[Federal Register: November 1, 2000 (Volume 65, Number 212)]
[Notices]
[Page 65331-65335]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no00-85]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 2000-52; Exemption Application No. L-
10667, et al.]
Grant of Individual Exemptions; Kwik Kopy Corporation Employees
Welfare Benefit Plan and Trust (the Plan)
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, DC. The notices also
invited interested persons to submit comments on the requested
exemptions to the Department. In addition the notices stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicants have represented that they
have complied with the requirements of the notification to interested
persons. No public comments and no requests for a hearing, unless
otherwise stated, were received by the Department.
The notices of proposed exemption were issued and the exemptions
are being granted solely by the Department because, effective December
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 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.
[[Page 65332]]
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.
Kwik-Kopy Corporation Employees Welfare Benefit Plan and Trust (the
Plan) Located in Cypress Creek, TX
[Prohibited Transaction Exemption 2000-52; Exemption Application No. L-
10667]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the
Act shall not apply to the cash sale by the Plan of certain
recreational facilities (the Recreational Facilities) to the
International Center for Entrepreneurial Development, Inc., the parent
of Kwik-Kopy Corporation (Kwik-Kopy), the Plan sponsor, and a party in
interest with respect to the Plan.\1\
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\1\ Because the Plan is a voluntary employees' beneficiary
association trust, it is not qualified under section 401 of the
Code. Therefore, there is no jurisdiction under Title II of the Act
pursuant to section 4975 of the Code. However, the Department is
assuming, for purposes of this final exemption, that there is
jurisdiction under Title I of the Act pursuant to section 3(1) of
the Act.
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This exemption is subject to the following requirements:
(a) The proposed sale is a one-time transaction for cash.
(b) The fair market value of the Recreational Facilities has been
determined by qualified, independent appraisers who propose to update
their valuation of the Recreational Facilities on the date of the sale.
(c) On the date of the sale, the Plan receives an amount which is
equal to the greater of the fair market value of the Recreational
Facilities or the Plan's total acquisition costs.
(d) The Plan pays no fees or commissions in connection with the
proposed sale.
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
50223.
Technical Correction
The Department notes that in the notice of proposed exemption, the
word ``Copy,'' as used in references to ``Kwik-Copy Corporation'' or
``Kwik Copy,'' has been misspelled. For purposes of this exemption, the
Department wishes to point out that correct spelling of the term is
``Kopy.''
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
American Mutual Holding Company (AMHC) Located in Des Moines, IA
[Prohibited Transaction Exemption 2000-53; Exemption Application No. D-
10874]
Exemption
Section I. Covered Transactions
The restrictions of section 406(a) 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 (D) of the Code, shall not apply,
effective September 20, 2000, to (1) the receipt of certain common
stock (Common Stock) issued by AMHC,\2\ or (2) the receipt of cash
(Cash) or policy credits (Policy Credits), by or on behalf of a
policyowner (the Eligible Member) of AmerUs Life Insurance Company
(AmerUs Life), which is an employee benefit plan (the Plan), other than
a Plan maintained by AMHC and/or its affiliates, in exchange for such
Eligible Member's membership interest in AMHC, in accordance with the
terms of a plan of conversion (the Plan of Conversion), implemented
under Iowa law.
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\2\ For purposes of this exemption, all references to AMHC are
deemed to include references to AmerUs Group Co. (AmerUs Group), the
successor in interest to AMHC.
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This exemption is subject to the following conditions set forth
below in Section II.
Section II. General Conditions
(a) The Plan of Conversion is subject to approval, review and
supervision by the Iowa Commissioner of Insurance (the Commissioner)
and is implemented in accordance with procedural and substantive
safeguards that are imposed under Iowa law.
(b) The Commissioner reviews the terms and options that are
provided to Eligible Members of AMHC as part of such Commissioner's
review of the Plan of Conversion and the Commissioner approves the Plan
of Conversion following a determination that such Plan is fair and
equitable to Eligible Members.
(c) Each Eligible Member has an opportunity to vote to approve the
Plan of Conversion after full written disclosure is given to the
Eligible Member by AMHC.
(d) Any determination to receive Common Stock, Cash or Policy
Credits by an Eligible Member which is a Plan, pursuant to the terms of
the Plan of Conversion, is made by one or more Plan fiduciaries which
are independent of AMHC and its affiliates and neither AMHC Group nor
any of its affiliates exercises any discretion or provides investment
advice, within the meaning of 29 CFR 2510.3-21(c), with respect to such
decisions.
(e) After each Eligible Member entitled to receive Common Stock is
allocated at least 20 shares, additional consideration is allocated to
Eligible Members who own participating policies based on actuarial
formulas that take into account each participating policy's
contribution to the surplus and asset valuation reserve of AMHC, which
formulas have been approved by the Commission.
