Notice of Proposed Individual Exemption To Amend and Replace Prohibited Transaction Exemption (PTE) 97-35 Involving Amalgamated Bank of New York (the Bank) Located in New York, NY

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10546]

Notice of Proposed Individual Exemption To Amend and Replace

Prohibited Transaction Exemption (PTE) 97-35 Involving Amalgamated Bank

of New York (the Bank) Located in New York, NY

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

Labor.

ACTION: Notice of proposed individual exemption to modify andreplace

PTE 97-35.

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SUMMARY: This document contains a notice of pendency before the

Department of Labor (the Department) of a proposed individual exemption

which, if granted, would amend and replace PTE 97-35 (62 FR 41088, July

31, 1997). PTE 97-35 permits, among other things, 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. PTE 97-35 is

effective as of July 1, 1995, except for Plan investments in a fund

maintained by the Bank designated as the LEI Fund, for which the

effective date is January 3, 1998.

If granted, the proposed exemption would replace PTE 97-35 but

would incorporate by reference the facts, representations and all of

the conditions that are contained in the notice and the final

exemption.

DATES: Written comments and requests for a public hearing should be

received by the Department on or before May 29, 1998.

ADDRESSES: All written comments and requests for a public hearing

(preferably, three copies) should be sent to the Office of Exemption

Determinations, Pension and Welfare Benefits Administration, Room N-

5649, U.S. Department of Labor, 200 Constitution Avenue, N.W.,

Washington, D.C. 20210, Attention: Application No. D-10546. The

application pertaining to the proposed exemption and the comments

received will be available for public inspection in the Public

Documents Room of the Pension and Welfare Benefits Administration, U.S.

Department of Labor, Room N-5638, 200 Constitution Avenue, N.W.,

Washington, D.C. 20210.

FOR FURTHER INFORMATION CONTACT: Ronald Willett, Office of Exemption

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

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

number.)

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency

before the Department of a proposal to amend and replace PTE 97-35. PTE

97-35 provides relief, effective July 1, 1995, from 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. The request to amend

and replace PTE 97-35 was set forth in an exemption application dated

December 4, 1997, filed on behalf of the Bank. The Department is

proposing the exemption to amend and replace PTE 97-35 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 applicant requested modifications to sections IV(C) and IV(E)

of the exemption. Section IV(C) of PTE 97-35 provides that:

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, and, (c) effective January 3, 1998, the

LEI Fund maintained by the Bank.

The Bank has requested that this definition be modified to add another

investment fund to those covered by PTE 97-35. The Banking Services

covered by the exemption include investments by the Plans in the

LongView Fund maintained by the Bank. As described in the Written

Comments in PTE 97-35, the LongView Fund is a bank collective

investment fund that is designed to mirror the S&P 500 Index. The

LongView Fund is established and maintained pursuant to Revenue Ruling

81-100 and, accordingly, investments therein are restricted to tax

qualified plans. The Bank represents that in response to expressions of

interest from several investors, it has developed an additional fund,

the LongView 500 Index Fund (the 500 Index Fund), designed to mirror

the S&P 500 Index, for investment by tax-qualified plan investors and

investors other than tax qualified plans. The Bank represents that

except for the fact that the investors will include entities other than

tax-qualified plans, the 500 Index Fund will be managed and

restructured in a manner identical to the LongView Fund. The proposed

addition of the 500 Index Fund to the definition of Banking Services

under the exemption and the potential investments by the Plans in the

500 Index Fund have been analyzed and evaluated by U.S. Trust, which is

the Independent Fiduciary representing the interests of the Plans under

PTE 97-35. Consistent with the approach taken under PTE 97-35, the Bank

directed an analysis of the 500 Index Fund by the commercial management

consulting firm of Towers Perrin. Utilizing a report by Towers Perrin,

the Independent Fiduciary determined that the addition of the 500 Index

Fund as an available investment under the exemption would be in the

best interests of the Plans. Accordingly, the Bank requests that

Section IV(C) of the exemption be amended by adding the LongView 500

Index Fund to the definition of Banking Services.

Section IV(E) of PTE 97-35 identifies the 22 plans which are

covered by the exemption. The Bank states that since PTE 97-35 was

issued, a new employee benefit plan, the UNITE Staff Retirement Plan,

ILGWU Unit (the New Plan), has expressed an interest in using the

Bank's services under the exemption. The New Plan covers UNITE

employees formerly employed by ILGWU prior to the merger which created

UNITE. The Bank represents that the New Plan has no prior investment or

other servicing relationship with the Bank but has expressed an

interest in investing in the LongView Fund, which is among the Banking

Services covered by the exemption. The Independent Fiduciary represents

that it has reviewed the proposed provision of Banking Services to the

New Plan by the Bank and the addition of the New Plan to those covered

by the exemption. The Independent Fiduciary states that it has

determined that inclusion of the New Plan under the exemption would be

appropriate. Accordingly, the Bank requests that Section IV(E) of the

exemption be amended to add the UNITE Staff Retirement Plan, ILGWU Unit

to the list of plans covered by the exemption.

The proposed exemption would affect participants and beneficiaries

of, and fiduciaries with respect to, plans affiliated with UNITE for

which the Bank provides Banking Services.

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Notice to Interested Persons

Notice of the proposed exemption will be mailed by first class mail

to each of the Plans, including the New Plan, within 30 days of the

publication of the notice of pendency in the Federal Register. The

notice will contain a copy of the notice of proposed exemption as

published in the Federal Register and a supplemental statement, as

required pursuant to 29 CFR 2570.43(b)(2). The supplemental statement

will inform interested persons of their right to comment on and/or to

request a hearing with respect to the pending exemption. Written

comments and hearing requests are due within 60 days of the publication

of the proposed exemption in the Federal Register.

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 Employee Retirement Income Security Act of

1974, as amended (the Act), and section 4975(c)(2) of the Internal

Revenue Code of 1986 (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;

(2) The proposed exemption, if granted, will not extend to

transactions prohibited under section 406(b)(3) of the Act and section

4975(c)(1)(F) of the Code;

(3) Before an exemption can be granted under section 408(a) of the

Act and section 4975(c)(2) of the Code, the Department must find that

the exemption is administratively feasible, in the interest of the plan

and of its participants and beneficiaries and protective of the rights

of participants and beneficiaries of the plan;

(4) This proposed exemption, if granted, 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 proposed exemption, if granted, is subject to the express

condition that the Summary of Facts and Representations set forth in

the notice of proposed exemption relating to PTE 97-35, as amended by

this notice, accurately describe, where relevant, the material terms of

the transactions to be consummated pursuant to this exemption.

Written Comments and Hearing Requests

All interested persons are invited to submit written comments or

requests for a hearing on the pending exemption to the address above,

within 30 days after the publication of this proposed exemption in the

Federal Register. All comments will be made a part of the record.

Comments received will be available for public inspection with the

referenced applications at the address set forth above.

Proposed Exemption

Based on the facts and representations set forth in the

application, the Department is considering granting the requested

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, August 10, 1990).

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, 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.

[[Page 15230]]

(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

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) 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

[[Page 15231]]

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 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 availability of this proposed 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 applications change, the 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 PTE 97-35, refer to the

proposed exemption and grant notice which are cited above.

Signed at Washington, D.C., this 25th day of March, 1998.

Ivan L. Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 98-8198 Filed 3-27-98; 8:45 am]

BILLING CODE 4510-29-P