skip to page content
Secretary of Labor Thomas E. Perez
     DOL Home > Federal Register > Notices > EBSA
EBSA Notices

Notice of Proposed Exemptions   [6/26/2009]
[PDF]
FR Doc E9-15159
[Federal Register: June 26, 2009 (Volume 74, Number 122)]
[Notices]               
[Page 30631-30642]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26jn09-139]                         

-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application Nos. and Proposed Exemptions; D-11432, Iron Workers Local 
17 Pension Fund (the Plan); D-11483 Urology Clinics of North Texas, 
P.A. 401(k) Profit Sharing Plan and Trust (The Plan); and L-11451, Ford 
Motor Corporation and Its Affiliates (collectively, Ford), et al.]

 
Notice of Proposed Exemptions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of Proposed Exemptions.

-----------------------------------------------------------------------

SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. ------ stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via e-mail or FAX. Any such 
comments or requests should be sent either by e-mail to: 
``moffitt.betty@dol.gov'', or by FAX to (202) 219-0204 by the end of 
the scheduled comment period. The applications for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990).

[[Page 30632]]

Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue exemptions of the type requested to 
the Secretary of Labor. Therefore, these notices of proposed exemption 
are issued solely by the Department. The applications contain 
representations with regard to the proposed exemptions which are 
summarized below. Interested persons are referred to the applications 
on file with the Department for a complete statement of the facts and 
representations.

Iron Workers Local 17 Pension Fund (the Plan) Located in Cleveland, 
Ohio

[Application No. D-11432]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code, and in accordance with the procedures set forth in 29 CFR part 
2570 subpart B (55 FR 32836, 32847, August 10, 1990). If the proposed 
exemption is granted, the restrictions in sections 406(a)(1)(A), 
406(a)(1)(D), and 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 sections 4975(c)(1)(A) and 4975(c)(1)(D) through (E) of the Code, 
shall not apply to the sale of a leasehold interest, which includes an 
office building (the Building) and certain rights pursuant to a ground 
lease, held by the Plan, to the Bridge, Structural and Ornamental Iron 
Workers Local Union No. 17 (the Union), a party in interest with 
respect to the Plan, provided that the following conditions are 
satisfied:
    (a) The terms and conditions of the sale are at least as favorable 
to the Plan as those that the Plan could obtain in an arm's length 
transaction with an unrelated party;
    (b) The Plan receives the greater of $285,000 or the fair market 
value of the Building and lot on which the Building is located (the 
Lot), as of the date of the sale, as determined by a qualified, 
independent appraiser;
    (c) The sale is a one-time transaction for cash;
    (d) The Plan pays no commissions, costs, or other expenses in 
connection with the sale (other than fees associated with the retention 
of a qualified, independent appraiser and the retention of a qualified, 
independent fiduciary);
    (e) The Board of Trustees retains a qualified, independent 
fiduciary, who will review and approve the methodology used by the 
qualified, independent appraiser, will ensure that such methodology is 
properly applied in determining the fair market value of the Building 
and Lot as of the date of the sale, and will determine whether it is 
prudent to go forward with the proposed transaction; and
    (f) Prior to the publication of a final exemption, if granted, in 
the Federal Register, regarding the transaction that is the subject of 
this proposed exemption, the Union: Files Form 5330 (Return of Excise 
Taxes Related to Employee Benefit Plans) with the Internal Revenue 
Service and pays all applicable excise taxes that are due by reason of 
its prohibited past leasing to the Plan of the Lot on which the subject 
Building was constructed by the Plan; and Provides a copy of the 
cancelled check and other documentary evidence to the Department 
indicating that the taxes were correctly computed and paid.

Summary of Facts and Representations

    1. The Plan is a multi-employer, defined benefit pension plan, 
created and maintained pursuant to collective bargaining agreements 
between the Union and the Construction Employers Association (CEA). The 
Plan is administered by a Board of Trustees (the Trustees), consisting 
of three trustees appointed by the Union and three, by the CEA. As of 
April 30, 2008, the Plan had approximately 2,180 participants and 
beneficiaries and total assets of approximately $115,313,797.
    2. Among the assets of the Plan is its leasehold interest in a 
property located at 1564 East 23rd Street, Cleveland, Ohio. A one-story 
office building (the Building), measuring 4114 square feet, sits on a 
51' x 147' lot belonging to the Union (the Lot) that is currently being 
leased to the Plan. The lease provides for an initial term of 99 years 
until 2084 and a rental rate of $200 per month. Under the lease terms, 
the Plan also has an option to terminate the lease at any time, to 
extend the term of the lease indefinitely at the same rental rate, or 
to purchase the Lot for $20,000. The Building is adjacent to, and 
shares a common wall with, the Union's building at 1544 East 23rd 
Street, Cleveland, Ohio. There is a parking lot consisting of eight 
parking spaces in front of the Building. The immediate neighborhood is 
a mixed-use commercial area.
    The Building was constructed on the Lot by the Plan in 1986, 
pursuant to a feasibility study by Coopers & Lybrand commissioned by 
the Trustees; Coopers & Lybrand opined that it would be more cost-
effective in the long run for the Plan to construct its own office 
space rather than to continue renting, as it had been doing. 
Subsequently, the Plan entered into a lease for the Lot with the Union, 
made retroactive to September 1985 but without the benefit of an 
administrative prohibited transaction exemption.\1\
---------------------------------------------------------------------------

    \1\ The Department is not proposing any exemptive relief herein 
for these past prohibited transactions, whose background is 
described in greater detail in Facts and Representations 5, 
below.
---------------------------------------------------------------------------

    The Plan uses the Building for administrative office space and also 
leases office space to its ``sister plans,'' the Iron Workers Local 17 
Annuity Fund and the Iron Workers Local 17 Insurance Benefit Fund, 
pursuant to Prohibited Transaction Exemption (PTE) 76-1 and PTE 77-
10.\2\ According to the applicant, shared expenses are allocated on a 
pro rata basis, with the Plan consistently receiving an allocation of 
approximately 40% of shared expenses.
---------------------------------------------------------------------------

    \2\ PTE 76-1 (41 FR 12740, March 26, 1976) is a class exemption 
that provides relief from sections 406(a) and 407(a) of the Act (and 
section 4975(c)(1)(A) through (D) of the Code), under certain 
conditions, for the leasing of office space by a multiple employer 
plan to a participating employee organization, participating 
employer, participating employer association, or another multiple 
employer plan, which is a party in interest or disqualified person 
with respect to the plan. PTE 77-10 (42 FR 33918, July 1, 1977) is a 
class exemption that provides relief from section 406(b)(2) of the 
Act, under certain conditions, for the leasing of office space by a 
multiple employer plan to a participating employee organization, 
participating employer (without regard to whether the office space 
constitutes ``qualifying employer real property''), participating 
employer association, or another multiple employer plan, which is a 
party in interest with respect to the plan or to which it is related 
by virtue of having common trustees. The Department expresses no 
opinion herein as to whether the Plan's leases to its ``sister 
plans'' satisfy the terms and conditions of PTEs 76-1 and 77-10.
---------------------------------------------------------------------------