(f) All Eligible Members that are Plans participate in the
transactions on the same basis as all Eligible Members that are not
Plans.
(g) No Eligible Member pays any brokerage commissions or fees in
connection with their receipt of Common Stock or Policy Credits or in
connection with the implementation of the commission-free program.
(h) All of AmerUs Life's policyowner obligations remain in force
and are not affected by the Plan of Conversion.
Section III. Definitions
For purposes of this exemption:
(a) The term ``AMHC'' means American Mutual Holding Company, its
successor, AmerUs Group, and any of their affiliates, as defined in
paragraph (b) of this Section III.
(b) An ``affiliate'' of AMHC includes--
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with AMHC. (For purposes of this paragraph, the term ``control'' means
the power to exercise a controlling influence over the management or
policies of a person other than an individual.)
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an
officer, director or a 5 percent partner or owner.
(c) The term ``Eligible Member'' means a person who is (or,
collectively, persons who are) the owner(s) of one or more ``eligible
policies'' (the Eligible Policy or Eligible Policies) on the adoption
date of the Plan of Conversion. An ``Eligible Policy'' is defined as a
policy that has been in force for at least
[[Page 65333]]
one year prior to the adoption date and that remains in force on the
effective date of the Plan of Conversion. A mutual member of AMHC who
owns both an Eligible Policy and a policy that is not an Eligible
Policy will be an Eligible Member only with respect to the Eligible
Policy.
(d) The term ``Policy Credit'' means either an increase in the
accumulation account value (to which no surrender or similar charge
will be applied) or an increase in a dividend accumulation on a policy
or contract issued by AmerUs Life.
EFFECTIVE DATE: This exemption is effective as of September 20, 2000.
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 that was published on August 17, 2000
at 65 FR 50240.
Written Comments
The Department received nine written comments with respect to the
proposed exemption. Eight comments were submitted by Plan policyowners.
The ninth comment, which was submitted by AmerUs Group, the successor
to AMHC, and also referred to herein as ``the Applicant,'' is intended
to update and clarify the proposal in certain areas.
Of the policyowner comments received, four commenters expressed
their approval of the exemption. Three commenters made general
comments. Of the comments falling into this category, one comment was
not germane to the exemption request, while the two others focused on
either the commenter's retirement eligibility or the form of
demutualization consideration to be received. (Both of these comments
were subsequently forwarded to the Applicant for handling by
appropriate personnel.) Finally, another commenter objected to the
granting of the exemption because he believed the exemption would favor
officers and owners of AMHC at the expense of the investors.
Following is a discussion of the comment submitted by the objecting
policyowner as well as the Applicant's response to this comment. Also
discussed is the Applicant's comment and the Department's responses to
the specific areas of the Applicant's concern.
Opposing Policyowner's Comment
As discussed briefly above, the commenter is of the view that the
Restructuring will not benefit investors but will entirely benefit the
officers and the owners of AMHC. Therefore, the commenter asserts that
he is opposed to the granting of the exemption.
In response to this comment, the Applicant explains that the
Restructuring provides significant benefits to the policyowners of
AmerUS Life, which are the ``investors'' in and ``owners'' of AMHC for
periods prior to the Restructuring, and does not serve to benefit
AMHC's officers. The Applicant notes that the Restructuring provides
AmerUS Life policyowners with Common Stock, Cash or Policy Credits in
exchange for such policyowners' illiquid membership interests in AMHC.
Thus, according to the Applicant, policyowners may effectively convert
the economic value of their membership interests into a marketable
equity position, cash or an enhanced return on their AmerUs Life
insurance products. The Applicant states that this realization of
economic value occurs while the underlying insurance or annuity
contacts remain in force, without compromising any benefits, guarantees
or other rights and interests (apart from membership in AMHC) under the
existing policies and contracts. Additionally, the Applicant points out
that policyowners receiving Common Stock as consideration for their
membership interests are expected to benefit, along with other AMHC
shareholders, from the increased financial flexibility that the
organization of AMHC as a stock company (rather than a mutual company)
will realize. For these reasons, the Applicant believes that the view
expressed by the commenter should not prevent the Department from
granting the final exemption.
Applicant's Comments
1. Status of the Restructuring and Renaming of AMHC. The Applicant
states that the Plan of Conversion was approved by the Commissioner on
August 1, 2000 and that the restructuring (the Restructuring) of AMHC
occurred on September 20, 2000. Specifically, on that date, the
Applicant explains that AmerUs Group liquidated into AMHC and AMHC
converted to a stock corporation. In addition, the Applicant states
that AmerUs Life Holdings, Inc. merged into AMHC, with AMHC as the
surviving corporation. Further, the Applicant points out that AmerUs
Life (i.e., AmerUs Life Insurance Company) became a wholly owned
subsidiary of AMHC and AMHC was renamed ``AmerUs Group Co.''
