Proposed Exemptions; J.C.O., Inc. Retirement Plan and Trust (the
Plan)
[11/30/2004]
Volume 69, Number 229, Page 69620-69628
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Application No. D-11211, et al.]
Proposed Exemptions; J.C.O., Inc. Retirement Plan and Trust (the
Plan)
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of Proposed Exemptions.
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SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restrictions of the Employee
Retirement Income Security Act of 1974 (the Act) and/or the Internal
Revenue Code of 1986 (the Code).
Written Comments and Hearing Requests
All interested persons are invited to submit written comments or
requests for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, within 45 days from the
date of publication of this Federal Register Notice. Comments and
requests 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.
ADDRESSES: All written comments and requests for a hearing (at least
three copies) should be sent to the Employee Benefits Security
Administration (EBSA), 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. Interested persons are also invited to submit
comments and/or hearing requests to EBSA via e-mail or FAX. Any such
comments or requests should be sent either by e-mail to:
[[Page 69621]]
moffitt.betty@dol.gov, or by FAX to (202) 219-0204 by the end of the
scheduled comment period. The applications for exemption and the
comments received will be available for public inspection in the Public
Documents Room of the Employee Benefits Security Administration, U.S.
Department of Labor, Room N-1513, 200 Constitution Avenue, NW.,
Washington, DC 20210.
Notice to Interested Persons
Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).
SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in
applications filed pursuant to section 408(a) of the Act and/or section
4975(c)(2) of the Code, and in accordance with procedures set forth in
29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4
of 1978, 5 U.S.C. App. 1 (1996), 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.
J.C.O., Inc. Retirement Plan and Trust (the Plan) Located in Boulder,
CO
[Application No. D-11211]
Proposed Exemption
Based on the facts and representations set forth in the
application, 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).\1\ If the
exemption is granted, the restrictions of sections 406(a), 406(b)(1)
and (b)(2) of the Act and the sanctions resulting from the application
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through
(E) of the Code, shall not apply to (1) the cash sale (the Sale) of
certain improved real property (the Property) to the Plan by Cynthia G.
Vogels, a party in interest with respect to the Plan and a 50%
shareholder of J.C.O., Inc. (JCO), the Plan sponsor; and (2) the
simultaneous lease (the New Lease) of the Property by the Plan to JCO,
provided that the following conditions are met:
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\1\ For purposes of this proposed exemption, references to
provisions of Title I of the Act, unless otherwise specified, refer
also to corresponding provisions of the Code.
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(a) The terms and conditions of the transactions are not less
favorable to the Plan than those obtainable in an arm's length
transaction between unrelated parties.
(b) The Sale is a one-time transaction for cash.
(c) The acquisition price that is paid by the Plan for the Property
is not more than the fair market value of the Property as determined by
a qualified, independent appraiser on the date of the Sale.
(d) The value of the Property that is acquired by the Plan does not
exceed 20% of the Plan's assets at the time of the Sale nor throughout
the duration of the New Lease.
(e) The Plan does not pay any real estate fees, commissions or
other expenses with respect to the transactions.
(f) Mrs. Vogels indemnifies and holds the Plan harmless from any
liability arising from the Sale, including but not limited to hazardous
materials found on the Property, violation of zoning or land use
regulations or restrictions, and violations of federal, state or local
environmental regulations or laws.
(g) The New Lease is a triple-net lease under which the JCO, as
lessee, pays, in addition to the base rent, all expenses incurred by
the Property, including all taxes and assessments, insurance,
maintenance, utilities and any other expenses.
(h) The annual rental amount under the New Lease is the higher of
$40,800 or the fair market rental value of the Property, as determined
by a qualified, independent appraiser on the date the New Lease is
entered into by the parties.
(i) The rent payable under the New Lease is adjusted every year
after the first 12 months of the New Lease by an amount equal to the
percentage increase in the Consumer Price Index for All Urban Consumers
for the Denver Metropolitan Area (the CPI). In addition, the Property
is reappraised every five years by a qualified, independent appraiser
selected by the Plan's independent fiduciary and the independent
fiduciary then adjusts the rental for the Property based on the
appraisal. However, in no event is the rent adjusted below the rental
amount paid for the preceding year.
(j) The Plan is represented at all times and for all purposes with
respect to the Sale and the New Lease by a qualified, independent
fiduciary.
(k) The Plan's independent fiduciary has negotiated, reviewed, and
approved the terms and conditions of the Sale and the New Lease and has
determined that the transactions are appropriate for the Plan and in
the best interests of the Plan's participants and beneficiaries.
(l) The Plan's independent fiduciary monitors and enforces
compliance with the terms and conditions of the New Lease and this
exemption throughout the duration of the New Lease.
Summary of Facts and Representations
1. JCO is a Colorado corporation and maintains its principal place
of business in Boulder, Colorado. JCO publishes the Journal of Clinical
Orthodontics, a monthly professional journal. The stock of JCO is owned
equally by Cynthia G. Vogels and her husband, David S. Vogels III (the
Vogels). Mrs. Vogels is Secretary/Treasurer of JCO and Mr. Vogels is
President and Managing Editor of JCO.
2. The Plan is a defined benefit pension plan. The Plan was
established by JCO on January 1, 1978. As of December 31, 2003, the
Plan had total assets of $4,916,444, and as of October 27, 2003, the
Plan had eight participants,\2\ including the Vogels and Eugene and
Jacqueline Gottlieb, the parents of Mrs. Vogels. Mr. Vogels and Mr.
Gottlieb are trustees of the Plan and are the only persons who have
investment discretion over any assets involved in the exemption
transactions.
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\2\ There are six active participants and two participants who
are separated and are either receiving benefits or have elected to
defer the receipt of benefits.
