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EBSA Notices

Grant of Individual Exemptions; Columbia Energy Group (Columbia)   [10/11/2000]
[PDF]
[Federal Register: October 11, 2000 (Volume 65, Number 197)]
[Notices]               
[Page 60452-60456]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11oc00-98]                         

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-48; Exemption Application No. D-
10802, et al.]

 
Grant of Individual Exemptions; Columbia Energy Group (Columbia)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, D.C. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In

[[Page 60453]]

addition the notices stated that any interested person might submit a 
written request that a public hearing be held (where appropriate). The 
applicants have represented that they have complied with the 
requirements of the notification to interested persons. No public 
comments and no requests for a hearing, unless otherwise stated, were 
received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 1 (1996), transferred the authority of the Secretary of the 
Treasury to issue exemptions of the type proposed to the Secretary of 
Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemptions are administratively feasible;
    (b) They are in the interests of the plans and their participants 
and beneficiaries; and
    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

Columbia Energy Group (Columbia), Located in Herndon, Virginia

[Prohibited Transaction Exemption 2000-48; Exemption Application No. D-
10802]

Exemption

    The restrictions of section 406(a) and (b) of the Act shall not 
apply to the reinsurance of risks and the receipt of premiums therefrom 
by Columbia Insurance Corporation, Ltd. (CICL) in connection with an 
insurance contract sold by Employers Insurance of Wausau (Wausau), or 
any successor insurance company to Wausau which is unrelated to 
Columbia, to provide long-term disability benefits to participants in 
Columbia's Long Term Disability Plan (the Plan), provided the following 
conditions are met:
    (a) CICL--
    (1) Is a party in interest with respect to the Plan by reason of a 
stock or partnership affiliation with Columbia that is described in 
section 3(14)(E) or (G) of the Act;
    (2) Is licensed to sell insurance or conduct reinsurance operations 
in at least one State as defined in section 3(10) of the Act;
    (3) Has obtained a Certificate of Authority from the Insurance 
Commissioner of its domiciliary state which has neither been revoked 
nor suspended;
    (4)(A) Has undergone an examination by an independent certified 
public accountant for its last completed taxable year immediately prior 
to the taxable year of the reinsurance transaction; or
    (B) Has undergone a financial examination (within the meaning of 
the law of its domiciliary State, Vermont) by the Insurance 
Commissioner of the State of Vermont within 5 years prior to the end of 
the year preceding the year in which the reinsurance transaction 
occurred; and
    (5) Is licensed to conduct reinsurance transactions by a State 
whose law requires that an actuarial review of reserves be conducted 
annually by an independent firm of actuaries and reported to the 
appropriate regulatory authority;
    (b) The Plan pays no more than adequate consideration for the 
insurance contracts;
    (c) No commissions are paid by the Plan with respect to the direct 
sale of such contracts or the reinsurance thereof;
    (d) In the initial year of any contract involving CICL, there will 
be an immediate and objectively determined benefit to the Plan's 
participants and beneficiaries in the form of increased benefits;
    (e) In subsequent years, the formula used to calculate premiums by 
Wausau or any successor insurer will be similar to formulae used by 
other insurers providing comparable long-term disability coverage under 
similar programs. Furthermore, the premium charge calculated in 
accordance with the formula will be reasonable and will be comparable 
to the premium charged by the insurer and its competitors with the same 
or a better rating providing the same coverage under comparable 
programs;
    (f) The Plan only contracts with insurers with a rating of A or 
better from A.M. Best Company (Best's). The reinsurance arrangement 
between the insurers and CICL will be indemnity insurance only, i.e., 
the insurer will not be relieved of liability to the Plan should CICL 
be unable or unwilling to cover any liability arising from the 
reinsurance arrangement;
    (g) CICL retains an independent fiduciary (the Independent 
Fiduciary), at Columbia's expense, to analyze the transaction and 
render an opinion that the requirements of sections (a) through (f) 
have been complied with. For purposes of this exemption, the 
Independent Fiduciary is a person who:
    (1) Is not directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with Columbia or CICL (this relationship hereinafter referred to as an 
``Affiliate'');
    (2) Is not an officer, director, employee of, or partner in, 
Columbia or CICL (or any Affiliate of either);
    (3) Is not a corporation or partnership in which Columbia or CICL 
has an ownership interest or is a partner;
    (4) Does not have an ownership interest in Columbia or CICL, or any 
of either's Affiliates;
    (5) Is not a fiduciary with respect to the Plan prior to the 
appointment; and
    (6) Has acknowledged in writing acceptance of fiduciary 
responsibility and has agreed not to participate in any decision with 
respect to any transaction in which the Independent Fiduciary has an 
interest that might affect its best judgment as a fiduciary.
    For purposes of this definition of an ``Independent Fiduciary,'' no 
organization or individual may serve as an Independent Fiduciary for 
any fiscal year if the gross income received by such organization or 
individual (or partnership or corporation of which such individual is 
an officer, director, or 10 percent or more partner or shareholder) 
from Columbia, CICL, or their Affiliates (including amounts received 
for services as Independent Fiduciary under any prohibited transaction 
exemption granted by the Department) for that fiscal year exceeds 5 
percent of that organization or individual's annual gross income from 
all sources for such fiscal year.
    In addition, no organization or individual who is an Independent 
Fiduciary, and no partnership or corporation of which such organization 
or individual is an officer, director, or 10 percent or more partner or 
shareholder, may acquire any property from, sell any property to, or 
borrow funds from Columbia, CICL, or their Affiliates during the period 
that such organization or individual serves as Independent Fiduciary, 
and continuing for a period of six months after such organization or 
individual ceases to be an Independent Fiduciary, or negotiates any 
such transaction during the period that such organization or individual 
serves as Independent Fiduciary.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on August 17, 2000 at 65 FR 
50237.