    3. The Building and Lot were appraised by James P. Prosek, SRA, and 
Aaron Baaske, CRA, CREA, independent appraisers located in Amherst, 
Ohio. Mr. Prosek and Mr. Baaske are experienced real estate appraisers 
licensed in the state of Ohio and are members of recognized societies 
that award professional designations in their field. In their appraisal 
report, Mr. Prosek and Mr. Baaske utilized the Sales Comparison 
Approach and the Income Approach, with greater reliance on the former, 
to arrive at an estimated value of $285,000, as of November 14, 2008, 
for the fee simple interest of the Building and Lot (as a unified 
property). They then opined that the value of the Union's leased fee 
interest in the property, belonging to the Union as the lessor, is 
$20,000, or the amount specified in the Plan's option to purchase the 
Lot under the terms of the ground lease. To isolate the value of the 
Plan's leasehold interest in the property, they then subtracted $20,000 
from the value of the fee simple interest

[[Page 30633]]

($285,000), so that the value of the Plan's interest is $265,000, as of 
November 14, 2008. Although the Plan does not own the whole property 
but only the leasehold interest, the Union is willing to pay a purchase 
price encompassing the fair market value of both the Building and Lot 
as a unified property.
    Mr. Prosek and Mr. Baaske also determined that no premium is due 
from the Union to the Plan, as a term of the proposed sale, for any 
assemblage value resulting from the adjacency of the Union's building 
to the Plan's Building. The appraisers state, ``A study of the 
influence of incremental size on office property values in this market 
does not reveal a premium being paid, on a price per square foot basis, 
for larger properties. In fact, some tendency toward diminishing return 
on size is evident * * *.'' The report continues, ``Further, the 
subject building was designed and built for a single user * * *. It was 
not designed to be incorporated with the neighboring building and 
combining the two might result in a larger building that offers less 
than optimum utility.'' The report concludes, ``[T]he highest and best 
use of the subject property is a continuation of its current use as an 
independent office facility.''
    In regard to the fair market rental value of the Building, Mr. 
Prosek and Mr. Baaske state, ``The observed leasing activity produces a 
fairly tight range of contract and asking rents, generally from about 
$9.00 to $12.00 per square foot of building area * * *. These leases 
and offerings suggest rent, assuming the described market expense 
structure, near $10.50 per square foot per year as appropriate for the 
subject space.''
    4. The Trustees have retained Ms. Nell Hennessy, President and 
Chief Executive Officer of Fiduciary Counselors Inc. (FCI) to act as an 
independent fiduciary on behalf of the Plan. Ms. Hennessy has headed 
FCI since its incorporation in 1999. From 1993 to 1998, she served as 
Deputy Executive Director and Chief Negotiator of the Pension Benefit 
Guaranty Corporation (PBGC), the federal agency that guarantees private 
defined benefit pensions. Prior to Ms. Hennessy's employment at the 
PBGC, Ms. Hennessy was a partner in the law firm of Willkie Farr & 
Gallagher, where she advised clients on a wide range of benefit, 
investment, and corporate governance issues. Ms. Hennessy will review 
and approve the methodology used by the appraisers to ensure that such 
methodology is properly applied in determining the fair market value of 
the Building and Lot, to be updated as of the date of the sale. She 
also will determine whether it is prudent to go forward with the 
proposed transaction.
    5. At the Department's request, the applicant provided background 
on the Union's past and on-going lease of the Lot to the Plan. 
According to the applicant, the Cincinnati Regional Office opened an 
investigation of the Plan in 1985, which continued until 1989. The 
investigator advised the Union that, because the Plan did not have 
separate title to the Building, use of the Plan assets to construct the 
Building on Union land was a prohibited transaction.
    Upon the advice of counsel, the Union, on July 10, 1987, entered 
into a lease of the Lot located at 1564 East 23rd Street to the Plan, 
with a retroactive effective date of September 1, 1985, pursuant to the 
terms described in Facts and Representations 2, above. The 
Trustees represent that they were advised by counsel, at that time, 
that the ground lease was covered by the statutory exemption contained 
in section 408(b)(2) of the Act.\3\ The Trustees, however, were unable 
to locate and produce contemporaneous written documentation of the 
advice from an ERISA counsel regarding the applicability of section 
408(b)(2) to the lease.\4\ The applicant has agreed, as a condition of 
this proposed exemption, to file Form 5330 and pay all applicable 
excise taxes that are due by reason of its prohibited past leasing to 
the Plan of the Lot on which the subject Building was constructed.
---------------------------------------------------------------------------

    \3\ The Department's review of correspondence with the 
Cincinnati Regional Office revealed that the field office had 
advised their counsel that the ground lease was a prohibited 
transaction and that an administrative prohibited transaction 
exemption should be sought to cover it. The regulation at 29 CFR 
2550.408b-2 clarifies that section 408(b)(2) provides relief for 
payments by a plan for leases of office space. It also limits the 
scope of the exemptive relief to section 406(a) so that relief from 
section 406(b), which prohibits, among other things, self-dealing by 
plan fiduciaries, is not provided.
    \4\ The request for retroactive prohibited transaction relief 
for the ground lease was withdrawn. The Department's standard for 
obtaining a retroactive prohibited transaction exemption is set 
forth in ERISA Technical Release 85-1.
---------------------------------------------------------------------------

    6. The Trustees have determined that the proposed sale to the Union 
of the Plan's leasehold interest, which includes the Building, a right 
of first refusal to purchase the Lot, a purchase option for the Lot, 
and an option to renew for successive terms, is in the best interests 
of the Plan. According to the applicant, the Plan and its ``sister 
plans'' have reduced the size of their respective office staffs over 
the past few years and thus their need for office space. Although the 
Plan's leasehold interest represents less than three-tenths of one 
percent of the Plan's assets, the Trustees believe that it is in the 
best interests of the Plan to divest itself of this illiquid asset. 
Further, the Plan will eliminate the operating and maintenance expenses 
associated with the Building. It is represented that the Plan will 
realize savings by renting the smaller amount of office space it needs 
rather than continuing to occupy the Building, as explained below.
    All three of the Iron Workers Local 17 plans will rent nearby 
office space from an unrelated party following the sale of the Plan's 
leasehold interest to the Union. The three plans will split the monthly 
rental cost of $1,125 per month. Based upon the Plan's current expense 
allocation of 40% of the overall cost, the Plan will pay rent of $450 
per month, or $5,400 per year. The Plan's expense allocation in 2007 in 
connection with the Building that it currently occupies (for holding 
costs, such as the land lease, utilities, and taxes) was $10,383 per 
year, the amount not offset by rent payments from the Plan's sister 
plans. Thus, according to the Trustees, the move to different office 
space will yield annual savings to the Plan of $4,983, approximately 
47%.
    Although the Plan owns only the leasehold interest, the Union is 
willing to pay the greater of $285,000 or the fair market value for the 
fee simple interest of the Building and Lot as a unified property (as 
previously stated in Facts and Representations 3, above); the 
fair market value is to be updated as of the date of the sale by a 
qualified, independent appraiser. The Plan's cost of construction for 
the Building was initially quoted at $231,900, but, due to cost 
overruns, came to a total of $321,738.\5\ Nevertheless, the Trustees 
represent that the Plan saved approximately $16,830 in rental costs 
from owning the Building, which also has generated rental income for 
the Plan. Although the minimum $285,000 sales price will not enable the 
Plan to recoup its construction and holding costs of $640,631, the 
Trustees state that the Plan has had use of the Building for the past 
22 years and the imputed value of the rental income it did not have to 
pay is estimated to be $367,463.
---------------------------------------------------------------------------