Because of the foregoing changes, the Applicant requests that the
final exemption reflect that: (a) The Plan of Conversion was approved
by the Commissioner on August 1, 2000; (b) the Restructuring occurred
on September 20, 2000; and (c) the Applicant's name was changed from
AMHC to ``AmerUs Group Co.''
The Department has noted these modifications to the proposed
exemption. With respect to the Applicant's name change, the Department
has added a new footnote to the operative language of the exemption to
clarify that, for purposes of this exemption, all references to AMHC
are deemed to include references to AmerUs Group, the successor in
interest to AMHC. The Department believes that by incorporating
references to AmerUs Group into the definition of the term ``AMHC,''
the continuity of the proposed and final exemptions will be preserved
and reader confusion will be minimized. In addition, the Department has
made a corresponding change to Section III(a) of the final exemption in
order that it will read as follows:
For purposes of this exemption:
(a) The term ``AMHC'' means American Mutual Holding Company, its
successor, AmerUs Group, and any of their affiliates, as defined in
paragraph (b) of this Section III.
2. Effective Date of Exemption and Use of the Escrow Arrangement.
When the exemption application was initially filed, the Applicant
explains that the timing and sequence of events for the Restructuring
and the final exemption were uncertain. For this reason, the Applicant
notes that the exemption application indicated that ``[i]n the event
that a final exemption ha[d] not been granted by the Department as of
the effective date of the Restructuring, consideration otherwise
payable to the Plans [would] be held in an interest-bearing escrow
account, at the expense of AMHC, pending the grant of the final
exemption.'' The Applicant also noted that a subsequent submission to
the Department stated more definitely that an escrow arrangement would
be established.
However, because the publication of the proposed exemption was so
close to the effective date of the Restructuring, the Applicant states
that the use of the escrow arrangement became potentially burdensome.
If an escrow arrangement were utilized, the Applicant explains that it
would have been in place for a brief period of time and all of the
fixed costs of such an arrangement would be have been borne by the
Applicant.
In lieu of establishing an escrow account, the Applicant represents
that it decided to distribute the demutualization consideration between
October 18-24, 2000, which occurrence would be prior to the granting of
the final exemption. Therefore, the
[[Page 65334]]
Applicant requests that the final exemption be made retroactive to
September 20, 2000, the date of the Restructuring. Additionally, the
Applicant requests that the final exemption not be conditioned on
AMHC's use of an escrow arrangement.
In response to this comment, the Department has made the final
exemption effective as of September 20, 2000. This text appears in
Section I of the final exemption, in the operative language, as well as
in the section captioned EFFECTIVE DATE.
The Department notes that while the failure to describe the escrow
arrangement in the Summary of Facts and Representations (the Summary)
may have been due to an oversight, the Applicant counsel subsequently
informed the staff, in telephone communication, of the time and
monetary problems that would result if such an arrangement were ever
adopted. Therefore, the Applicant requested that the exemption be made
retroactive to the date of the Restructuring. The Department has
complied with this request and it has not conditioned the final
exemption on AMHC's use of the escrow arrangement.
3. Identification of Insurance Company. In the operative language,
Section I of the proposed exemption refers to ``a policyowner of
AMHC.'' Similarly, Representation 18(g) of the Summary refers to
``AMHC's policyholder obligations.'' As indicated in the exemption
application, the Applicant states that AMHC was a mutual holding
company in which the policyowners of AmerUs Life held mutual membership
interests. However, the Applicant believes that the present wording of
the proposed exemption could result in some confusion as to the actual
policyowners covered by the exemption because there were no
policyowners of AMHC. Therefore, the Applicant requests that Section I
of the final exemption replace the phrase ``a policyowner of AMHC''
with the phrase ``a policyowner of AmerUs Life'' and that
Representation 18(g) of the Summary refer to ``policyholder obligations
of AmerUs Life'' rather than ``AMHC's policyholder obligations.''
In response to this comment, the Department has modified the
operative language of Section I of the final exemption to reflect this
change. In addition, the Department has deleted the reference to
``AMHC's policyholder obligations'' in section I(h) of the proposed
exemption and has substituted the phrase ``AmerUs Life's policyowner
obligations.'' Further, the Department notes the modification to
Representation 18(g) of the Summary.