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3. Mrs. Vogels is the owner of certain improved real property that
is located at 1828 Pearl Street in Boulder, Colorado. The Property is a
rectangular, 7,000 square-foot site, measuring 50 feet by 140 feet, and
is improved with a 1,630 square-foot, brick building which was
constructed, according to Boulder County records, in 1898, and includes
a 352 square-foot brick garage. Mrs. Vogels originally acquired the
Property by a series of gifts beginning November 30, 1978, and ending
December 27, 1996, from her father, Eugene L. Gottlieb. The Property is
currently leased (the Current Lease) to JCO. The
[[Page 69622]]
Current Lease is a 15 year, triple net lease which commenced on October
1, 2003 and expires on November 30, 2018. Under the Current Lease, JCO
is required to pay Mrs. Vogels all expenses relating to the Property,
including property taxes, utilities, insurance, and janitorial
services. The annual rental under the Current Lease is $40,800, payable
in monthly installments of approximately $3,400.
4. The Property was initially appraised by Russell C. Bowie, MAI,
Certified General Appraiser, a qualified, independent real estate
broker/appraiser affiliated with Bowie Appraisal Service located in
Boulder, Colorado. Mr. Bowie states that he has been active in Colorado
real estate since 1972 and is experienced in sales, leasing,
management, and appraisal of commercial, industrial, and residential
properties. Mr. Bowie represents that he has specialized in commercial
and industrial appraisals for the past 20 years, including easements,
rights-of-way, standardized form reports, and narrative appraisal
reports, and has completed over 700 appraisals of commercial properties
in Boulder County. In addition, Mr. Bowie certifies that he has no
present or prospective interest in the Property and has no personal
interest or bias with respect to the parties involved.
In an independent appraisal report dated April 28, 2003 (the 2003
Appraisal), Mr. Bowie placed the fair market value of the Property in
fee simple \3\ at $525,000 as of April 15, 2003 utilizing the Sales
Comparison Approach to valuation. As of the same date, and as confirmed
in a letter from Mr. Bowie dated July 15, 2004 (the July 2004 Letter),
Mr. Bowie also placed the annual fair market rental value of the
Property at $27,710 as of April 15, 2003 or approximately $2,309 per
month on a triple net basis.
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\3\ The Property was not encumbered by the Current Lease at the
time of the 2003 Appraisal.
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In a full, updated independent appraisal report dated June 3, 2004
(the 2004 Appraisal), Mr. Bowie determined that the fair market value
of a leased fee interest \4\ in the Property was $530,000 as of June 2,
2004, utilizing the Sales Comparison Approach to valuation. As of the
same date, Mr. Bowie also placed the monthly fair market rental value
of the Property at $2,037.50 and its annual fair market rental value at
$24,450.\5\ Mr. Bowie will update the 2004 Appraisal on the date of the
Sale and New Lease transactions.
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\4\ At the time of the 2004 Appraisal, the Property was
encumbered by the Current Leases.
\5\ In the 2004 Appraisal, Mr. Bowie explained that the fair
market value of the Property increased from the value reached in the
2003 Appraisal due to a strong market for small office properties in
Boulder that can be owner-occupies. Mr. Bowie also explained that
the fair market rental value decreased from the value reached in the
2003 Appraisal due to abnormally high vacancy rates for office space
in the surrounding area resulting from the strained economic
conditions in the current market.
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5. Due to the recent rapid appreciation of real estate within
Boulder, Colorado, the applicant has deemed acquisition of the Property
by the Plan to be a better long-term investment on behalf of the Plan
than most other available investments. Therefore, the applicant
proposes that the Plan purchase the Property from Mrs. Vogels for
$530,000 or an amount that is not more than the fair market value of
the Property on the date of the Sale, as determined by a qualified,
independent appraiser. Contemporaneously with the Plan's purchase of
the Property, the Current Lease will be assigned by Mrs. Vogels to the
Plan to reflect the new ownership of the Property, at which time the
New Lease will go into effect.
The terms of both the Sale and the New Lease will be not less
favorable to the Plan than those obtainable in an arm's length
transaction between unrelated parties. In this regard, the Sale will be
a one-time transaction for cash. The Property will not represent more
than 20% of the Plan's assets. The Plan will not be required to pay any
real estate fees, commissions or other expenses in connection with its
acquisition of the Property or with the administration of the New
Lease. Finally, Mrs. Vogels will indemnify and hold the Plan harmless
from any liability arising from the Sale, including but not limited to,
hazardous materials found on the Property, violation of zoning or land
use regulations or restrictions, and violations of federal, state or
local environmental regulations or laws.
Accordingly, the applicant requests an administrative exemption
from the Department with respect to the Sale of the Property by Mrs.
Vogels to the Plan and the leasing of the Property by the Plan to JCO
under the New Lease. The exemption will also be subject to the terms
and conditions described herein.
6. The proposed New Lease will have the same terms as the Current
Lease. In this regard, it will have a 15 year term and be triple-net to
the Plan. Under such circumstances, JCO will pay the Plan all expenses
related to the Property including real estate taxes, insurance, common
area maintenance and property management. In addition, JCO will
continue to pay the Plan an initial monthly rent of $3,400 per month,
or $25 per square foot, based upon the rental amount paid currently by
JCO. This amounts to an additional $10 per square foot over the fair
market rental value of the Property as reported in Mr. Bowie's 2004
Appraisal.
The rent payable under the New Lease will be increased, if
necessary, to equal the fair market rental value of the Property, as
determined by a qualified, independent appraiser at the time it becomes
effective. Then, every year after the first 12 months of the New Lease,
the rent will be adjusted in accordance with the CPI. In no event will
the rent be adjusted below the $25 per square foot presently being paid
by JCO to Mrs. Vogels.
In addition, the New Lease requires that the Property be
reappraised every five years by a qualified, independent appraiser
selected by the Plan's independent fiduciary. The independent fiduciary
will then adjust the rental for the Property based on the independent
appraisal. In no event will the rent be adjusted below the rental
amount paid for the preceding year.
Although the New Lease contains no renewal provisions, it will
terminate upon any termination of the Plan. However, such termination
must be determined, by the qualified, independent fiduciary, to be in
the best interests of the Plan and its participants and beneficiaries.