    \5\ The Department expresses no opinion herein as to whether the 
cost overruns paid by the Plan violated any of the provisions of 
part 4 of Title I of the Act.
---------------------------------------------------------------------------

    7. The Trustees represent that the subject sale will be a one-time 
transaction for cash and that the Plan will incur no fees, commissions, 
or other expenses in connection with the sale (other than fees 
associated with the

[[Page 30634]]

retention of a qualified, independent appraiser and the retention of a 
qualified, independent fiduciary). The Union is also bearing the costs 
of the exemption application and of notifying interested persons.
    8. In summary, the applicant represents that the proposed 
transaction satisfies the statutory criteria for an exemption under 
section 408(a) of the Act for the following reasons: (a) The terms and 
conditions of the sale will be at least as favorable to the Plan as 
those that the Plan could obtain in an arm's length transaction with an 
unrelated party; (b) the Plan will receive the greater of $285,000 or 
the fair market value of the Building and Lot as of the date of the 
sale, as determined by a qualified, independent appraiser; (c) the sale 
will be a one-time transaction for cash; (d) the Plan will pay no 
commissions, costs, or other expenses in connection with the sale 
(other than fees associated with the retention of a qualified, 
independent appraiser and the retention of a qualified, independent 
fiduciary); and (e) the Trustees have retained a qualified, independent 
fiduciary, who will review and approve the methodology used by the 
qualified, independent appraiser, will ensure that such methodology is 
properly applied in determining the fair market value of the Building 
and Lot as of the date of the sale, and will determine whether it is 
prudent to go forward with the proposed transaction.

FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department, 
telephone (202) 693-8557. (This is not a toll-free number).

Urology Clinics of North Texas, P.A. 401(k) Profit Sharing Plan and 
Trust (The Plan) Located in Dallas, TX

[Application No. D-11483]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2) 
of the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1)(A) through (E) of the 
Code, will not apply to the proposed sale (the Sale) of a 2.52 percent 
ownership interest comprising five (5.0) Class I Units (the Units) 
issued by the Center for Pediatric Surgery (CPS), an unrelated party, 
by the individually directed account in the Plan (the Account) of David 
Ewalt, M.D. (Dr. Ewalt), to Dr. Ewalt, a party in interest with respect 
to the Plan.
    This proposed exemption is subject to the following conditions:
    (a) The Sale is a one-time transaction for cash;
    (b) the closing of the Sale (the Closing Date) occurs within 60 
days of the Department's grant of the final exemption;
    (c) the Units are sold to Dr. Ewalt at the greater of the fair 
market value of the Units as of the Closing Date, as determined by a 
qualified, independent appraiser or for $441,000 for the 2.52 percent 
interest of ownership of CPS;
    (d) in addition to the sale price described above, the Account will 
have received $408,954.00 in consideration for the reduction of the 
Account's interest in CPS as a result of an investment by Cook 
Children's Health Care System (Cook) in CPS;
    (e) the proceeds from the Sale are credited to the Account 
simultaneously with the transfer of the Units' title to Dr. Ewalt;
    (f) neither the Plan nor the Account pay any fees, commissions, or 
other costs or expenses associated with the Sale; and
    (g) the terms and conditions of the Sale remain at least as 
favorable to the Account as the terms and conditions obtainable under 
similar circumstances negotiated at arm's length with an unrelated 
party.

Summary of Facts and Representations

    1. Urology Clinics of North Texas, P.A. (the Employer) has its 
principal office and place of business in Dallas, TX. The Employer has 
27 physician partners including Dr. Ewalt.
    2. The Plan is a defined contribution profit sharing plan and has 
147 participants and beneficiaries. As of December 31, 2007, the Plan's 
assets were valued at $20,190,735.00. The Plan's trustees consist of 
four physicians. Dr. Ewalt is one of the trustees of the Plan and is 
also a member of the Plan's administrative committee. The value of the 
Account as of May 8, 2009 is $1,336,000.00.
    3. In 2002, the Plan purchased 4.63 percent (4.63%) interest in CPS 
for the benefit of the Account from the Plano Pediatric Surgery Center 
(Plano Center). The Plano Center was the entity that originally 
established CPS and it is not affiliated in any way with the Employer, 
the Plan or Dr. Ewalt. The Account paid $43,500 for the 4.63% interest 
in CPS. The acquisition of the Units occurred at the time of the 
original capitalization of CPS.
    4. CPS was formed in 2005 as an outpatient surgery facility in 
Plano, Texas. Construction on CPS' facility was completed in 2006. CPS 
currently performs cases in the following medical specialties: GI, 
Dermatology, Ophthalmology, Dental Surgery, Orthopedic Surgery, ENT, 
General Surgery, Plastic Surgery, and Urology.
    5. Since 2006, the Units have generated Unrelated Business Taxable 
Income (UBTI) under Code section 511. It is represented that the Plan 
has paid income taxes equal to $74,789 in 2006 and $58,937.00 in 2007 
resulting from the UBTI. It is estimated that for the 2008 tax year, 
the Plan will pay $59,000 in income tax based on the UBTI. It is 
represented that the Account has borne the entire tax burden on behalf 
of the Plan. Due to the burden on the Account for paying taxes 
generated by the UBTI, Dr. Ewalt determined that selling the Units was 
in the best interest of the Account. Following the Sale, the Account 
would no longer be subject to UBTI liability. Because CPS is a medical 
provider, only physicians or entities representing physicians could 
purchase the Units. Moreover, the general partner of CPS must also 
approve any sales of the Units to any outside physicians or entities 
that represent physicians. Accordingly, Dr. Ewalt proposes to purchase 
the Units from the Account.
    6. The Employer hired Vincent Kickirillo (the Appraiser) of VMG 
Health, LLC, to appraise the value of the Units. He is a member of the 
Association for Investment Management and Research, the National 
Association of Certified Valuation Analysts and the Dallas Society of 
Financial Analysts. In addition, he holds a Chartered Financial Analyst 
designation. Neither the Appraiser nor VMG Health, LLC have any 
affiliation with the Employer and less than one percent of the income 
received by VMG Health, LLC is generated from services rendered to the 
Plan or any party in interest with respect to the Plan. The Appraiser 
applied a minority discount to the Units of 25 percent when compared to 
a controlling interest stake. The Appraiser valued each one percent 
interest of ownership of CPS at $175,000 as of January 9, 2008. Since 
the Units represent a 4.63% interest in CPS, the value of the Units as 
of January 9, 2008 was $810,250 ($175,000 x 4.63).
    7. On August 1, 2008, Cook Children's Health Care System (Cook) 
completed a capital investment in CPS that resulted in Cook's ownership 
of 51 percent of the aggregate ownership interest CPS. Cook is not a 
party in interest to the Plan. The Cook investment did not represent an 
actual purchase from the Account of any