For Further Information Contact:  Gary H. Lefkowitz of the Department,

[[Page 60454]]

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

Actuarial Sciences Associates, Inc. (ASA) and ASA Fiduciary 
Counselors Inc. (ASA Counselors), Located in Alexandria, VA

[Prohibited Transaction Exemption 2000-47; Exemption Application No: D-
10879]

Exemption

I. General Transactions
    The restrictions of section 406(a)(1)(A) through (D) and the 
sanctions resulting from the application of section 4975 of the Code by 
reason of section 4975(c)(1)(A) through (D), shall not apply to a 
transaction between a party in interest with respect to the Plumbers 
and Pipe Fitters National Pension Fund (the Fund) and an account (the 
Account) that holds certain assets of the Fund managed by ASA or ASA 
Counselors, while serving as independent named fiduciary (the Named 
Fiduciary) in connection with Prohibited Transaction Exemption 99-46 
(PTE 99-46)(64 FR 61944, November 15, 1999); provided that the 
following conditions are satisfied:
    (a) ASA or ASA Counselors, as Named Fiduciary of the Account, is an 
investment adviser registered under the Investment Advisers Act of 1940 
that has, as of the last day of its most recent fiscal year, total 
client assets under its management and control in excess of 
$50,000,000, and shareholders' equity or partners' equity, as defined 
in Section III(h), below, in excess of $750,000;
    (b) At the time of the transaction, as defined in Section III(i), 
below, the party in interest or its affiliate, as defined in Section 
III(a), below, does not have, and during the immediately preceding one 
(1) year has not exercised, the authority to--
    (1) appoint or terminate the Named Fiduciary as a manager of the 
Account, or
    (2) negotiate the terms of the management agreement with the Named 
Fiduciary (including renewals or modifications thereof) on behalf of 
the Fund;
    (c) The transaction is not described in--
    (1) Prohibited Transaction Class Exemption 81-6 (PTCE 81-6) \1\ 
(relating to securities lending arrangements);
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    \1\ 46 FR 7527, January 23, 1981.
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    (2) Prohibited Transaction Class Exemption 83-1 (PTCE 83-1) \2\ 
(relating to acquisitions by plans of interests in mortgage pools), or
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    \2\ 48 FR 895, January 7, 1983.
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    (3) Prohibited Transaction Class Exemption 82-87 (PTCE 82-87) \3\ 
(relating to certain mortgage financing arrangements);
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    \3\ 47 FR 21331, May 18, 1982.
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    (d) The terms of the transaction are negotiated on behalf of the 
Account under the authority and general direction of the Named 
Fiduciary, and either the Named Fiduciary, or (so long as the Named 
Fiduciary retains full fiduciary responsibility with respect to the 
transaction) a property manager acting in accordance with written 
guidelines established and administered by the Named Fiduciary, makes 
the decision on behalf of the Account to enter into the transaction, 
provided that the transaction is not part of an agreement, arrangement, 
or understanding designed to benefit a party in interest;
    (e) The party in interest dealing with the Account is neither the 
Named Fiduciary nor a person related to the Named Fiduciary, as defined 
in Section III(f), below;
