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[Application No: D-10936] Adoption of Amendment to Prohibited Transaction Exemption 96-62 (PTE 96-62) To Permit Certain Authorized Transactions Between Plans and Parties in Interest   [7/3/2002]
[PDF]
[Federal Register: July 3, 2002 (Volume 67, Number 128)]
[Notices]               
[Page 44622-44625]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jy02-64]                         

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No: D-10936]

 
Adoption of Amendment to Prohibited Transaction Exemption 96-62 
(PTE 96-62) To Permit Certain Authorized Transactions Between Plans and 
Parties in Interest

AGENCY: Pension and Welfare Benefits Administration, Department of 
Labor.

ACTION: Adoption of amendment to PTE 96-62.

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SUMMARY: This document amends PTE 96-62 (61 FR 39988, July 31, 1996). 
PTE 96-62 permits certain prospective transactions between employee 
benefit plans and parties in interest where such transactions are 
specifically authorized by the Department and are subject to terms, 
conditions and representations which are substantially similar to two 
individual exemptions granted by the Department within the 60 month 
period ending on the date of filing of a written submission seeking 
authorization for the transaction. The amendment affects plans, 
participants and beneficiaries of such plans and certain persons 
engaging in such transactions.

EFFECTIVE DATE: This amendment is effective July 3, 2002.

FOR FURTHER INFORMATION CONTACT: Allison Padams Lavigne, Office of 
Exemption Determinations, Pension and Welfare Benefits Administration 
at (202) 693-8540 (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On March 20, 2002, notice was published in 
the Federal Register (67 FR 13019) of the pendency before the 
Department of a proposed amendment to PTE 96-62. PTE 96-62 provides 
relief from a restriction described in sections 406(a) and 406(b) of 
the Employee Retirement Income Security Act (ERISA or the Act) or a 
parallel restriction described in section 8477(c)(2) of the Federal 
Employees' Retirement Systems Act (FERSA), and from the taxes imposed 
by section 4975(a) and (b) of the Internal Revenue Code of 1986 (the 
Code), by reason of a parallel provision described in section 
4975(c)(1)(A) through (F) of the Code. The amendment adopted by this 
notice was proposed by the Department on its own motion pursuant to 
section 408(a) of ERISA and section 4975(c)(2) of the Code and in 
accordance with the procedures set forth in 29 CFR part 2570, subpart B 
(55 FR 32836, August 10, 1990).\1\
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    \1\ Section 102 of Reorganization Plan No. 4 of 1978 (5 U.S.C. 
App. 1 (1996)) generally transferred the authority of the Secretary 
of the Treasury to issue administrative exemptions under section 
4975(c)(2) of the Code to the Secretary of Labor.
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    The notice gave interested persons an opportunity to comment or to 
request a hearing on the proposed amendment. No public comments or 
requests for a hearing were received.
    For the sake of convenience, the entire text of PTE 96-62, as 
amended, has been reprinted with this notice.