[[Page 30635]]

of the Units. Instead, the Cook investment represented an injection of 
capital into CPS which resulted in the issuance of additional ownership 
units to Cook and dilution of the then existing investors of CPS.
    8. Prior to the investment by Cook, individual investors, including 
the Account, together held an 81 percent aggregate interest in CPS, 
while the remaining 19 percent interest was held by Nuettera Holdings, 
LLC, (Nuettera) the entity providing business management services to 
CPS. Following the investment by Cook, the individual investors' 
aggregate interest in CPS has been reduced to 44 percent and the 
interest held by Nuettera Holdings, LLC has been reduced to five 
percent.\6\ Due to the Cook investment and the resulting dilution and 
reduction of the ownership of the individual investors, the Account's 
aggregate interest in CPS decreased from 4.63 percent to 2.52 percent. 
As consideration for this dilution of their ownership interest, the 
previous investors received a special cash distribution from CPS. The 
Account's share of this cash consideration was $408,954.00. This amount 
was deposited in the Account and invested in accordance with Dr. 
Ewalt's directions. On March 30, 2009, the Appraiser updated his 
appraisal concerning the value of a one percent ownership interest in 
CPS as a result of the Cook investment. The Appraiser determined that a 
one percent interest in CPS is valued at $175,000. Therefore, the 
current value of the Units which now represent a 2.52% interest in CPS 
is valued at $441,000 (2.52 x $175,000).
---------------------------------------------------------------------------

    \6\ Nuetttera was engaged to provide management services for the 
surgery center. Nuettera held an ownership interest in CPS, but that 
interest was represented by units of a different class (Class II 
units) than those held by the physician practitioners who owned the 
remaining interests in CPS (Class I units). When Cook acquired its 
interest in CPS in 2008, it acquired both Class I and Class II 
units. The dilution of Nuettera's interest in CPS was 
proportionately greater than the dilution of the physicians' 
interests because Cook acquired seventy-five percent (75%) of the 
Class II units. In contrast, the aggregate ownership of the 
physicians was diluted by roughly fifty-four percent (54%) following 
the Cook investment. The reason the relative dilution of the two 
groups was different was a result of the fact that the two groups 
owned different classes of units.
---------------------------------------------------------------------------

    9. In summary, it is represented that the Sale satisfies the 
statutory criteria for an exemption under Section 408(a) of the Act for 
the following reasons: (a) The Sale to Dr. Ewalt is a one-time 
transaction for cash; (b) the Closing Date occurs within 60 days of 
grant of the final exemption; (c) the Units will be sold to Dr. Ewalt 
at the greater of the fair market value of the Units as of the Closing 
Date, as determined by a qualified, independent appraiser, or $441,000; 
(d) In addition to the sale price described above, the Account will 
have received $408,954.00 from Cook in consideration for the reduction 
of the Account's interest in CPS; (e) the Sale proceeds from the 
transaction are credited simultaneously to Dr. Ewalt's Account as the 
transfer of the Units' title to Dr. Ewalt; (f) the Account pays no 
fees, commissions or other costs and expenses associated with the Sale; 
(g) The terms and conditions of the Sale remain at least as favorable 
to the Account as the terms and conditions obtainable under similar 
circumstances negotiated at arm's length with an unrelated party.
    Notice to Interested Parties: Notice of the proposed exemption 
shall be given to all interested persons in the manner agreed upon by 
the Employer and Department within 15 days of the date of publication 
of this notice of proposed exemption in the Federal Register. Comments 
and requests for a hearing are due forty-five (45) days after 
publication of this notice in the Federal Register.

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

Ford Motor Corporation and Its Affiliates (Collectively, Ford) Located 
in Detroit, MI

[Application No. L-11451]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
32847, August 10, 1990).

Section I. Covered Transactions

    If the exemption is granted, the restrictions of sections 
406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of the Act shall 
not apply, effective July 13, 2006, to: (1) Monthly cash advances to 
Ford by the Independent Health Care Trust for UAW Retirees of Ford 
Motor Company (the DC VEBA), as defined in section III(f), below, of 
this exemption, to reimburse Ford for the estimated mitigation of 
certain health care expenses (the Mitigation), as defined in section 
III(h), below, of this exemption, and during the period from July 14, 
2006 through February 28, 2007, 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 Ford has been underpaid 
by the DC VEBA, Ford receives the balance outstanding from the DC VEBA 
with interest, or (b) if the DC VEBA has overpaid Ford, Ford reimburses 
the DC VEBA for the amount overpaid, with interest.

Section II. Conditions

    This proposed 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), as defined in section III(d), 
below, of this exemption, acting as a fiduciary independent of Ford, 
has represented and will continue to represent the DC VEBA and its 
participants and beneficiaries for all purposes with respect to the 
Mitigation process under the settlement agreement (the DC VEBA 
Settlement Agreement or the Settlement Agreement), as defined in 
section III(g), below, of this exemption.
    (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 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 Ford.
    (d) Outside auditors retained by the Committee, along with an 
administrative company that is partly owned by the DC VEBA, have 
audited and will audit the calculation of the true-up to determine 
whether there are any differences between the estimated Mitigation and 
actual Mitigation amounts and have made and will make such information 
available to Ford.
    (e) Ford has provided various reports and records to the Committee 
concerning dental care reimbursements for the period from July 14, 
2006, through February 28, 2007, which were subject to review and audit 
by the Committee, and Ford has provided and will continue to provide 
various reports and records to the Committee concerning the Mitigation 
required under the Settlement Agreement which were and will continue to 
be subject to review and audit by the Committee.
    (f) The terms of the covered 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

[[Page 30636]]

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 not and will 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) Ford and the Committee have maintained and will continue to 
maintain for a period of six (6) years from the date of any of the 
covered transactions, any and all records necessary to enable the 
persons described in section II(j), below, of this exemption 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 Ford 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 Ford 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 
section II(j), below, of this exemption.
    (j)(1) Except as provided in section II(j)(2), below, of this 
exemption and notwithstanding any provisions of subsections (a)(2) and 
(b) of section 504 of the Act, the records referred to in section 
II(i), above, of this exemption have been or will be unconditionally 
available at their customary location during normal business hours to:
    (A) Any duly authorized employee or representative of the 
Department;
    (B) The International Union, United Automobile, Aerospace and 
Agricultural Implement Workers of America (the UAW) or any duly 
authorized representative of the UAW;
    (C) Ford or any duly authorized representative of Ford; 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 in section II(j)(1)(B) or (D), 
above, in this exemption is authorized to examine the trade secrets of 
Ford, or commercial or financial information that is privileged or 
confidential.