7. An independent party, Mr. Richard B. Hayes, began his service as
the Plan's independent fiduciary in August 2003, followed by a formal
agreement to serve as the Plan's independent fiduciary executed on
October 27, 2003. Mr. Hayes represents that he is qualified to act as
an independent fiduciary for the Plan because he has been a certified
public accountant for twenty-nine years. Mr. Hayes further states that
he serves as a trustee for three different trusts with assets of $4.2
million, and as manager of a family partnership with assets of $3
million. In such capacities, Mr. Hayes states that he is responsible
for determining the appropriate investment objectives and policies for
such entities, monitoring and reviewing the investment strategy and
asset allocation of such trusts and partnership, and making investment
decisions for such entities. Mr. Hayes confirms that he is independent
of JCO, and, in any one year, he will derive less than one percent of
his gross annual income from JCO.
8. Mr. Hayes, acting as the Plan's independent fiduciary,
represents that the transactions are in the interests of the Plan
participants and beneficiaries, and comply with the Plan's investment
[[Page 69623]]
objectives and policies. In reaching this conclusion, Mr. Hayes
represents that he has analyzed the Plan's overall investment portfolio
as well as the Plan's liquidity and diversification requirements. In
addition, after reviewing both the 2003 Appraisal and the 2004
Appraisal and considering the New Lease terms compared to similar
leases in the area, Mr. Hayes also certifies that the terms of the New
Lease, including CPI adjustments to the rent, are no less favorable to
the Plan than those obtainable in an arm's length transaction with
unrelated parties.
In addition, Mr. Hayes represents that he will monitor the
performance of the New Lease over its term and has been empowered to
direct the Plan trustee to divest the Plan of the Property in the event
it exceeds 20% of the Plan's assets when added to other transactions
with interested parties to the transactions. Moreover, Mr. Hayes states
that he has also been empowered to direct the Plan trustee to sell the
Property or take other appropriate legal action against JCO in the
event JCO defaults on the New Lease.
9. In summary, it is represented that the proposed transactions
will satisfy the statutory criteria for an exemption under section
408(a) of the Act because:
(a) The terms and conditions of the transactions will not be less
favorable to the Plan than those the Plan would receive in an arm's
length transaction with an unrelated party.
(b) The Sale will be a one-time transaction for cash.
(c) The acquisition price that is paid by the Plan for the Property
will be no more than the fair market value of the Property, as
determined by a qualified, independent appraiser on the date of the
Sale.
(d) The value of the Property that is acquired by the Plan will not
exceed 20% of the Plan's assets at the time of the Sale and throughout
the duration of the New Lease.
(e) The Plan will not pay any real estate fees, commissions or
other expenses with respect to the transactions.
(f) Mrs. Vogels will indemnify and hold the Plan harmless from any
liability arising from the Sale, including but not limited to hazardous
materials found on the Property, violation of zoning or land use
regulations or restrictions, and violations of federal, state or local
environmental regulations or laws.
(g) The annual rental amount under the New Lease will be the higher
of $40,800 or the fair market rental value of the Property, as
determined by a qualified, independent appraiser on the date the New
Lease is entered into by the parties.
(h) The New Lease will be a triple net lease under which the JCO,
as lessee, will pay, in addition to the base rent, all expenses
incurred by the Property, including all taxes and assessments,
insurance, maintenance, utilities and any other expenses.
(i) The rent payable under the New Lease will be adjusted every
year after the first 12 months of the New Lease by an amount equal to
the percentage increase in the CPI. In addition, the Property will be
reappraised at least every five years by a qualified, independent
appraiser selected by the Plan's independent fiduciary and the
independent fiduciary will then adjust the rental for the Property
based on the appraisal. However, in no event will the rent be adjusted
below the rental amount paid for the preceding year.
(j) The Plan will be represented at all times and for all purposes
with respect to the Sale and the New Lease by a qualified, independent
fiduciary.
(k) The Plan's independent fiduciary has negotiated, reviewed, and
approved the terms and conditions of the Sale and the New Lease and has
determined that the transactions are appropriate for the Plan and in
the best interests of the Plan's participants and beneficiaries.
(l) The Plan's independent fiduciary will monitor and enforce
compliance with the terms and conditions of the New Lease and this
exemption throughout the duration of the New Lease.
FOR FURTHER INFORMATION CONTACT: Ms. Anna M.N. Mpras of the Department,
telephone (202) 693-8565. (This is not a toll-free number.)
Wheeling-Pittsburgh Corporation and Wheeling Pittsburgh Steel
Corporation Located in Wheeling, WV
[Application No. L-11200]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act 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)(1)(E), 407(a)(2), 406(b)(1), and 406(b)(2) of the
Act, shall not apply to: (1) The initial acquisition of 4,000,000
shares on August 1, 2003 (Initial Shares) of publicly traded Employer
Stock through the in-kind contribution of such Initial Shares, and
subsequent in-kind acquisitions of Employer Stock, by the Wheeling-
Pittsburgh Steel Corporation Retiree Benefits Plan (the Plan) for the
purpose of pre-funding welfare benefits provided by the Plan; (2) the
holding by the Plan of Employer Stock acquired pursuant to the
contributions; and (3) the extension of credit between Wheeling
Pittsburgh Corporation (WPC), Wheeling-Pittsburgh Steel Corporation
(WPSC) and the Plan, which will occur in conjunction with WPC's and
WPSC's contributions of Employer Stock and cash for the benefit of the
retirees, provided that the following conditions are satisfied:
(a) An Independent Fiduciary will represent the Plan and its
participants and beneficiaries for all purposes related to such
contributions for the duration of the Plan's holding of such Employer
Stock and will have sole responsibility relating to the acquisition,
holding, disposition, ongoing management, and voting of Employer Stock.