Description of the Exemption

    Section I of PTE 96-62 provides relief from certain of the 
restrictions described in section 406(a) of ERISA and from the taxes 
imposed by section 4975(a) and (b) of the Code, by reason of a parallel 
provision described in section 4975(c)(1)(A) through (D) of the Code, 
for a transaction between a plan and a party in interest with respect 
to such plan, provided the conditions of the exemption are met. Under 
section II, additional relief is provided from certain of the 
restrictions described in section 406(b) of ERISA and the parallel 
restrictions described in section 8477(c)(2) of FERSA, as well as from 
the taxes imposed by section 4975(a) and (b) of the Code, by reason of 
a parallel provision described in section 4975(c)(1)(E) and (F). 
Sections I(a) and II(a) require that the transaction be substantially 
similar (as defined in section IV(a) of PTE 96-62) to transactions 
described in at least two individual exemptions that were granted by 
the Department, and which provided relief from the same restrictions as 
requested by the party, within the 60-month period ending on the date 
of filing of the written submission.\2\
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    \2\ Section IV(a) defines the term ``substantially similar'' to 
mean alike in all respects as determined by the Department, in its 
sole discretion.
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    The amendment granted by this notice expands sections I(a) and 
II(a) to permit parties to either base their submission on 
substantially similar transactions described in two individual 
exemptions granted within the past 60 months; or on one individual 
exemption granted within the past 120 months and one transaction which 
received final authorization by the Department under PTE 96-62 within 
the past 60 months (the Authorized Transaction). The Department 
believes that the alternate method for satisfying the requirements of 
sections I(a) and II(a) will continue to ensure that the transactions 
that the party compares to its proposed transaction reflect the current 
policies of the Department.\3\ The amendment also adds a definition for 
the term ``Authorized Transaction'' in section IV(g).
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    \3\ The Department maintains, on its website (www.dol.gov/pwba) 
a list of Authorized Transactions. This list includes the following 
information: The final authorization numbers, the name of the 
applicants, a description of the transactions, and the grant numbers 
and Federal Register citations of the exemptions on which the 
submissions were based. Parties wishing to base their submissions on 
an Authorized Transaction will be able to refer to the submissions 
previously filed by parties under PTE 96-62 and to the two granted 
individual exemptions identified as substantially similar for 
additional information regarding the subject transactions.
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    The Department notes that all other conditions contained in PTE 96-
62 must continue to be satisfied with respect to those parties seeking 
to base their submissions on an Authorized Transaction rather than on 
two substantially similar individual exemptions. Accordingly, these 
parties should submit, among other things, a comparison of the proposed 
transaction with the Authorized Transaction and the transaction which 
was the subject of the individual exemption, including an explanation 
as to why any differences should not be considered material.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and section 4975(c)(2) of the Code does 
not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of ERISA and the Code to which the 
exemption does not expressly apply and the general fiduciary provisions 
of section 404 of ERISA. Section 404 requires, in part, that a 
fiduciary discharge his or her duties respecting the plan solely in the 
interest of participants and beneficiaries of the plan and in a prudent 
fashion in

[[Page 44623]]

accordance with section 404(a)(1)(B) of ERISA. This exemption, if 
granted, does not affect the requirement of section 401(a) of the Code 
that a plan must operate for the exclusive benefit of the employees of 
the employer maintaining the plan and their beneficiaries;
    (2) The Department finds that the exemption is administratively 
feasible, in the interests of the plan(s) and of participants and 
beneficiaries, and protective of the rights of the participants and 
beneficiaries of the plan(s);
    (3) This amendment is supplemental to and not in derogation of any 
other provisions of ERISA 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 amendment is applicable to a transaction only if the 
transaction satisfies the conditions specified in the class exemption.