Section III. Definitions

    For purposes of this proposed exemption, the term--
    (a) ``Ford'' means Ford Motor Company and its affiliates.
    (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'' or ``Class Members'' mean all persons who, as of the 
ratification date (the Ratification Date), as defined in section I(a) 
of the Settlement Agreement, (i.e., December 22, 2005) were: (1) Ford/
UAW hourly employees who had retired from Ford with eligibility to 
participate in retirement in the Hospital-Surgical-Medical-Drug-Dental-
Vision Program (the Original Plan), as in effect prior to the 
Ratification Date, or (2) the spouses, surviving spouses, and 
dependents of Ford/UAW hourly employees, who, as of the Ratification 
Date, were eligible for post-retirement or surviving spouse health care 
coverage under the Original Plan as a consequence of a Ford/UAW hourly 
employee's retirement from Ford or death prior to retirement. Active 
employees, as defined in section I(A) of the Settlement Agreement, are 
not members of the Class.
    (d) ``Committee'' means the seven (7) individuals, consisting of 
two classes: (1) The 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 defined contribution--Voluntary 
Employees' Beneficiary Association trust established by Ford pursuant 
to the Settlement Agreement and the trust agreement (the Trust 
Agreement).
    (g) ``DC VEBA Settlement Agreement'' or the ``Settlement 
Agreement'' means the agreement, dated February 13, 2006, which was 
entered into between Ford, the UAW, and class representatives, on 
behalf of a class of plaintiffs in a class action suit cited as Int'l 
Union, UAW, et. al. v. Ford Motor Company (Civil Case No. 05-74730 
(E.D. Mich. July 13, 2006), aff'd, 497 F.3d 615 (6th Cir. 2007) 
(hereinafter referred to as the Hardwick I Case).
    (h) ``Mitigation'' means the reduction of monthly contributions, 
deductibles, out-of-pocket maximums, co-insurance payments, or any 
other payment in accordance with section 14 of the Settlement Agreement 
to the extent payments from the DC VEBA are made, as directed by the 
Committee, to Ford 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 valuation of a company's post 
retirement 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, 
and legal services
    (j) ``Shares'' or ``Stock'' refers to the common stock of Ford for 
which the par value is $.01.
    (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.
    (m) ``Defined Contribution Plan'' or ``the Defined Contribution 
Plan of the Independent Health Care Trust for UAW Retirees of Ford 
Motor Company'' means the defined contribution welfare benefit plan 
funded by the DC VEBA following the effective date (the Effective 
Date), as defined in section I(A) of the Settlement Agreement (i.e., 
July 13, 2006), which will include the requirement to make 
contributions to the DC VEBA, as set forth in section 13 of the 
Settlement Agreement.
    Effective Date: If granted, this proposed exemption will be 
effective as of July 13, 2006.

Summary of Facts and Representations

    1. Ford is primarily engaged in automotive production and marketing 
operations. Ford designs, manufactures, and markets vehicles worldwide, 
with its largest operating presence in North America. As of December 
31, 2005, Ford had approximately 131,000 active employees in the United 
States, of whom approximately 86,000 are represented by the UAW and 
other unions. Approximately 590,000 retirees and dependents in the U.S. 
receive

[[Page 30637]]

retiree health benefits from Ford, and of this total, as of January 1, 
2006, approximately 170,000 are hourly retirees and spouses, surviving 
spouses, and eligible dependents.
    Ford is a corporation organized under the laws of the State of 
Delaware and maintains its headquarters in Dearborn, Michigan. As of 
December 17, 2007, Ford had total assets of $279,264,000,000, as 
reported in the consolidated balance sheet in Ford's Form 10-k filed 
for the fiscal year ended December 31, 2007.
    2. The DC VEBA Settlement Agreement, dated February 13, 2006, was 
entered into among Ford, the UAW, and class representatives, on behalf 
of plaintiffs (i.e., the Class Members), in the Hardwick I Case. The 
Settlement Agreement was approved by the United States District Court 
for the Eastern District of Michigan in an order dated July 13, 2006, 
and was affirmed by the United States Court of Appeals for the 6th 
Circuit in 2007. The Hardwick I Case contested whether Ford had the 
right to unilaterally modify retiree welfare benefits for hourly 
retired Ford employees who had been represented by the UAW. The 
settlement of the Hardwick I Case provided Ford with the opportunity to 
address its retiree health care costs in an agreed-upon fashion without 
compromising the future rights of Ford, the UAW, and the hourly retired 
Ford employees.
    3. Ford's spiraling retiree health care costs were at the heart of 
the Hardwick I Case. Ford and the UAW engaged in discussions regarding 
the impact of rising health care costs on Ford's financial condition. 
In conjunction therewith, Ford provided the UAW and the Class with 
extensive information as to its financial condition and its health care 
expenditures. Separate teams of investment bankers, actuaries, and 
legal experts reviewed Ford's information and provided an assessment to 
the UAW and to the Class as to the state of Ford's financial condition. 
Upon completion of such review, the UAW, the representatives of the 
Class, and counsel to the Class concluded that, without the Settlement 
Agreement, Ford's ability to provide retiree health care benefits to 
Class Members would be unlikely over the long term.
    4. The Settlement Agreement modifies the health plan that Ford 
sponsors for its hourly retirees and their enrolled spouses and 
dependents. The modified plan imposes new cost sharing requirements 
with respect to retiree health benefits. Specifically, the Ford 
modified retiree health plan will require hourly retiree participants 
to make monthly contributions toward the cost of their retiree health 
coverage, and also imposes annual deductibles, out-of-pocket maximums, 
and certain co-insurance payments on participants and beneficiaries.
    In order to soften the impact of these new cost sharing 
obligations, the Settlement Agreement created a new employee welfare 
benefit plan, as described in section 3(1) of the Act. The new welfare 
benefit plan is called the Defined Contribution Plan of the Independent 
Health Care Trust for UAW Retirees of Ford Motor Company (the Defined 
Contribution Plan). The purpose of the Defined Contribution Plan is to 
provide mitigation to the affected Ford retirees of the costs shifted 
to them and no longer to be paid by the Ford modified health plan.
    5. The Defined Contribution Plan Mitigation benefits will be paid 
from a new voluntary employee beneficiary trust, the DC VEBA, 
controlled by a seven (7) member Committee which is independent of 
Ford. The DC VEBA qualifies as a ``voluntary employees' beneficiary 
association'' within the meaning of section 501(c)(9) of the Code. The 
DC VEBA was established on July 18, 2006, through a welfare benefit 
trust (the Trust), as described under section 419(A)(f)(5)(A) of the 
Code. The Trust was established by the Trust Agreement between State 
Street Bank and Trust (the Trustee) and Ford.
    Under the terms of the Settlement Agreement, Ford is required to 
make certain contributions to the DC VEBA. In this regard, Ford is 
obligated to make a contribution in cash in the amount of $30 million 
as soon as practicable following the Effective Date (i.e., July 13, 
2006) of the Settlement Agreement. It is represented that on August 10, 
2006, the initial cash contribution in the amount of $30 million was 
paid into the DC VEBA. Ford is obligated to make a second contribution 
in cash in the amount of $35 million on the third anniversary of the 
first contribution and to make a third contribution in cash in the 
amount of $43 million in 2011, on the anniversary of the first 
contribution. It is represented that Ford's obligation to make the 
second contribution and, if necessary, the third contribution, will be 
moved up to the extent necessary in order to enable the DC VEBA to 
continue paying mitigation at the initial mitigation level.
    In addition, monthly cash contributions relating to certain wage 
increases and COLA amounts for active hourly employees will be diverted 
into the DC VEBA. Further, a series of contributions in cash (the 
Contribution Obligation) based on the increase in the notional value of 
8,750,000 shares of common stock of Ford (the Notional Shares) will be 
made. Each of these cash contributions will be equal to the value of 
any appreciation in the share price of Ford common stock over a value 
based on a share price of $8.145. One third of the Notional Shares 
shall be taken into account on the Effective Date of the Settlement 
Agreement (i.e., July 13, 2006); one third on the first anniversary of 
the Effective Date; and the final third on the second anniversary of 
the Effective Date. The right to such cash contributions is non-
transferable, and the DC VEBA shall have no shareholder rights with 
respect to such cash contributions based on Notional Shares. It is 
represented that the calculation of such cash contribution will be 
based on the average price per share of Ford common stock for the five 
(5) consecutive trading days ending on the day preceding the applicable 
of the three (3) calculation dates. In the event of a special dividend 
issued by Ford prior to the third anniversary of the Effective Date, 
Ford will be obligated to make a contribution in cash equal to the per 
share dividend times the total number of Notional Shares minus the 
number of Notional Shares with respect to which Ford has already made a 
cash contribution based on such Notional Shares.
    Under section 13.C of the Settlement Agreement, no contributions 
are payable by Ford to the DC VEBA, unless and until Ford has received 
either assurances that such contributions are covered by an exemption 
issued by the Department, or do not violate section 406 and 407 of the 
Act. In this regard, with respect to the value of the Notional Shares, 
as of the Effective Date of the Settlement Agreement (i.e., July 13, 
2006), Ford's common stock had not increased above the base value as 
set forth in section 13.C of the Settlement Agreement, and, as a 
result, no contribution was due to the DC VEBA with respect to that 
measurement date. As of the first anniversary of the Effective Date, 
(i.e., July 13, 2007), Ford's common stock had increased over the base 
value; however, based on section 13.C of the Settlement Agreement, Ford 
declined to make a contribution at that time. In this regard, pursuant 
to section 13.C, Ford and the UAW have the option to agree upon a 
contribution to replace the Contribution Obligation, as set forth 
therein, if certain alternatives had not been satisfied by the first 
anniversary of the Effective Date of the Settlement Agreement. Because 
neither of the alternatives were satisfied by such date, Ford and the 
UAW agreed in the Memorandum of