The Independent Fiduciary will authorize the Trustee to accept or
dispose of Employer Stock only after such Independent Fiduciary
determines, at the time of each transaction, that such transaction is
feasible, in the interest of the Plan, and protective of the
participants and beneficiaries of such Plan, subject to the terms of
the Registration Rights Agreement, Stock Transfer Restriction and
Voting Agreement;
(b) The appropriate fair market value of any Employer Stock
contributed by WPC and WPSC to the Trust will be established by the
Independent Fiduciary;
(c) The Plan or Trust incurs no fees, costs or other charges (other
than those described in the Engagement Letter Agreement and the Trust
Agreement) as a result of any of the transactions described herein;
(d) The terms of any transactions between the Plan and the
Companies will be no less favorable to the Plan than terms negotiated
at arm's length under similar circumstances between unrelated third
parties;
(e) Employer Stock contributed in-kind to the Plan will be held in
a separate account under a Trust which is qualified under section
501(c)(9) of the Code;
(f) The Committee maintains, for a period of six years from the
date of the initial acquisition of shares by the Plan and from the date
of any subsequent contributions of Employer Stock, any and all records
necessary to enable the persons described in paragraph (g) below to
determine whether the conditions of this exemption have been met,
except that: (1) If the records necessary to enable the persons
described in paragraph (g) to determine
[[Page 69624]]
whether the conditions of the exemption have been met are lost or
destroyed, due to circumstances beyond the control of the plan
fiduciary, then no prohibited transaction will be considered to have
occurred solely on the basis of unavailability of those records; and
(2) no party in interest other than the Committee shall be subject to
the civil penalty that may be assessed under section 502(i) of the Act
if the records are not maintained, or are not available for examination
as required by paragraph (g) below;
(g)(1) Except as provided below in paragraph (g)(2) and
notwithstanding any provisions of subsections 504(a)(2) and (b) of the
Act, the records referred to in paragraph (f) above shall be
unconditionally available at their customary location for examination
during normal business hours by:
(A) Any duly authorized employee or representative of the
Department;
(B) The USWA or any duly authorized representative of the USWA; and
(C) Any participant or beneficiary of the Plan, or any duly
authorized representative of such participant or beneficiary.
(2) None of the persons described above in subparagraphs (B) and
(C) of this paragraph (g) shall be authorized to examine the trade
secrets of WPC or WPSC or commercial or financial information that is
privileged or confidential.
Definitions
(a) For purposes of this exemption, the term ``Independent
Fiduciary'' means a fiduciary with respect to the Plan who is: (1)
Independent of and unrelated to WPC, WPSC or its affiliates; and (2)
appointed to act on behalf of the Plan with respect to the acquisition,
holding, management, and disposition of the shares. In this regard, the
fiduciary will not be deemed to be independent of and unrelated to WPC
and WPSC if: (1) Such fiduciary directly or indirectly controls, is
controlled by or is under common control with WPC or WPSC; (2) such
fiduciary directly or indirectly receives any compensation or other
consideration in connection with any transaction described in this
proposed exemption; except that the Independent Fiduciary may receive
compensation for acting as an Independent Fiduciary from WPC in
connection with the transactions contemplated herein if the amount or
payment of such compensation is not contingent upon or in any way
affected by the Independent Fiduciary's ultimate decision, and (3) the
annual gross revenue received by the Independent Fiduciary, during any
year of its engagement, from WPC exceeds one percent (1%) of the
Independent Fiduciary's annual gross revenue from all sources (for
federal income tax purposes) for its prior tax year;
(c) The term ``Initial Shares'' means the 4,000,000 shares of
common stock of WPC that were contributed to the Trust on August 1,
2003.
(d) The term ``Participant'' shall mean former employees of WPC,
WPSC and its subsidiaries who separated from service from USWA-
represented bargaining units and who are designated as beneficiaries of
the newly-created WPSC Retiree Benefit Plan, as well as any dependent,
surviving spouse or other beneficiary of a bargaining unit retiree who
is entitled to receive benefits under the Plan.
(e) The term ``Plan'' refers to the Wheeling-Pittsburgh Steel
Corporation Retiree Benefits Plan. The Plan is an employee welfare
benefit plan established and maintained by the Committee.
(f) The term ``Shares'' or ``Employer Stock'' means shares of
publicly traded common stock of WPC.
(g) The term ``Trust'' means a Code section 501(c)(9) trust which
is established for the purpose of funding life, sickness, accident, and
other welfare benefits for the participants and beneficiaries of the
Plan.
(h) ``USWA'' shall mean the United Steelworkers of America, AFL-
CIO-CLC.
Summary of Facts and Representations
1. Wheeling-Pittsburgh Corporation (WPC), the parent company of
Wheeling-Pittsburgh Steel Corporation (WPSC), is a metal products
company with 3,100 employees in facilities located in Steubenville,
Mingo Junction, Yorkville, and Martins Ferry, Ohio; Beech Bottom and
Follansbee, West Virginia; and Allenport, Pennsylvania. WPC owns a 50%
equity interest in Ohio Coatings Company and a 35.7% equity interest in
Wheeling-Nisshin, Inc. WPC is the holding company for WPSC, its wholly
owned operating subsidiary. WPSC is located in Wheeling, West Virginia,
and produces carbon flat rolled products for the construction,
container, appliance, automotive, and other markets. WPSC's products
include sheet products, such as hot rolled, cold rolled, and hot dipped
galvanized steel. The proposed exemption is requested on behalf of the
applicants, WPC and WPSC (collectively, the Companies), whose former
employees are covered under the recently established WPSC Retiree
Benefit Plan.
2. WPC and WPSC filed for Chapter 11 bankruptcy protection in
November 2000 and operated under bankruptcy protection until August 1,
2003. According to the applicants, WPC and WPSC provided retiree health
benefits to an estimated 10,000 participants and beneficiaries under a
predecessor retiree health plan. While under bankruptcy protection,
WPSC maintained post-retirement benefits (as defined in Section 1114(a)
of the Bankruptcy Code) for its USWA-represented retirees in accordance
with an existing collective bargaining agreement. However, the
applicants represent that WPC and WPSC could not emerge from bankruptcy
as a viable integrated steel company while also maintaining the
existing welfare benefit programs.
