EBSA Notices

Prohibited Transaction Exemptions and Grant of Individual Exemptions Involving: Calpine Corporation, D-11458 (2009-01); Starrett Corporation Pension Plan (the Plan), D-11473 (2009-02); and General Motors Corporation and Its Wholly Owned Subsidiaries (together, GM) (2009-03)   [1/21/2009]
FR Doc E9-963
[Federal Register: January 21, 2009 (Volume 74, Number 12)]
[Page 3644-3646]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Employee Benefits Security Administration

Prohibited Transaction Exemptions and Grant of Individual 
Exemptions Involving: Calpine Corporation, D-11458 (2009-01); Starrett 
Corporation Pension Plan (the Plan), D-11473 (2009-02); and General 
Motors Corporation and Its Wholly Owned Subsidiaries (together, GM) 

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.


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 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
    A notice was published in the Federal Register of the pendency 
before the Department of a proposal to grant such exemption. The notice 
set forth a summary of facts and representations contained in the 
application for exemption and referred interested persons to the 
application for a complete statement of the facts and representations. 
The application has been available for public inspection at the 
Department in Washington, DC. The notice also invited interested 
persons to submit comments on the requested exemption to the 
Department. In addition the notice stated that any interested person 
might submit a written request that a public hearing be held (where 
appropriate). The applicant has represented that it has complied with 
the requirements of the notification to interested persons. No requests 
for a hearing were received by the Department. Public comments were 
received by the Department as described in the granted exemption.
    The notice of proposed exemption was issued and the exemption is 
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 exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Calpine Corporation, Located in Houston, TX
[Prohibited Transaction Exemption 2009-01; Exemption Application No. D-


    Effective January 31, 2008, the restrictions of sections 406(a), 
406(b)(1) and (b)(2), and 407(a) of the Act and the sanctions resulting 
from the application of section 4975(c)(1)(A) through (E) of the Code, 
shall not apply to (1) the past acquisition by the Calpine Corporation 
Retirement Savings Plan (the Plan) of warrants (the Warrants) issued by 
the Calpine Corporation (the Applicant) that would have permitted, 
under certain conditions, the purchase of shares of newly issued 
Calpine Common Stock (the New Stock) pursuant to certain bankruptcy 
proceedings; (2) the holding of the Warrants by the Plan; and (3) the 
disposition of the Warrants. This exemption is subject to adherence to 
the following conditions:
    (a) The acquisition and holding of the Warrants by the Plan 
occurred in connection with the Applicant's bankruptcy proceedings 
pursuant to which all holders of Calpine Common Stock prior to January 
31, 2008 (the Old Stock) were treated in the same manner;
    (b) The Plan had little, if any, ability to affect the negotiation 
of the Applicant's Plan of Reorganization pursuant to Chapter 11 of the 
United States Bankruptcy Code;
    (c) The Plan acquired the Warrants automatically and without any 
action on the part of the Plan;
    (d) The Plan did not pay any fees or commissions in connection with 
the acquisition and holding of the Warrants;
    (e) All decisions regarding the holding and disposition of the 
Warrants by the Plan were made in accordance with Plan provisions for 
individually directed investment of participant accounts by the 
individual participants whose accounts in the Plan received the 
Warrants; and
    (f) The Plan received the same proportionate number of Warrants as 
other owners of Old Stock.
    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 3, 2008 at 73 
FR 51524.

FOR FURTHER INFORMATION CONTACT: Mr. Anh-Viet Ly, Department of Labor, 
telephone number (202) 693-8648. (This is not a toll-free number.)

Starrett Corporation Pension Plan (the Plan), Located in New York, NY
[Prohibited Transaction Exemption 2009-02; Application Number: D-11473]


    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 the cash sale (the Sale) by the Plan to the 
Starrett Corporation (the Applicant), a party in interest with respect 
to the Plan, of a $25,000 face amount 7.797% secured senior note (the 
Security) issued by the Osprey Trust (the Trust), an Enron related 
entity, provided that the following conditions were satisfied:
    (a) The Sale is a one-time transaction for cash;
    (b) The Plan pays no commissions, fees or other expenses in 
connection with the Sale;

[[Page 3645]]

    (c) The terms and conditions of the Sale are at least as favorable 
as those obtainable in an arm's length transaction with an unrelated 
third party;
    (d) The value of the Security is determined by Interactive Data 
Systems, a qualified, unrelated entity; and
    (e) The Plan is a defined benefit plan which has been terminated 
and all benefits have been paid out to Plan participants and 
    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 November 20, 2008 at 73 
FR 70377.