[[Page 30638]]

Understanding on Post Retirement Medical Care, dated November 3, 2007, 
(the MOU) (as subsequently embodied in a settlement agreement, dated 
March 28, 2008, (the New Settlement Agreement), that Ford shall satisfy 
its Contribution Obligation, pursuant to section 13.C, by making an 
aggregate cash contribution of $33 million to the DC VEBA, within five 
(5) days of the ``Final Effective Date'' (as defined in the New 
Settlement Agreement) \7\ in full satisfaction of Ford's obligations 
thereunder.
---------------------------------------------------------------------------

    \7\ It is represented that ``Final Effective Date'' means the 
later of the date on which the U.S. District Court enters the 
approval order or the date on which Ford has completed, on a basis 
reasonably satisfactory to Ford, its discussions with the staff of 
the SEC regarding certain accounting treatment with respect to the 
New VEBA and Ford's post-employment retiree health obligation for 
the covered group.
---------------------------------------------------------------------------

    6. The Committee acts as the named fiduciary and administrator for 
the Defined Contribution Plan and is responsible for the 
administration, operation, management and interpretation of the Trust, 
as set forth in the Trust Agreement. In this regard, the Committee 
appoints (and may remove) the Trustee, the investment managers of the 
DC VEBA's assets, and other suitable professionals and agents to 
provide advice and services to the Committee or the Trust. The 
Committee's duties include directing the investment of the assets of 
the Trust, except and to the extent that the Committee has invested 
such authority in the Trustee or has appointed an investment manager. 
In addition the Trust may be amended in writing at any time and from 
time to time, in whole or in part, by the action of the Committee. It 
is represented that Ford has no right to amend the Trust at any time.
    The Committee is comprised of seven individuals, consisting of two 
classes, the ``UAW class,'' and the ``public class.'' The UAW Class has 
three (3) members which are appointed by the UAW and serve at the 
discretion of the UAW. The members of the UAW class may be removed or 
replaced at any time by written notice by the President of the UAW to 
the members of the Committee.
    The public class has four (4) members who serve terms of four (4) 
years, except that the initial members serve terms, as set forth in the 
Trust Agreement. In the event of a vacancy in the public class, whether 
by expiration of a term, resignation, removal, incapacity, death or 
otherwise, the public class will elect a new member of the public class 
by majority vote of the continuing public class members, excluding such 
member vacating his or her seat. A public class member can be removed 
by the affirmative vote of any five (5) other members of the Committee 
at any time.
    One of the members of the public class serves as the Chair of the 
Committee. William E. Spriggs serves in the capacity as Chairman of the 
Committee. The Committee Chair serves for a term of two (2) years. Any 
successor Committee Chair will be elected by a majority vote of the 
Committee.
    All of the members of the Committee are independent of Ford. The 
members of the Committee do not include any Ford representative, and 
Ford does not have any authority to select members of the Committee. No 
member of the Committee may be an affiliate of Ford, as the term, 
``Affiliate,'' is defined in section III(b), above of this exemption, 
including a current or former officer, director or salaried employee of 
Ford. No member of the public class may be an active employee or 
retiree of the UAW, nor may any member of the public class have any 
financial or institutional relationship with Ford, with the Committee 
or any Committee member that the Committee, in its sole discretion 
determines to be material.
    The Committee handles administrative tasks on behalf of the DC VEBA 
and the Defined Contribution Plan which is funded by the DC VEBA, as 
described in the Settlement Agreement, through Retiree Health 
Administration Company, LLC (RHAC). RHAC is a limited liability company 
set up to administer the Defined Contribution Plan on behalf of the 
Committee. RHAC is jointly owned by the UAW-GM VEBA and the DC VEBA. 
RHAC has joined and will continue to join with the Committee's outside 
auditors in auditing the calculation of the true-up in connection with 
the Defined Contribution Plan.
    RHAC also administers the provision of dental coverage to eligible 
retirees by the DC VEBA. For the plan year beginning in July 2006 and 
for January and February of 2007, Ford provided dental coverage for 
UAW-Ford retirees and surviving spouses and their dependents, and the 
DC VEBA reimbursed Ford for the claims and premiums attributable to 
this group. From and after March 1, 2007, dental benefits are provided 
by the DC VEBA to eligible groups separate and apart from Ford, without 
Mitigation or reimbursement arrangement of any kind. The DC VEBA has 
contracted directly with carriers for dental services and has paid the 
applicable claims and premiums directly. Claims processing is 
contracted out to Blue Cross Blue Shield of Michigan. Maintaining 
eligibility records is contracted to Ford's National Employee Service 
Center which also provides a call center to respond to participant 
needs. RHAC pays the bills, negotiates and monitors outside vendor 
contracts, audits claims and eligibility, coordinates the activities of 
outside professionals, and provides for certain other needs of the 
Committee with respect to the provision of dental benefits.
    The Committee has retained George Johnson & Company as its outside 
auditor responsible for the audit of the financial statements for the 
DC VEBA and the Defined Contribution Plan, including preparation of 
certain annual form filings. The Committee has also retained Plante & 
Morgan, L.L.P. (Plante) as its outside auditor responsible for 
assisting the staff of the Committee with the review of differences 
between estimated and actual Mitigation amounts. As such, Plante has 