3. A key issue in the negotiation between the Companies and the
USWA was the extent to which the Companies could satisfy the claims of
current and future retirees who would lose their welfare benefits post
bankruptcy. On October 1, 2003, in accordance with both section 1114(e)
of the Bankruptcy Code and the plan of reorganization, the Companies
terminated all existing welfare benefit programs, and established a new
retiree medical insurance Plan, the Wheeling-Pittsburgh Steel
Corporation Retiree Benefits Plan, pursuant to a new collective
bargaining agreement (CBA or 2003 Settlement Agreement) on the same
date. Thus, the termination of benefits under the predecessor retiree
health plan was coincident with the implementation of the Plan. The
applicants state that both the Companies and the USWA recognize that
the establishment of the Plan was the only viable alternative for
funding welfare benefits for current and future retirees. According to
the applicants, terminating the predecessor retiree health plan was the
only financially viable option because of cash scarcity and the
inability of WPSC to adequately fund existing and future obligations
under the predecessor plan. The applicants state that during the
pendency of the bankruptcy, the Companies and the Union agreed to
numerous modifications in an effort to address the Companies' cash
shortage caused by continuing operating losses. In October 2001, the
Union agreed to temporarily modify its agreement during bankruptcy to
provide for, among other things, reductions of wages and medical
benefits to active and retired employees in exchange for improvement in
wages and pension benefits for hourly employees upon emergence from
bankruptcy protection. The Companies estimate that this agreement,
together with related reductions in compensation for salaried
employees, reduced cash
[[Page 69625]]
advances for wages, salaries, and other benefits by more than $47
million during the period of October 1, 2001 through December 31, 2002.
4. The Companies emergence from bankruptcy was dependent on the
achievement of a number of interrelated agreements among its creditors,
lenders, interested government agencies, and unionized employees. In
particular, on July 30, 2003, members of the USWA successfully
negotiated a new post-reorganization collective bargaining agreement
with WPC and WPSC.\6\ The applicants represent that this CBA provided
for: wage concessions; workforce reductions of both hourly and salaried
employees; discontinuance of WPSC's participation in the WHX
Corporation defined benefit pension plan which covered, among others,
substantially all of the employees of WPSC; and the termination of all
predecessor existing retiree medical and life insurance programs and
the implementation of the new retiree health Plan to satisfy existing
and future claims of retirees who lost their welfare benefits in
connection with the reorganization. An exemption is needed because the
transactions that are intended to adequately fund the Plan will result
in violations of sections 406(a)(1)(E), 407(a)(2), 406(b)(1) and
406(b)(2) of the Act.
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\6\ Pursuant to the CBA, the USWA is responsible for appointing
and retaining half of the fiduciaries (other than the Independent
Fiduciary) that will administer the Plan. The transactions that are
subject of this proposed exemption were negotiated by the USWA and
both WPSC and WPC.
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5. After several months of arms length negotiations, on October 1,
2003, WPC, WPSC, and the USWA announced the establishment of the Plan.
The Plan provides retiree health and death benefits to retirees.\7\ The
Plan will be funded through a separate Trust designed to meet the
requirements contained in section 501(c)(9) of the Code pertaining to
voluntary employees' beneficiary associations (VEBAs).\8\
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\7\ The applicants represent that retirees covered by the plan
will include: (1) Retirees from USWA represented bargaining units
(and their dependents) who, by reason of any collectively bargained
agreement between the Union and the companies, were eligible for
retiree insurance benefits as of the effective Plan date, and are
adversely affected by the elimination of such coverage; (2)
employees from USWA represented bargaining units who retire from the
Companies after the Plan's effective date in connection with the
window buyout program with eligibility for retiree insurance
coverage as of the effective date who were adversely affected by the
elimination of such coverage, to the extent of their eligibility as
of that date and; (3) employees not described above from USWA
represented bargaining units who retire from the Companies, who were
eligible for retiree insurance coverage and who were adversely
affected by the elimination of such coverage.
\8\ The applicants represent that the Plan is an employee
welfare benefit plan within the meaning of section 3(1) of ERISA.
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The Trustee, Wesbanco Bank, Inc., a West Virginia banking
corporation, shall hold the assets and income of the Trust Fund for the
exclusive purpose of providing welfare benefits to participants and
beneficiaries in accordance with the Plan. According to the applicants,
the Trustee has no discretionary authority with respect to the Employer
Stock and shall hold the Employer Stock in one or more segregated
accounts and shall be subject to direction by the Independent Fiduciary
with respect to the acquisition, management, disposition, and voting of
such Employer Stock.\9\ The applicants represent that the Trustee shall
be responsible only for the management and disbursement of amounts from
the Trust Fund in accordance with the Trust Agreement.
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\9\ Under ERISA section 403(a)(1), a plan may expressly provide
that a trustee is subject to the direction of a named fiduciary who
is not a trustee, in which case the trustee shall be subject to
proper directions of such fiduciary which are made in accordance
with the terms of the plan and which are not contrary to the Act. 29
U.S.C. 1103(a)(1).
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6. The applicants note that the transactions described herein
require the oversight of an Independent Fiduciary. In this regard, the
Employer Stock will be managed by an Independent Fiduciary, U.S. Trust,
who is independent of WPC, WPSC, and the Trustee, and shall have
exclusive authority with respect to the acquisition, management, and
disposition (including the valuation of the shares) of the shares of
stock contributed to the Plan, subject to the provisions of the Stock
Transfer Restriction and Voting Agreement of August 1, 2003 (Stock
Agreement), and the Registration Rights Agreement of August 1, 2003
(RRA). The applicants note that the Independent Fiduciary's sole
responsibilities were to (i) conduct a due diligence review of the
proposed transaction; (ii) negotiate such additional terms or different
terms on behalf of the Plan as it deems necessary, and; (iii) determine
whether to cause the Plan to participate in the proposed transaction.
Prospectively, the Independent Fiduciary shall have sole authority
and control with respect to the Employer Stock, including authority to
direct the trustee, to effect (directly or indirectly) any purchase,
sale, exchange, or liquidation of the stock and to enter into any
agreements relating to the stock for the benefit of the Plan.\10\ The
applicants represent that the Independent Fiduciary is not responsible
for any assets of the Plan except the management of the Employer Stock.
Additionally, the investment of the proceeds of the sale, exchange, or
liquidation of the stock shall be the responsibility of the other
fiduciaries.
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\10\ The Department notes that the Act's general standards of
fiduciary conduct would apply to the transactions permitted by this
proposed exemption, if granted. In this regard, section 404 of the
Act requires, among other things, a fiduciary to discharge his or
her duties respecting a plan solely in the interest of the plan's
participants and beneficiaries and in a prudent manner. Accordingly,
the Independent Plan Fiduciary must act prudently with respect to:
(1) The decision to enter into the transactions described herein;
and (2) the negotiation of the terms of such a transaction,
including, among other things, the specific terms by which the Plan
will acquire, hold, and sell WPC stock. The Department further
emphasizes that it expects the Independent Fiduciary, prior to
authorizing each acquisition of WPC stock and any sale of such
stock, to fully understand the benefits and risks associated with
such transactions.