    (f) At the time the transaction is entered into, and at the time of 
any subsequent renewal or modification thereof that requires the 
consent of the Named Fiduciary, the terms of the transaction are at 
least as favorable to the Account as the terms generally available in 
arm's length transactions between unrelated parties;
    (g) Neither the Named Fiduciary nor any affiliate thereof, as 
defined in Section III(b), below, nor any owner, direct or indirect, of 
a 5 percent (5%) or more interest in the Named Fiduciary is a person 
who, within the ten (10) years immediately preceding the transaction, 
has been either convicted or released from imprisonment, whichever is 
later, as a result of:
    (1) any felony involving abuse or misuse of such person's employee 
benefit plan position or employment, or position or employment with a 
labor organization;
    (2) any felony arising out of the conduct of the business of a 
broker, dealer, investment adviser, bank, insurance company, or 
fiduciary;
    (3) income tax evasion;
    (4) any felony involving the larceny, theft, robbery, extortion, 
forgery, counterfeiting, fraudulent concealment, embezzlement, 
fraudulent conversion, or misappropriation of funds or securities; 
conspiracy or attempt to commit any such crimes or a crime in which any 
of the foregoing crimes is an element; or
    (5) any other crimes described in section 411 of the Act.
    For purposes of this Section I(g), a person shall be deemed to have 
been ``convicted'' from the date of the judgment of the trial court, 
regardless of whether the judgment remains under appeal.
II. Specific Exemption Involving Places of Public Accommodation
    The restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1) 
and 406(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 
November 8, 1999, to the furnishing of services, facilities, and any 
goods incidental thereto by a place of public accommodation owned by 
the Account managed by the Named Fiduciary to a party in interest with 
respect to the Fund, if the services, facilities, and incidental goods 
are furnished on a comparable basis to the general public.
III. Definitions
    (a) For purposes of Section I(b), above, of this exemption, an 
``affiliate'' of a person means--
    (1) any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,
    (2) any corporation, partnership, trust, or unincorporated 
enterprise of which such person is an officer, director, 5 percent (5%) 
or more partner, or employee (but only if the employer of such employee 
is the plan sponsor), and
    (3) any director of the person or any employee of the person who is 
a highly compensated employee, as described in section 4975(e)(2)(H) of 
the Code, or who has direct or indirect authority, responsibility, or 
control regarding the custody, management, or disposition of plan 
assets. A named fiduciary (within the meaning of section 402(a)(2) of 
the Act) of a plan, and an employer any of whose employees are covered 
by the plan will also be considered affiliates with respect to each 
other for purposes of Section I(b) if such employer or an affiliate of 
such employer has the authority, alone or shared with others, to 
appoint or terminate the named fiduciary or otherwise negotiate the 
terms of the named fiduciary's employment agreement.
    (b) For purposes of Section I(g), above, of this exemption, an 
``affiliate'' of a person means--
    (1) any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,
    (2) any director of, relative of, or partner in, any such person,