FOR FURTHER INFORMATION CONTACT: Mr. Brian Buyniski of the Department, 
telephone (202) 693-8545. (This is not a toll-free number.)

General Motors Corporation and Its Wholly-Owned Subsidiaries (together, 
GM), Located in Detroit, MI
[Prohibited Transaction Exemption 2009-03; Exemption Application No. L-


Section I. Covered Transactions

    The restrictions of sections 406(a)(1)(B), 406(a)(1)(D), and 
406(b)(1) and (b)(2) of the Act \1\ shall not apply, effective December 
16, 2005, to: (1) Monthly cash advances to GM by the DC VEBA to 
reimburse GM for the estimated mitigation of certain health care 
expenses (the Mitigation) and for the payment of dental expenses 
incurred by participants in the DC VEBA; and (2) an annual ``true up'' 
of the Mitigation payments and dental expenses against the actual 
expenses incurred, with the result that (a) if GM has been underpaid by 
the DC VEBA, GM receives the balance outstanding from the DC VEBA with 
interest, or (b) if the DC VEBA has overpaid GM, GM reimburses the DC 
VEBA for the amount overpaid, with interest.

    \1\ Because the Independent Health Care Trust for UAW Retirees 
of General Motors Corporation (the DC VEBA) is not qualified under 
section 401 of the Code, there is no jurisdiction under Title II of 
the Act pursuant to section 4975 of the Code. However, there is 
jurisdiction under Title I of the Act.

Section II. Conditions

    This exemption is conditioned upon adherence to the material facts 
and representations described herein and upon satisfaction of the 
following conditions:
    (a) A committee (the Committee), acting as a fiduciary independent 
of GM, has represented and will continue to represent the DC VEBA and 
its participants and beneficiaries for all purposes with respect to the 
Mitigation process.
    (b) The Committee for the DC VEBA has discharged and will continue 
to discharge its duties consistent with the terms of the DC VEBA and 
the DC VEBA Settlement Agreement.
    (c) The Committee and actuaries retained by the Committee have 
reviewed and approved and will continue to review and approve the 
estimation process involved in the Mitigation, which results in the 
monthly Mitigation amount paid to GM.
    (d) Outside auditors retained by the Committee, along with an 
administrative company that is partly owned by the DC VEBA, will audit 
the calculation of the true up to determine whether there are any 
differences between the estimated Mitigation and actual Mitigation 
amounts and make such information available to GM.
    (e) GM has provided and will continue to provide various reports 
and records to the Committee concerning the Mitigation and dental care 
reimbursements, which are and will continue to be subject to review and 
audit by the Committee.
    (f) The terms of the transactions are no less favorable and will 
continue to be no less favorable to the DC VEBA than the terms 
negotiated at arm's length under similar circumstances between 
unrelated third parties.
    (g) The interest rate applied to any true up payments is a 
reasonable rate, as set forth in the DC VEBA Settlement Agreement, and 
will continue to be a reasonable rate that runs from the beginning of 
the year being trued up and does and will continue to not present a 
windfall or detriment to either party.
    (h) The DC VEBA has not incurred and will continue not to incur any 
fees, costs or other charges (other than those described in the DC VEBA 
and the DC VEBA Settlement Agreement) as a result of the covered 
transactions described herein.
    (i) GM and the Committee have maintained and will continue to 
maintain for a period of six years from the date of any of the covered 
transactions, any and all records necessary to enable the persons 
described in paragraph (j) below to determine whether conditions of 
this exemption have been and will continue to be met, except that (1) a 
prohibited transaction will not be considered to have occurred if, due 
to circumstances beyond the control of GM or the Committee, the records 
are lost or destroyed prior to the end of the six-year period, and (2) 
no party in interest other than GM or 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 (j) below.
    (j)(1) Except as provided in section (2) of this paragraph and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to in paragraph (i) above have 
been or will be unconditionally available at their customary location 
during normal business hours to:
    (A) Any duly authorized employee representative of the Department;
    (B) The UAW or any duly authorized representative of the UAW;
    (C) GM or any duly authorized representative of GM; and
    (D) Any participant or beneficiary of the DC VEBA, or any duly 
authorized representative of such participant or beneficiary.
    (2) None of the persons described above in subparagraphs (1)(B) or 
(D) of this paragraph (j) is authorized to examine the trade secrets of 
GM, or commercial or financial information that is privileged or 