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The Companies will provide the Independent Fiduciary with access to
all information that the Independent Fiduciary reasonably requires
pertaining to the Employer Stock, including but not limited to
financial statements, annual reports, materials filed with the
Securities and Exchange Commission, and independent research and
reports.
The Independent Fiduciary has notified the Department that since
August 1, 2003 it has: (1) Conducted a due diligence review of the
proposed contribution of WPC stock to the Plan; (2) made a
determination to cause the Plan to accept the contribution of Employer
Stock, subject to negotiated terms, including the Registration Rights
Agreement, Stock Transfer Restriction and Voting Agreement; and (3)
managed the Employer Stock that was contributed to the Plan, in
accordance with the terms of the Registration Rights Agreement, and
Stock Transfer Restriction and Voting Agreement.
In March 2004, the Independent Fiduciary filed Form 144 with the
Securities and Exchange Commission evidencing its intent to sell
Employer Stock pursuant to Rule 144 under the Securities Act of 1933.
The Independent Fiduciary sold 42,000 shares of Employer Stock from
March 25, 2004 to April 20, 2004 at an average share price of $20.84
pursuant to Rule 144.
In June 2004, WPC advised the Independent Fiduciary of its intent
to register the offer and sale of Employer Stock (the Offering). The
Registration Statement permitted the Plan to participate as a selling
shareholder for up to 357,600 shares of Employer Stock held by the
Plan. In September 2004, the
[[Page 69626]]
Independent Fiduciary concluded it was in the best interest of the Plan
to offer and sell 357,600 shares of Employer Stock in the Offering. The
proceeds of the Plan's sale of 357,600 shares of Employer Stock
($9,774,102) and $596,298 (reimbursement of underwriting commissions
and fees) were credited to the Plan's account with the Trustee of the
Plan. The applicants represent that WPC reimbursed the Plan for the
underwriting commissions from the sale of Employer Stock although WPC
was not obligated to pay for the underwriting commissions.
7. The Plan will be administered by a VEBA Committee consisting of
four individuals, two appointed by the Companies and two appointed by
the Union.\11\ Both the Union and the Companies will also have the
power to remove and replace the committee members which they
appoint.\12\ The applicants state that the Committee members will serve
without compensation from the Plan. The VEBA Committee shall serve as
the named fiduciary and plan administrator. According to the Retiree
Benefit Trust Agreement under which the Plan operates, the VEBA
Committee shall have the discretion to determine the benefits to be
provided to the beneficiaries of the Retiree Trust, including the form
and amount of such benefits, and the contributions that the
beneficiaries will make to help defray the cost of their coverage.\13\
The VEBA Committee may also retain independent service providers that
it deems necessary to administer the Plan and Trust.
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\11\ According to the Retiree Benefit Trust Agreement, the VEBA
Committee shall serve as the named Fiduciary and the Plan
Administrator.
\12\ The Companies intend that the Committee constitute the
joint board of employer and employee representatives within the
meaning of section 302(c)(5) of the Labor Management Relations Act,
1947, as amended, and section 3(16)(B) of ERISA.
\13\ The Wheeling-Pittsburgh Steel Corporation Retiree Benefits
Plan Trust states that the VEBA Committee shall have the discretion
to determine the amount of benefits to be paid to beneficiaries
provided that the beneficiaries shall make a contribution to the
cost of their coverage. In making such decisions, the VEBA Committee
may take into account all relevant circumstances, including, without
limitation, the degree to which beneficiaries may have alternative
coverage sources, as well as the resources of the Trust based upon
Company contributions.
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8. The transactions described in this proposed exemption involve
the pre-funding of the Plan by the Companies. The CBA is conditioned on
the Companies' contribution to the Plan of employer stock representing
forty (40%) percent of WPC fully-diluted common equity and certain cash
payments described further in this proposed exemption. The Employer
Stock is common stock issued by WPC. The applicants represent that the
Employer Stock is widely held, publicly traded, and may be freely
exchanged on the Nasdaq National Market with the sticker symbol WPSC.
Based on an independent appraisal, before WPSC became a publicly traded
company, the estimated equity value of WPC was between $111 million and
$176 million, resulting in an estimated equity value for the new Plan
between $44.4 and $70.4 million from the 40% contribution of the
shares.\14\
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\14\ The independent appraisal was performed by Conway, Del
Genio, Gries & Co., LLC for the purpose of developing an estimated
reorganized enterprise value for WPC and WPSC.
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Initial Company Contributions
9. The applicants represent that on August 1, 2003, WPC issued to
the Trust 4,000,000 shares of common stock of WPC (Initial
Contribution) representing 40% of its fully diluted common equity as of
the reorganization date. Pursuant to the terms of the CBA, the parties
agreed that 2,000,000 shares of the Initial Contribution may be applied
by WPC, in its discretion, as a credit against future stock
contributions that WPC may be required to make in connection with the
variable profit-based contribution schedule described in further detail
below. Furthermore, the Initial Contribution of shares are maintained
in a separate sub-account within the Plan and will be utilized for the
exclusive benefit of the retirees.\15\
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\15\ The applicants represent that if the proposed exemption is
not granted the Trust would likely hold no shares of Employer Stock.
WPC requests exemptive relief because of its belief that
contributions of WPC stock would not meet the requirements for the
acquisition of ``employer securities'' under section 408(e) of the
Act. In this regard, 407(d)(5) of the Act provides that term
``qualifying employer security'' means an employer security that is
stock or a marketable obligation (as defined in subsection (e)).
After December 17, 1987, in the case of a plan, other than an
individual account plan, stock is considered a ``qualifying employer
security'' only if such stock satisfies the requirements of
subsection 407(f)(1) of the Act. Section 407(f)(1) of the Act
provides that stock satisfies such requirement if, immediately
following the acquisition of such stock--(A) no more than 25 percent
of the aggregate amount of stock of the same class issued and
outstanding at the time of acquisition is held by the plan, and (B)
at least 50 percent of the aggregate amount referred to in
subparagraph (A) is held by the persons independent of the issuer.