[[Page 60455]]

    (3) any corporation, partnership, trust, or unincorporated 
enterprise of which such person is an officer, director, or a 5 percent 
(5%) or more partner or owner, and
    (4) any employee or officer of the person who--
    (A) Is a highly compensated employee (as described in section 
4975(e)(2)(H) of the Code) or officer (earning 10 percent (10%) or more 
of the yearly wages of such person) or
    (B) Has direct or indirect authority, responsibility or control 
regarding the custody, management, or disposition of Fund assets.
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (d) The term ``goods'' includes all things which are movable or 
which are fixtures used by the Account but does not include securities, 
commodities, commodities futures, money, documents, instruments, 
accounts, chattel paper, contract rights, and any other property, 
tangible or intangible, which, under the relevant facts and 
circumstances, is held primarily for investment.
    (e) The term ``party in interest'' means a person described in 
section 3(14) of the Act and includes a ``disqualified person,'' as 
defined in section 4975(e)(2) of the Code.
    (f) The Named Fiduciary is ``related'' to a party in interest for 
purposes of Section I(e), above, of this exemption, if the party in 
interest (or a person controlling, or controlled by, the party in 
interest) owns a 5 percent (5%) or more interest in the Named 
Fiduciary, or if the Named Fiduciary (or a person controlling, or 
controlled by, the Named Fiduciary) owns a 5 percent (5%) or more 
interest in the party in interest. For purposes of this definition:
    (1) The term ``interest'' means with respect to ownership of an 
entity--
    (A) The combined voting power of all classes of stock entitled to 
vote or the total value of the shares of all classes of stock of the 
entity if the entity is a corporation,
    (B) The capital interest or the profits interest of the entity if 
the entity is a partnership; or
    (C) The beneficial interest of the entity if the entity is a trust 
or unincorporated enterprise; and
    (2) A person is considered to own an interest held in any capacity 
if the person has or shares the authority--
    (A) To exercise any voting rights, or to direct some other person 
to exercise the voting rights relating to such interest, or
    (B) To dispose or to direct the disposition of such interest.
    (g) The term ``relative'' means a relative as that term is defined 
in section 3(15) of the Act, or a brother, sister, or a spouse of a 
brother or sister.
    (h) For purposes of Section I(a) of this exemption, the term 
``shareholders'' equity'' or ``partners'' equity'' means the equity 
shown in the most recent balance sheet prepared within the two (2) 
years immediately preceding a transaction undertaken pursuant to this 
exemption, in accordance with generally accepted accounting principles.
    (i) The ``time'' as of which any transaction occurs is the date 
upon which the transaction is entered into. In addition, in the case of 
a transaction that is continuing, the transaction shall be deemed to 
occur until it is terminated. If any transaction is entered into on or 
after the effective date of this exemption, or a renewal that requires 
the consent of the Named Fiduciary occurs on or after such effective 
date, and the requirements of this exemption are satisfied at the time 
the transaction is entered into or renewed, respectively, the 
requirements will continue to be satisfied thereafter with respect to 
the transaction. Nothing in this subsection shall be construed as 
exempting a transaction which becomes a transaction described in 
section 406 of the Act or section 4975 of the Code while the 
transaction is continuing, unless the conditions of this exemption were 
met either at the time the transaction was entered into or at the time 
the transaction would have become prohibited but for this exemption.