4. Approval of Plan of Conversion by Voting Members. The fourth
full paragraph of Representation 9 of the Summary states that ``Section
508B.6 of the Iowa Code requires that the plan of conversion be
approved by two-thirds of the policyholders \3\ of the mutual company
who are entitled to vote on the conversion.'' The Applicant represents
that Iowa law does not require two-thirds approval by the members who
are eligible to vote. Rather, it requires two-thirds approval by the
members who do vote. The Applicant notes that this matter was misstated
in the exemption application.
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\3\ AMHC's Plan of Conversion refers to ``Owners'' of
``Policies'' issued by AmerUs Life or ``policyowners'' while the
Iowa Code refers to ``policyholders.'' For purposes of this
exemption, the Department notes that both terms have the same
meaning.
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Therefore, to correct this error, the Applicant requests that the
sentence be revised to read as follows: ``Section 508B.6 of the Iowa
Code requires that the plan of conversion be approved by two-thirds of
the policyowners of the mutual company voting on the conversion.''
In response, the Department notes this revision to the Summary.
5. Scope of Determination. Section II(b) of the proposed exemption
and Representation 18(b) of the Summary condition the exemption on the
Commissioner determining that the Plan of Conversion ``is fair and
equitable to Eligible Members and is not detrimental to the general
public.'' The Applicant states that although Iowa law requires the
Commissioner to determine that the Plan of Conversion is ``fair and
equitable'' to policyowners, it does not require that the Commissioner
make a determination regarding the effect on the general public.
The Applicant explains that under Section 508B.7 of the Iowa Code,
the full legal standard for the Commissioner's approval of the Plan of
Conversion is a determination that ``the plan complies with all
provisions of law, the plan is fair and equitable to the mutual company
and its policyholders, and that the reorganized company will have the
amount of capital and surplus deemed by the commissioner to be
reasonably necessary for its future solvency.'' Therefore, the
Applicant requests that Section II(b) of the final exemption and
Representation 18(b) of the Summary be amended to conform with the Iowa
Code.
In response to this comment, the Department has revised Section
II(b) of the final exemption to read as follows:
(b) The Commissioner reviews the terms and options that are
provided to Eligible Members of AMHC as part of such Commissioner's
review of the Plan of Conversion and the Commissioner approves the
Plan of Conversion following a determination that such Plan is fair
and equitable to Eligible Members.
In addition, the Department notes the modification to Representation
18(b) of the Summary.
6. Filing of Indianapolis Life Plan of Conversion with the
Commissioner. In Representation 10 of the Summary, Footnote 36 of the
proposed exemption states that ``[i]t is anticipated that a plan of
conversion for the demutualization of ILICo will be filed with the
Indiana Insurance Commissioner in August 2000.'' The Applicant wishes
to clarify that this filing was actually made in September 2000.
Accordingly, the Department notes this clarification.
For further information regarding the comments and other matters
discussed herein, interested persons are encouraged to obtain copies of
the exemption application file (Exemption Application No. D-10874) the
Department is maintaining in this case. The complete application file,
as well as all supplemental submissions received by the Department, are
made available for public inspection in the Public Documents Room of
the Pension and Welfare Benefits Administration, Room N-5638, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.
20210.
Accordingly, after giving full consideration to the entire record,
including the written comments, the Department has decided to grant the
exemption subject to the modifications and clarifications described
above.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Richard E. Lobenherz Profit Sharing Plan (the Plan) Located in
Charlevoix, Michigan
[Prohibited Transaction Exemption 2000-54; Exemption Application No. D-
10895]
Exemption
The sanctions resulting from the application of section 4975 of the
Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall
not apply to the proposed sale of certain unimproved real property (the
Land) by the Plan to Richard E. Lobenherz (Mr. Lobenherz), a
disqualified person with respect to the Plan,\4\ provided that the
following conditions are satisfied:
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\4\ Because Mr. Lobenherz is the sole owner of the Plan sponsor
and the only participant in the Plan, there is no jurisdiction under
Title I of the Employee Retirement Income Security Act of 1974 (the
Act) pursuant to 29 CFR 2510.3-3(b). However, there is jurisdiction
under Title II of the Act pursuant to section 4975 of the Code.
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[[Page 65335]]
(a) The proposed sale will be a one-time transaction for cash;
(b) The Plan will receive the current fair market value for the
Land established at the time of the sale by a qualified, independent
appraiser;
(c) The Plan will pay no real estate expenses or commissions
associated with the sale; and
(d) The sale will provide the Plan with greater liquidity and
further diversification of the Plan's assets.
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 September 22, 2000 at 65
FR 57396.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (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 exemptions does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of the Act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
any other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional rules. Furthermore, the
fact that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
(3) The availability of these exemptions is subject to the express
condition that the material facts and representations contained in each
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC, this 25th day of October, 2000.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 00-27916 Filed 10-31-00; 8:45 am]
BILLING CODE 4510-29-M