audited the calculation of the true-up and has made and will continue 
to make, such information available to Ford.
    The Committee has retained Milliman, Inc. (Milliman), as its 
actuary. The Committee and Milliman have reviewed and approved the 
estimation process which results in the monthly Mitigation amounts paid 
to Ford and will continue to do so.
    7. As of December 31, 2006, the DC VEBA had cash of approximately 
$119 million. The DC VEBA uses its assets to mitigate the cost sharing 
requirements imposed on the retirees by the Settlement Agreement. 
Initial levels of Mitigation are set forth in the Settlement Agreement, 
and may be modified later by the Committee in accordance with the terms 
of the Settlement Agreement and the Trust Agreement.
    8. The initial Mitigation levels provide for Mitigation of monthly 
retiree contributions down to $10 per individual and $21 per family 
(from $50 per individual, and $105 per family). Deductibles will be 
mitigated down to an annual maximum of $150 per individual (from $300 
per individual) and $300 per family (from $600 per family). The out-of-
pocket maximum will be mitigated so that it is capped for in-network 
benefits at $250 per individual per year (from $500 per individual) and 
$500 per family per year (from $1,000 per family), and capped for out-
of-network benefits at $500 per individual (from $1,000 per individual) 
and $1,000 per family (from $2,000 per family). It is represented that 
the Mitigation provided by the Defined Contribution Plan through the DC 
VEBA provides a significant benefit to participants who would otherwise 
be

[[Page 30639]]

required to make these payments out of their own pockets.
    In addition, dental benefits were provided from July 2006 through 
February 2007, pursuant to a reimbursement arrangement with Ford. Since 
March 1, 2007, however, the DC VEBA has been the sole source of dental 
benefits for eligible groups.
    9. In order to reduce the administrative burden on the DC VEBA, and 
avoid having participants initially pay the costs and subsequently 
request reimbursement upon submission of documentation, the Settlement 
Agreement contemplates having Ford act as the conduit through which the 
DC VEBA will make Mitigation. Specifically, Ford will make certain 
payments that hourly retirees and their enrolled dependents would 
otherwise be required to make out of their own pockets. Ford will then 
accept Mitigation payments from the DC VEBA and apply such payments in 
accordance with the direction and instruction of the Committee for the 
benefit of the participants in the Defined Contribution Plan.
    This reimbursement process anticipates monthly advance payments to 
Ford from the DC VEBA of the actuarially anticipated cost of the 
initial Mitigation amounts, with a true-up no later than December 23 of 
the following calendar year.
    Specifically, the Mitigation process will work as follows: 
Annually, no later than May 1 of the preceding year, the Committee will 
inform Ford of the Mitigation levels for the following calendar year. 
Thereafter, no later than September 1 of the year preceding the 
forthcoming Mitigation year, Ford will provide the Committee with a 
preliminary estimate of the annual mitigation amount for the following 
calendar year. On December 1 of the preceding year, Ford will provide 
the Committee with the actuarially-determined, final estimated annual 
mitigation amount. Both the preliminary and final estimated mitigation 
amounts need to be agreed to by the Committee. Then, as of the 
beginning of the calendar year of Mitigation, the DC VEBA will pay to 
Ford on a monthly basis an amount equal to \1/12\ of the final 
estimated annual mitigation amount.
    No later than December 1 following the calendar year in which the 
monthly estimated mitigation payments have been made, Ford and the DC 
VEBA will engage in a true-up process. Ford will provide the Committee 
an actuarial report that determines the actual annual Mitigation amount 
and compares it to the estimated annual Mitigation payments that Ford 
received during the prior year. No later than December 23 of the year 
following the year being trued-up, a true-up payment either will be 
paid by the DC VEBA to Ford, or by Ford back to the DC VEBA. Interest 
for any late payments, or for any true-up payment (whether from Ford 
back to the DC VEBA or from the DC VEBA to Ford) will be paid at the 
interest rate \8\ for Other Post-Employment Benefits (the OPEB), as 
defined in section III(i) of this exemption. In addition, Ford is 
required to provide detailed quarterly reports to the Committee 
detailing retiree health claims experience, and the Committee shall 
have the right to request a reasonable audit of Ford's books and 
records with respect to Mitigation payments made to Ford by the DC 
VEBA. The amount of any true-up payment will need to be approved by the 
Committee. If there is a dispute as to the true-up report or the amount 
of the true-up payment, undisputed amounts will be paid and the parties 
will enter into an arbitration dispute process, as set forth in the 
Settlement Agreement, which involves independent decision-makers who 
will resolve any true-up dispute.
---------------------------------------------------------------------------

    \8\ The OPEB interest rate, as defined in section 13(D) of the 
Settlement Agreement, is the discount rate used by Ford's health 
care actuaries in accordance with the Financial Accounting Standard 
106 (FAS 106) actuarial valuation for the applicable period. Ford 
has also represented that the OPEB interest rate is the discount 
rate that a company uses to value ``Other Post-Retirement Employee 
Benefits'' for FAS 106 accounting reporting. The discount rate is 
based on market yields, as of a plan's annual measurement date, on 
high quality fixed income securities of duration similar to the 
benefit obligation. For purposes of Ford's retiree health 
obligation, its OPEB interest rate is developed each year in 
consultation with its outside accountants. Ford used an OPEB 
interest rate of 5.75% in 2005, of 5.75% in 2004, and of 6.25% in 
2003 relating to retiree health.
---------------------------------------------------------------------------