In this regard, after all the contributions of Employer Stock is
contributed to the Plan, substantially more than 25 percent of all
issued and outstanding shares of WPC will be held by the Plan.
Moreover, the requirement that 50 percent of the shares of WPC be
held by persons independent of the issuer would not be met.
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On October 1, 2003 and continuing for five months thereafter, WPC
contributed cash to the Plan at the rate of $1.5 million per month.
This $7.5 million is held by the Plan as a credit against contributions
that WPC and WPSC will make in connection with the Variable Profit-
Based Contribution schedule set forth below for that five-month period.
According to the applicants, if the Variable Profit-Based Contributions
total an amount less than $7.5 million, the balance of the credit shall
be applied against future contributions made by WPC and WPSC in equal
installments over the succeeding 18 months. To the extent the Variable
Profit-Based Contributions for this period total an amount greater than
$7.5 million, the difference was paid by WPC and WPSC to the Plan no
later than April 1, 2004.
On April 1, 2004, and continuing for 6 months thereafter, WPC began
making contributions of $300,000 in cash to the Plan on the first day
of each month. This total contribution of $1.8 million was also
credited against future Variable Profit-Based Contributions in equal
installments over the period commencing on April 1, 2005 and ending on
October 1, 2006.
Variable Profit-Based Contribution Schedule
10. Subject to the possibility of credits described above, WPC and
WPSC shall make quarterly contributions to the Plan in accordance with
the following formula, to be known as the Variable Profit-based
Contribution Schedule:
(i) 40% of operating cash flow, between $16 and $24 dollars of
operating cash flow per ton shipped, payable to the Plan in cash.\16\
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\16\ The applicants define operating cash flow as earnings
before interest and taxes, calculated on a consolidated basis in
accordance with Generally Accepted Accounting Principles (GAAP). The
applicants also define tons shipped in the variable profit-based
schedule as tons of steel products sold to third parties.
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(ii) 12% of operating cash flow, above $24 and no more than $65
dollars of operating cash flow per ton shipped, payable to the Plan at
WPC or WPSC's discretion in cash or common stock of WPC.
(iii) 25% of operating cash flow, above $65 dollars of operating
cash flow per ton shipped, payable to the Plan in cash.
(iv) In addition, within 45 days after the end of each fiscal
quarter, a special contribution will be made by WPC and WPSC to the
Plan equal to 15% of operating cash flow below $30 of operating cash
flow per ton shipped, payable at the Companies' discretion in cash or
common stock of WPC.
The applicants represent that any contribution of shares made in
satisfaction of an obligation to
[[Page 69627]]
contribute cash or shares at their discretion, in compliance with the
Variable Profit-Based Contribution Schedule, will be valued based on
the closing price of the shares for the ten (10) trading days
immediately preceding the date on which the shares are contributed to
the Plan.
11. The applicants represent that substantially all of the Plan
assets will consist of shares until July 30, 2005 because the cash
contributions will be applied to the payment of benefits under the
Plan. The initial contribution of shares will represent forty percent
(40%) of the Companies' fully-diluted common equity, and additional
contributions of shares may be made in an aggregate amount of not more
than ten percent (10%) of the Companies' fully-diluted common equity.
Stock Transfer Restriction
12. Upon consummation of the plan of reorganization on August 1,
2003, WPSC issued to the Trust 4,000,000 shares (Initial Shares) of
Employer Stock representing forty percent (40%) of its fully-diluted
common equity as of the reorganization date. Pursuant to the terms of
the CBA, the parties agreed that the Initial Shares contributed to the
Trust shall be subject to the following conditions:
(i) The applicants represent the Employer Stock contributed to the
Plan and managed by the Independent Fiduciary is subject to a two-year
disposition restriction which commenced on August 1, 2003 (First
Restriction Period) so long as the Plan holds five percent or more of
the Initial Shares then held by the Trust; provided that WPC may, in
the exercise of its reasonable discretion, consent to the disposition
of some portion of the shares during the First Restriction Period by
the Independent Fiduciary to the extent that such disposition will not
disrupt an orderly market for the shares or impair the Company's
ability to retain or make use of its net operating loss carryover.
(ii) During the two-year period commencing on the day following the
last day of the First Restriction Period described in (i) above, the
Independent Fiduciary shall be permitted to dispose of the Initial
Shares then held by the Trust, provided that (1) the Independent
Fiduciary shall not dispose of more than one half of the Initial Shares
then remaining in the Trust within any consecutive 12 month period, and
(ii) the Independent Fiduciary shall dispose of such Initial Shares in
a manner reasonably calculated not to disrupt the orderly trading of
the WPC's common stock (such as, by way of example, by causing the
disposition to occur in several transactions over a period of weeks or
months). However, WPC, in the exercise of reasonable discretion, may
consent to the disposition of a greater number of Initial Shares during
any consecutive 12 month period, to the extent that such disposition
will not disrupt the orderly trading of WPC's common stock.
(iii) Amendment to the CBA. The applicants represent that on March
24, 2004, both the USWA, WPSC, and WPC amended the CBA to allow an
exception from the two-year disposition restriction of selling shares
of WPC common stock. The amendment authorizes 400,000 (10%) of the
initial shares of WPC stock to be sold in the open market. The
applicants represent that the Independent Fiduciary has commenced
selling some of the Initial Shares held by the Plan in the open market.
According to the applicants, as of March 31, 2004, 22,000 of the
Initial Shares have been sold by the Plan at an average price of $20.44
per share. The agreement further provides for the crediting of a
portion of the proceeds from the sale of the Initial Shares (the amount
in excess of $6.3 million) against future Variable Profit-Based
Contributions. WPC is further obligated within 45 days after December
31, 2007 to make an additional contribution of shares of WPC Employer
Stock to the Plan equal to the difference between (i) 400,000 shares
and (ii) the number of shares of WPC common stock issued to the Plan
pursuant to the Variable Profit-Based Contribution Schedule. The
agreement further provides that WPC is permitted to apply 1.6 million
of the Initial Shares, plus the number of shares determined under the
preceding sentence, as a credit against future stock contributions
described in the Variable Profit-Based Contribution Schedule.