Exemption

    Accordingly, PTE 96-62 is amended under the authority of section 
408(a) of ERISA, section 4975(c)(2) of the Code and section 8477(c)(3) 
of FERSA, and in accordance with the procedures set forth in 29 CFR 
2570, subpart B (55 FR 32836, August 10, 1990).
    Section I--General Exemption. Effective July 31, 1996, a 
restriction described in section 406(a) of ERISA, and the taxes imposed 
by section 4975(a) and (b) of the Code, by reason of a parallel 
provision described in section 4975(c)(1)(A) through (D) of the Code, 
shall not apply to a transaction between a plan and a party in interest 
with respect to such plan, provided the following conditions are met:
    (a) The transaction is substantially similar (as defined in section 
IV(a)) to transactions described in: (a) At least two individual 
exemptions that were granted by the Department, and provided relief 
from the same restriction, within the 60-month period ending on the 
date of filing of the written submission referred to in section III(a); 
or (b) effective July 3, 2002, one individual exemption that was 
granted by the Department, and provided relief from the same 
restriction, within the 120-month period ending on the date of filing 
of the written submission referred to in section III(a), and at least 
one Authorized Transaction (as defined in section IV(g));
    (b) There is little, if any, risk of abuse or loss to the plan 
participants and beneficiaries as a result of the transaction; and
    (c) Prior to its execution, the transaction has met the 
requirements described in section III.
    Section II--Specific Exemption. Effective July 31, 1996, a 
restriction described in section 406(b) of ERISA, or a parallel 
restriction described in section 8477(c)(2) of FERSA, and the taxes 
imposed by sections 4975(a) and (b) of the Code, by reason of a 
parallel provision described in section 4975(c)(1)(E) and (F) of the 
Code, shall not apply to a transaction between a plan and a party in 
interest with respect to such plan, provided the following conditions 
are met:
    (a) The transaction is substantially similar (as defined in section 
IV(a)) to transactions described in: (a) At least two individual 
exemptions that were granted by the Department, and provided relief 
from the same restriction, or if FERSA relief is requested, the ERISA 
relief provided parallels the restrictions of section 8477(c)(1) of 
FERSA, within the 60-month period ending on the date of filing of the 
written submission referred to in section III(a); or (b) effective July 
3, 2002, one individual exemption that was granted by the Department, 
and provided relief from the same restriction, within the 120-month 
period ending on the date of filing of the written submission referred 
to in section III(a), and at least one Authorized Transaction (as 
defined in section IV(g));
    (b) There is little, if any, risk of abuse or loss to the plan 
participants and beneficiaries as a result of the transaction;
    (c) Prior to its execution, the transaction has met the 
requirements described in section III;
    (d) Where either of the previously granted exemptions identified in 
the written submission described in section III, required the 
involvement of an independent fiduciary, an independent fiduciary has 
reviewed the proposed transaction and determined that the transaction 
would be in the interests and protective of the plan and its 
participants and beneficiaries;
    (e) The independent fiduciary described in section II(d) represents 
the interests of the plan in the execution of the transaction; and
    (f) If the transaction is continuing in nature, the independent 
fiduciary described in section II(d)--
    (1) Represents the interests of the plan for the duration of the 
transaction and monitors the transaction on behalf of the plan;
    (2) Enforces compliance with all conditions and obligations imposed 
on any party dealing with the plan with respect to the transaction; and
    (3) Ensures that the transaction remains in the interests of the 
plan.
    Section III--Authorization Requirements. The requirements for this 
section are met if:
    (a) A written submission is filed with the Department with respect 
to the transaction which contains the following information:
    (1) A separate written declaration by the party who is to engage in 
the transaction that the written submission is made with the intention 
of demonstrating compliance with the conditions of this class 
exemption,
    (2) All information required to be submitted with an individual 
exemption application in accordance with the procedures set forth in 29 
CFR 2570 subpart B,
    (3) A specific statement demonstrating that the proposed 
transaction poses little, if any, risk of abuse or loss to the plan 
participants and beneficiaries,
    (4) A comparison of the proposed transaction to at least two 
substantially similar transactions which were the subject of individual 
exemptions granted by the Department, or the subject of an individual 
exemption granted by the Department within the 120-month period and an 
Authorized Transaction, and an explanation as to why any differences 
should not be considered material for purposes of this exemption, and
    (5) A complete and accurate draft of the notice (as defined in 
section IV(b)) prepared for distribution to interested persons and a 
description of the proposed method of distribution for such notice.
    (b) With respect to a transaction described in section II of this 
exemption, the written submission referred to in section (a) above 
contains the following additional information:
    (1) The identity of the independent fiduciary,
    (2) A description of such fiduciary's independence from the parties 
in interest involved in the subject transaction,
    (3) A statement by the independent fiduciary containing an 
explanation as to why the subject transaction is in the interest and 
protective of the participants and beneficiaries of the plan(s) 
involved,
    (4) An agreement by the independent fiduciary to represent the 
interests of the plan(s) involved in the transaction, and
    (5) A description of the procedures for replacement of the 
independent fiduciary, if necessary, during the term of the 
transaction.

[[Page 44624]]

