fiduciary'' means, with respect to each

Plan, the board of trustees of the Plan or other appropriate plan

fiduciary with discretionary authority to make decisions with respect

to the investment of Plan assets;

(B) ``Bank'' means the Amalgamated Bank of New York;

(C) ``Banking Services'' means (1) custodial, safekeeping, checking

account, trustee services, and (2) investment management services

involving (a) fixed income securities (either directly or through a

collective investment fund maintained by the Bank), (b) the LongView

Fund maintained by the Bank, (c) effective December 8, 1997, the

LongView 500 Index Fund, and (d) effective January 3, 1998, the LEI

Fund maintained by the Bank.

(D) ``Independent Fiduciary'' means a person, within the meaning of

section 3(9) of the Act, who (1) is not an affiliate of the Union of

Needletrades, Industrial & Textile Employees (UNITE) and any successor

organization thereto by merger, consolidation or otherwise, (2) is not

an officer, director, employee or partner of UNITE, (3) is not an

entity in which UNITE has an ownership interest, (4) has no

relationship with the Bank other than as Independent Fiduciary under

this exemption, and (5) has acknowledged in writing that it is acting

as a fiduciary under the Act. No person may serve as an Independent

Fiduciary for the Plans for any fiscal year in which the gross income

(other than fixed, non-discretionary retirement income) received by

such person (or any partnership or corporation of which such person is

an officer, director, or ten percent or more partner or shareholder)

from UNITE and the Plans for that fiscal year exceed five (5) percent

of such person's annual gross income from all sources for the prior

fiscal year. An affiliate of a person is any person directly or

indirectly, through one or more intermediaries, controlling, controlled

by, or under common control with the person. The term ``control'' means

the power to exercise a controlling influence over the management or

policies of a person other than an individual. Initially, the

Independent Fiduciary is U.S. Trust Company of California, N.A.

(E) ``Plans'' means any of the following employee benefit plans,

and their successors by reason of merger, spin-off or otherwise:

International Ladies Garment Workers Union Nation Retirement Fund;

International Ladies Garment Workers Union Death Benefit Fund;

Health Fund of New York Coat, Suit, Dress, Rainwear & Allied Workers

Union, ILGWU;

Health & Vacation Fund, Amalgamated Ladies Garment Cutters Union, Local

10;

ILGWU Eastern States Health & Welfare Fund;

ILGWU Office, Clerical & Misc. Employee Retirement Fund;

ILGWU Retirement Fund, Local 102;

Union Health Center Staff Retirement Fund;

Unity House 134 HREBIU Plan Fund;

Puerto Rican Health & Welfare Fund;

Health & Welfare Fund of Local 99, ILGWU;

Local 99 Exquisite Form Industries, Inc. Severance Fund;

Local 99 K-Mart Severance Fund;

Local 99 Kenwin Severance Fund;

Local 99 Lechters Severance Fund;

Local 99 Eleanor Shops Severance Fund;

Local 99 Monette Severance Fund;

Local 99 Moray, Inc. Severance Fund;

Local 99 Petri Stores, Inc. Severance Fund;

Local 99 Netco, Inc. Severance Fund;

Local 99 Misty Valley, Inc. Severance Fund;

Local 99 Norstan Apparel Shops, Inc. Severance Fund; and

UNITE Staff Retirement Plan, ILGWU Unit.

(F) ``UNITE'' means the Union of Needletrades, Industrial & Textile

Employees and any successor organization thereto by merger,

consolidation or otherwise.

Effective Date: This exemption is effective as of July 1, 1995, except

for: (1) Plan investments in the LEI Fund, for which the effective date

is January 3, 1998; (2) Plan investments in the LongView 500 Index

Fund, for which the effective date is December 8, 1997; and (3)

transactions involving the UNITE Staff Retirement Plan, for which the

effective date is July 8, 1998.

The availability of this exemption is subject to the express

condition that the material facts and representations contained in the

application for exemption are true and complete and accurately describe

all material terms of the transactions. In the case of continuing

transactions, if any of the material facts or representations described

in the application change, the

[[Page 36946]]

exemption will cease to apply as of the date of such change. In the

event of any such change, an application for a new exemption must be

made to the Department.

For a more complete statement of the facts and representations

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

the proposed exemption (i.e., the Notice) and the prior grant notice

for PTE 97-35, which are cited above.

Signed at Washington, D.C., this 1st day of July, 1998.

Ivan L. Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 98-18011 Filed 7-7-98; 8:45 am]

BILLING CODE 4510-29-P