Temporary Nature of Exemption

    The Department has determined that the relief provided to ASA and 
ASA Counselors by this exemption will be temporary in nature. The 
exemption is effective for ASA from November 8, 1999, through December 
20, 1999, and for ASA Counselors from December 20, 1999, until the 
resignation of ASA Counselors and the appointment of a replacement 
independent Named Fiduciary for the Account. In accordance with Section 
14 of the Independent Named Fiduciary Agreement (the Agreement), the 
Department was notified that ASA Counselors intends to resign as Named 
Fiduciary for the Account and terminate the Agreement on the later of: 
(a) Thirty (30) days from September 12, 2000; or (b) the appointment of 
a replacement independent Named Fiduciary for the Account. Accordingly, 
in order to accommodate the latest effective date of the resignation of 
ASA Counselors, the Department has determined that the relief provided 
by this exemption is available until the later of: (a) October 12, 
2000, or (b) the effective date of the appointment of a replacement 
independent Named Fiduciary for the Account that is acceptable to the 
Department.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department of 
Labor (the Department) invited all interested persons to submit written 
comments and requests for a hearing on the proposed exemption. As set 
forth in the Notice, interested persons consisted of the Trustees of 
the Fund and any interested persons who commented in writing to the 
Department in connection with Prohibited Transaction Exemption 99-46 
(PTE 99-46). The deadline for submission of such comments was within 
forty-five (45) days of the date of the publication of the Notice in 
the Federal Register on June 26, 2000. All comments and requests for a 
hearing were due on August 10, 2000.
    Prior to August 10, 2000, interested persons contacted the 
Department by telephone and in writing in order to point out that the 
documents provided in the notice to interested persons referenced the 
application number D-10514 for PTE 99-46, rather than the application 
number D-10879 for the subject case. In light of this error, the 
Department required, and the applicants agreed, that a corrected copy 
of these documents would be sent to all interested persons by first 
class mail. Further, in order to allow interested parties to have the 
full comment period after receiving the revised notice, the Department 
required, and the applicants agreed to, an extension of the deadline 
when comments would be due on the proposed exemption. In a letter dated 
July 20, 2000, the applicants confirmed that it had re-notified all 
interested persons, as of July 19, 2000. Accordingly, all comments and 
requests for a hearing were due on August 31, 2000.
    During the comment period, the Department received no requests for 
a hearing. However, the Department did receive comment letters from 
eleven (11) commentators. At the close of the comment period, the 
Department forwarded copies of these letters to the applicant for 
response. The applicant responded in writing to the various concerns 
raised by the commentators. A description of the comments and the 
applicant's responses thereto are summarized below.
    A number of commentators objected to the acquisition by the Fund of 
the Diplomat Resort and Country Club (the

[[Page 60456]]

Diplomat Project) which was the subject of PTE 99-46, and expressed 
concern over the ASA Counselors' authority under the exemption to use 
assets of the Fund for the operation of the Diplomat Project. In 
response to the comment, the applicants noted that the Department 
previously granted PTE 99-46 which permitted the investment. Further, 
the applicants maintain that the Diplomat Project involves a large 
hotel, country club, and marina. Given the number of participants, 
contributing employers, and service providers for the Fund and the 
scope of the Diplomat Project, in the opinion of the applicants, there 
would be significant administrative difficulties in identifying and 
preventing inadvertent prohibited transactions. In the opinion of the 
applicants, the granting of this exemption to ASA Counselors, the Named 
Fiduciary, will eliminate the risk that a prohibited transaction will 
occur during the course of building, selling, or operating the Diplomat 
Project.
    One commentator asked whether CS Capital Management had any ties to 
Capital Consultants, Inc. or Wilshire Financial Services. In response, 
CS Capital Management has confirmed that they do not have ties to 
either organization.
    After giving full consideration to the entire record, including the 
written comments from the commentators, the Department has decided to 
grant the exemption. In this regard, the comment letters submitted to 
the Department have been included as part of the public record of the 
exemption application. The complete application file, including all 
supplemental submissions received by the Department, is made available 
for public inspection in the Public Documents Room of the Pension 
Welfare Benefits Administration, Room N-5638, U.S. Department of Labor, 
200 Constitution Avenue, N.W., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice published on June 26, 2000, at 65 FR 39435.
    For Further Information Contact: Ms. Angelena C. Le Blanc of the 
Department, telephone (202) 219-8883 (this is not a toll-free number).

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the 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) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, D.C., this 4th day of October, 2000.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 00-26029 Filed 10-10-00; 8:45 am]
BILLING CODE 4510-29-P