    (c) The transaction meets the requirements for tentative 
authorization (as defined in section IV(c)) from the Department.
    (d) Following tentative authorization, the party who is to engage 
in the transaction provides written notice (as defined in section 
IV(b)) to interested persons in a manner that is reasonably calculated 
to result in the receipt of such notice by interested persons, informs 
interested persons of the date of the expiration of the comment period, 
and resolves all substantive adverse comments (as defined in section 
IV(f)) to the satisfaction of the Department.
    (e) The transaction meets the requirements for final authorization 
(as defined in section IV(d)).
    Section IV--Definitions. (a) The term ``substantially similar'' 
means alike in all material respects as determined by the Department, 
in its sole discretion.
    (b) The term ``notice'' means written notification to interested 
persons which includes--
    (1) An objective description of the transaction, including all 
material terms and conditions,
    (2) The approximate date on which the transaction will occur,
    (3) A statement that the proposed transaction has met the 
requirements for tentative authorization under this exemption,
    (4) A statement apprising interested persons of their right to 
comment to the Department on the proposed transaction at the following 
address: Office of Exemption Determinations, U.S. Department of Labor, 
200 Constitution Ave, NW, Room N-5649, Washington, DC 20210,
    (5) The expiration date of the comment period, and
    (6) The Federal Register citations for the prior exemption(s) and/
or the final authorization number of the Authorized Transaction 
(including the related Federal Register citations for the prior 
exemptions cited therein) identified by the party as substantially 
similar to the contemplated transaction.
    (c) For purposes of this exemption, ``tentative authorization'' 
occurs upon the earlier of:
    (1) The expiration of the 45-day period following an acknowledgment 
by the Department of receipt of the written submission with respect to 
the transaction under this exemption unless the Department has notified 
the party who is to engage in the transaction during that period that 
the transaction is not eligible for authorization under the terms of 
this exemption, or
    (2) The issuance of a written determination by the Department 
during the 45-day period that the proposed transaction meets the 
requirements for tentative authorization.
    (d) For purposes of this exemption, ``final authorization'' occurs 
upon the expiration of:
    (1) The five (5) day period immediately following the comment 
period (as defined in section IV(e)), unless the Department notifies 
the party that the transaction is not eligible for authorization under 
the terms of this exemption, and
    (2) If necessary in order to resolve any substantive adverse 
comments received by the Department from interested persons within the 
comment period, a period of time extending beyond the five-day period 
immediately following the comment period as mutually agreed between the 
Department and the party.
    (e) The term ``comment period'' means the 25-day period following 
the completion of distribution of the notice to interested persons by 
the party who is to engage in the transaction. For this purpose, 
distribution of notice by first class mail will be deemed complete 
three business days following the date of mailing to interested 
persons.
    (f) The term ``substantive adverse comments'' means those comments 
submitted by interested persons to the Department within the prescribed 
comment period which raise significant factual, legal or policy issues 
regarding the transaction as determined by the Department.
    (g) The term ``Authorized Transaction'' means a transaction that 
has received final authorization pursuant to PTE 96-62 within a 60-
month period ending on the date of the filing of the written submission 
referred to in section III(a).
    Section V--Optional Checklist. Completion and submission of the 
following optional checklist to accompany the written submission 
described in section III(a) will assist the Department in the 
consideration of the transaction under the class exemption.
    The written submission filed with the Department contains the 
following information:
    [  ] A separate written declaration of the intent to comply with 
the conditions of the class exemption.
    [  ] All information required to be submitted with an individual 
exemption application under 29 CFR 2570 subpart B.
    [  ] A statement demonstrating that the transaction poses little, 
if any, risk of abuse or loss to the plan participants and 
beneficiaries.
    [  ] A comparison of the proposed transaction to at least two 
substantially similar transactions which were the subject of individual 
exemptions granted within the 60-month period ending on the date of the 
filing, or the subject of one individual exemption that was granted by 
the Department within the 120-month period ending on the date of 
filing, and at least one Authorized Transaction and an explanation why 
any differences should not be considered material.
    [  ] A complete and accurate draft of the notice to interested 
persons (as described in section IV(b)).
    [  ] A description of the proposed method of distribution for such 
notice.
    If either of the previously granted exemptions or the Authorized 
Transactions identified in the written submission required the 
involvement of an independent fiduciary, the written submission must 
contain the following additional information:
    [  ] The identity of the independent fiduciary responsible for 
reviewing the proposed transaction, and representing the interests of 
the plan in the execution of the transaction. (If the transaction is 
continuing in nature, the independent fiduciary represents the 
interests of the plans for the duration of the transaction and takes 
all necessary action on behalf of the plan.)
    [  ] A description of such fiduciary's independence from the 
parties involved in the transaction.
    [  ] A statement from the independent fiduciary explaining why the 
transaction is in the interests and protective of the plan participants 
and beneficiaries.
    [  ] An agreement by the independent fiduciary to represent the 
interests of the plan.
    [  ] A description of the procedures for the replacement of the 
independent fiduciary, if necessary, during the term of the 
transaction.
    The notice to interested persons filed with the Department includes 
the following information:
    [  ] An objective description of the transaction, including all 
material terms and conditions.
    [  ] The approximate date on which the transaction will occur.
    [  ] A statement that the transaction has met the requirements for 
tentative authorization under the exemption.
    [  ] A statement apprising interested persons of their right to 
comment on the proposed transaction at the address contained in the 
exemption.
    [  ] The expiration date of the comment period.
    [  ] The Federal Register citations for the prior exemption(s) and/
or the final authorization number of the Authorized Transaction 
(including the related Federal Register citations for the prior 
exemptions cited therein) identified by

[[Page 44625]]

the party as substantially similar to the contemplated transaction.

    Signed at Washington, DC this 28th day of June, 2002.
Ivan L. Strasfeld,
Director, Office of Exemption Determinations, Pension and Welfare 
Benefits Administration, Department of Labor.
[FR Doc. 02-16737 Filed 7-2-02; 8:45 am]
BILLING CODE 4510-29-P