Section III. Definitions

    For purposes of this exemption, the term--
    (a) ``GM'' means General Motors Corporation and its wholly owned 
    (b) ``Affiliate'' means:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, or partner, employee or relative (as 
defined in section 3(15) of the Act) of such other person; or
    (3) Any corporation, partnership or other entity of which such 
other person is an officer, director or partner. (For purposes of this 
definition, the term ``control'' means the power to exercise a 
controlling influence over the management or policies of a person other 
than an individual.)
    (c) ``Class Members'' mean all persons other than active employees 
who, as of the ratification date of the GM-UAW Memorandum of 
Understanding, November 11, 2005 (the Ratification Date) were (1) GM/
UAW hourly employees who had retired from GM with eligibility for the 
General Motors Health Care Program for Hourly Employees (the Original 
Plan) as in effect prior to the Ratification Date or (2) the spouses, 
surviving spouses and dependents of GM/UAW hourly employees, who, as of 
the Ratification Date, were eligible for post-retirement or

[[Page 3646]]

surviving spouse health care coverage under the Original Plan as a 
consequence of a GM/UAW hourly employee's retirement from GM or death 
prior to retirement.
    (d) ``Committee'' means the seven individuals, consisting of two 
classes: (1) the United Auto Workers Class (UAW) with three members, 
and (2) the Public Class with four members, who act as the named 
fiduciary and administrator of the DC VEBA.
    (e) ``Court'' or ``Michigan District Court'' means the United 
States District Court for the Eastern District of Michigan.
    (f) ``DC VEBA'' means the Independent Health Care Trust for UAW 
Retirees of General Motors Corporation.
    (g) ``DC VEBA Settlement Agreement'' means the agreement, dated 
December 16, 2005, which was entered into between GM, the UAW, and 
Class Representatives, on behalf of a Class of plaintiffs in the Henry 
case (2006 WL 891151 (E.D. Mi. March 31, 2006)), aff'd 2007 WL 2239208 
(6th Cir. August 7, 2007).
    (h) ``Mitigation'' means the reduction of retirees' monthly 
contributions, annual deductibles, and other retirees' out-of-pocket 
costs to the extent payments from the DC VEBA are made, as directed by 
the Committee, to GM and/or to providers, insurance carriers and other 
agreed-upon entities.
    (i) ``OPEB'' means Other Post-Employment Benefits. The OPEB 
Valuation is an actuarially developed annual valuation of a company's 
post employment benefit obligations, other than for pension and other 
retirement income plans. The OPEB Valuation is based on a set of 
uniform financial reporting standards promulgated by the Financial 
Accounting Standards Board and embodied in Financial Accounting 
Standard 106, as revised from time to time. The types of benefits 
addressed in an OPEB Valuation typically are retiree healthcare 
(medical, dental, vision, hearing) life insurance, tuition assistance, 
day care, legal services, and the like.
    (j) ``Shares'' or ``Stock'' refers to shares of common stock of 
reorganized GM, par value $.01 per share.
    (k) ``UAW'' means the International Union, United Automobile, 
Aerospace and Agricultural Implement Workers of America or the United 
Auto Workers, if shortened.
    (l) ``VEBA'' means a voluntary employees' beneficiary association.

DATES: Effective Date: This exemption is effective as of December 16, 

Written Comments

    The Department invited all interested persons to submit written 
comments and/or requests for a public hearing with respect to the 
notice of proposed exemption within 30 days of the publication of such 
notice in the Federal Register on July 23, 2008. All comments were due 
by September 22, 2008.
    During the comment period, the Department received 159 telephone 
calls, 20 letters, and 24 E-mail messages from participants or 
beneficiaries of various GM-sponsored welfare plans. The Department 
also received four requests for a public hearing, all of which were 
withdrawn. GM submitted no comments or hearing requests with respect to 
the proposed exemption.
    A majority of the comments concerned the commenter's inability to 
understand the notice of proposed exemption or the effect of the 
exemption on the commenter's health care benefits. Of the written 
comments received, seven commenters said they were in favor of the 
Department's granting the exemption while five commenters objected to 
the exemption for reasons that were not germane to the subject matter 
of the proposal. In this regard, the commenters' objections ranged from 
general confusion over the subject exemption involving the DC VEBA and 
another exemption GM will be seeking in the future for a ``new 
VEBA,''to unhappiness over GM's decision not to renew the contract of a 
service provider for one of its health care plans.
    Accordingly, after giving full consideration to the entire record, 
including the written comments, the Department has determined to grant 
the exemption. 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. L-
11407) 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 Employee Benefits Security Administration, Room 
N-1513, U.S. Department of Labor, 200 Constitution Avenue, NW., 
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 of proposed exemption published on July 23, 2008 at 73 FR 

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady at telephone number 
(202) 693-8556. (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) This exemption is 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 this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 13th day of January, 2009.
Ivan Strasfeld,
Director of Exemption Determinations. Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E9-963 Filed 1-16-09; 8:45 am]