According to the applicants, the principal purpose of the first
restriction is to assure that the Companies' net operating loss carry-
over of approximately $180,000,000 will continue to be available to the
Companies following bankruptcy. The Companies note that this is a
valuable asset that will enable them to operate without an excessive
tax burden for a number of years.\17\
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\17\ The applicants represent that in order to preserve the net
operating loss carryover, the change in ownership of the Companies
upon their emergence from bankruptcy must qualify under section
382(1)(5) of the Code, which requires, among other things, that the
shareholders and creditors of the old loss corporation (i.e., WPC),
determined immediately before the ownership change, own after such
ownership change and as a result of being shareholders or creditors
immediately before such change, stock representing at least 50% of
the voting power and at least 50% of the value of the stock of WPC.
Moreover, the applicants represent that the USWA-represented
retirees, who will be entitled to the stock in satisfaction of their
medical claims, will be considered creditors of the old loss
corporation for purposes of section 382(1)(5) of the Code.
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The applicants represent that the purpose of the Second Restriction
Period is to achieve a reasonable balance between the Plan's need to
liquidate its holdings of WPC stock and the adverse impact on the stock
price caused by the selling of stock. To that end, the Second
Restriction Period is designed to assure that the Initial Shares can be
liquidated, but only at a rate that does not unduly impair the market
price for WPC stock.
Voting Agreement and Registration Rights Agreement
13. Pursuant to the terms of the CBA, the parties agreed that the
Initial Shares contributed to the Trust shall be subject to the
following conditions:
(i) The Initial Shares are subject to a voting agreement that
requires the Independent Fiduciary to abstain from voting 1,300,000 of
the Initial 4,000,000 Shares contributed to the Plan for the election
of the WPC's Board of Directors. The applicants represent that the
Independent Fiduciary agrees that, for so long as it holds any Initial
Shares, it shall abstain from voting 1,300,000 of the shares (or such
number of Initial Shares as the Independent Fiduciary may then hold, if
less than 1,300,000) for the election of any Board of Directors and
will only be able to exercise voting rights on 2.7 million of the
Initial Shares.\18\ The agreement reflects that two of the Company's
eleven directors will be appointed by the USWA.
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\18\ The applicants represent that any reference to a particular
number of shares shall be automatically and proportionately adjusted
in the event of any stock dividend, stock split, stock combination,
recapitalization, or other similar event affecting the Employer
Stock.
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(ii) Registration Rights Agreement (the RRA). The Registration
Rights Agreement was entered into on August 1, 2003, by WPC, the
Trustee and the Independent Fiduciary in order to comply with necessary
securities laws. The applicants represent that because the Plan
initially owns 40% of all the outstanding shares of WPC's Employer
Stock, an agreement of this type is necessary to comply with applicable
securities laws. The Independent Fiduciary is authorized to direct the
Trustee to deliver to WPC written notice of a request to cause
Registrable Securities to be registered for resale under the Securities
Act of 1933. Registrable Securities are any or all of the shares of
Employer Stock held by
[[Page 69628]]
the Trustee, including but not limited to the Initial Shares. The
portion of Employer Stock subject to this ``demand registration'' right
is limited at any time to the number of shares that the Independent
Fiduciary may sell under the Stock Transfer Restriction and Voting
Agreement. Additionally, the Plan is also given ``piggyback''
registration rights under the Registration Rights Agreement, under
which it may include a portion of its shares in any registration of
shares that the company undertakes for its own account or that of any
other stockholder.
14. In summary, the applicants represent that with respect to the
transactions described herein, the requirements of section 408(a) of
the Act have been met because:
(a) An Independent Fiduciary will represent the Plan and its
participants and beneficiaries for all purposes relating to the
acquisition, holding, disposition, ongoing management, and voting of
Employer Stock. The Independent Fiduciary will authorize the Trustee to
accept or dispose of Employer Stock only after such Independent
Fiduciary determines, at the time of the transaction, that such
transaction is feasible, in the interest of the Plan, and protective of
the participants and beneficiaries of such Plan, subject to the terms
of the Registration Rights Agreement, and Stock Transfer Restriction
and Voting Agreement;
(b) The appropriate fair market value of any Employer Stock
contributed by WPC and WPSC to the Trust will be established by the
Independent Fiduciary;
(c) The Plan or Trust incurs no fees, costs or other charges (other
than those described in the Engagement Letter Agreement and the Trust
Agreement) as a result of any of the transactions described herein; and
(d) The terms of any transactions between the Plan and the
Companies will be no less favorable to the Plan than terms negotiated
at arm's length under similar circumstances between unrelated third
parties.
Notice to interested Persons: The applicants represent that notice
will be provided by first class mail by WPSC within ten (10) calendar
days from the date of this publication of this Notice in the Federal
Register to each of its retirees, surviving spouses, and/or dependents
covered under the Plan. Such notice will contain a copy of the Notice,
as it appears in the Federal Register on the date of the publication,
and a copy of the supplemental statement, as required, pursuant to 29
CFR 2570.43(b)(2), which will advise such interested persons of their
right to comment and to request a hearing.
FOR FURTHER INFORMATION CONTACT: Brian J. Buyniski of the Department,
telephone (202) 693-8545. (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 of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which, among other things, require a fiduciary
to discharge his duties respecting the plan solely in the interest of
the participants and beneficiaries of the plan and in a prudent fashion
in accordance with section 404(a)(1)(b) of the Act; nor does it affect
the requirement of section 401(a) of the Code that the plan must
operate for the exclusive benefit of the employees of the employer
maintaining the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries, and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to,
and not in derogation of, any other provisions of the Act and/or the
Code, including statutory or administrative exemptions and transitional
rules. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete, and that each application
accurately describes all material terms of the transaction which is the
subject of the exemption.
Signed at Washington, DC, this 23rd day of November, 2004.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 04-26355 Filed 11-29-04; 8:45 am]
BILLING CODE 4510-29-P
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