    10. It is represented that the DC VEBA has made estimated 
Mitigation payments for health care to Ford for every month beginning 
with August 2006 and continuing to the present. The DC VEBA has 
separately reimbursed Ford for dental claims and premiums that Ford 
paid on behalf of the participants in the DC VEBA for the period from 
July 14, 2006, through February 28, 2007. As stated previously in this 
proposed exemption, beginning March 1, 2007, the DC VEBA has contracted 
directly for dental services for its participants. It is represented 
that the amount of the dental reimbursement payments for 2006 and 2007 
do not include the monthly administrative fee paid to Ford for 
maintaining eligibility records and providing a call center to respond 
to participant needs.\9\ For the period July 2006, through December 
2006, the DC VEBA made total Mitigation reimbursement payments to Ford 
for health care and dental benefits of approximately $30,755,460 and 
$16,141,185, respectively. For the period January 2007, through 
December 2007, the DC VEBA made total Mitigation reimbursement payments 
to Ford for health care and dental benefits of approximately 
$83,900,004 and $14,891,491, respectively. For the period January 2008, 
through March 2008, the DC VEBA made total Mitigation reimbursement 
payments to Ford solely for health care benefits of approximately 
$22,375,000. For the period April 2008, through April 2009, the DC VEBA 
made total Mitigation reimbursement payments to Ford solely for health 
care benefits of approximately $30,873,428.
---------------------------------------------------------------------------

    \9\ Ford relies on the relief provided by the statutory 
exemption, pursuant to section 408(b)(2) of the Act, in connection 
with Ford's providing the DC VEBA with monthly administrative 
services, maintaining eligibility records, and providing a call 
center to respond to participant needs. The Department, herein, is 
offering no view, as to whether the provision of such services 
rendered by Ford to the DC VEBA is covered by the statutory 
exemption provided in section 408(b)(2) of the Act and the 
Department's regulations, thereunder, pursuant to 29 CFR 
2550.408(b)-2. Further the Department is not providing, herein, any 
relief with respect to the provision of such services to the DC VEBA 
by Ford.
---------------------------------------------------------------------------

    On February 7, 2008, Ford paid to the DC VEBA a 2006 true-up 
payment in the amount of $866,387. In addition, Ford paid to the DC 
VEBA interest in the amount of $74,929.91 in two (2) payments dated 
February 7, 2008, and April 17, 2008, of approximately $72,777 and 
$2,153, respectively. The total true-up payment for the year 2006, 
including interest, was $941,316.91. The total true-up payment for the 
year 2007, including interest of $46,368, was $492,305. The true-up 
amount for 2008 will not be determined until the fall of 2009.
    11. Ford requests a retroactive administrative exemption from the 
Department with respect to the following transactions: (a) monthly cash 
advances to Ford by the DC VEBA to reimburse Ford for the estimated 
Mitigation of certain health care expenses and for the payment of 
certain dental expenses incurred by participants in the DC VEBA; and 
(b) an annual true-up of such Mitigation payments and such dental 
expenses. Further, in this regard, if Ford is underpaid by the DC VEBA, 
it would receive the balance outstanding from the DC VEBA, with 
interest. Conversely, if the DC VEBA overpaid Ford, Ford would 
reimburse the DC VEBA for the amount overpaid, with interest. 
Accordingly, Ford requests retroactive

[[Page 30640]]

relief from sections 406(a)(1)(B), and 406(a)(1)(D), respectively, 
because these transactions could be deemed to constitute the lending of 
money or extension of credit between the DC VEBA and Ford, a party in 
interest, or could be viewed as the use by or for the benefit of a 
party in interest of plan assets.
    With respect to violations of section 406(b) of the Act, in the 
opinion of Ford, the involvement in such transactions by the Committee, 
a fiduciary of the Defined Contribution Plan and the DC VEBA that is 
independent of Ford, eliminates any issues under section 406(b) of the 
Act. However, to eliminate any uncertainty respecting the issue, Ford 
seeks retroactive relief under section 406(b)(1) and (b)(2) of the Act. 
If granted, the exemption would be effective as of July 13, 2006.
    As discussed in paragraph 5, above of the Summary of Facts and 
Representations of this proposed exemption, the Settlement Agreement 
grants to the DC VEBA a right to receive, and obligates Ford to make 
contributions that are based on the increase in the notional value of 
8,750,000 shares of Ford common stock. Such contributions will be non-
transferable cash contributions determined on each of (i) the Effective 
Date of the Settlement Agreement (i.e., July 13, 2006), (ii) the first 
anniversary of the Effective Date, and (iii) the second anniversary of 
the Effective Date. The Department is not providing exemptive relief 
herein with respect to the Contribution Obligation because, in the view 
of the Department, the Contribution Obligation is merely a contractual 
provision evidenced in the DC VEBA Settlement Agreement which is 
designed to determine the amount of additional cash contributions that 
must be made to the DC VEBA.\10\
---------------------------------------------------------------------------

    \10\ The Department further believes that the Contribution 
Obligation is not an ``employer security: Within the meaning of 
section 407(d)(1) of the Act. Since it appears that the Contribution 
Obligation does not result in the acquisition or holding by the DC 
VEBA of an ``employer security,'' the Department has not proposed 
separate exemptive relief herein with respect to such obligation.
---------------------------------------------------------------------------

    12. It is represented that the Mitigation payments significantly 
benefit the interests of Ford hourly retirees and their covered 
dependents. Having the Mitigation paid directly from the DC VEBA would 
otherwise involve significant delays and out of pocket expenditures by 
plan participants.
    13. Without an administrative exemption, Ford states that the DC 
VEBA would be required to establish a costly administrative scheme to 
reimburse participants in the DC VEBA. In this regard, Ford retirees' 
would be charged the full costs of the monthly contributions, co-pays, 
and deductibles. These retirees would then have to apply for 
reimbursement payments, via a claim form, from the DC VEBA or its 
retained third party administrator. This alternative would have the 
dual effect of significantly delaying payments to the retirees and 
placing large and expensive administrative burdens on the DC VEBA, and 
hardship on the retirees themselves.
    14. It is represented that the proposed exemption is 
administratively feasible with terms clearly established in the 
Settlement Agreement and the Trust document. Further, implementation of 
the covered transactions provides the resolution to the Hardwick I 
Case, enabling Ford to fund the DC VEBA and provide Mitigation amounts 
to the retirees.
    15. The proposed exemption contains sufficient safeguards in that 
Ford and the UAW negotiated at arm's length over the terms of the 
covered transaction and such terms were memorialized in a court-
approved Settlement Agreement involving both the UAW and Class Counsel. 
In addition, the UAW, which represents the interests of the Ford hourly 
retirees and their dependents, fully supports the requested exemption. 
Further the terms of the Settlement Agreement, including the Mitigation 
payment process and the DC VEBA contribution rules, were subject to a 
fairness hearing and a judicial determination that it is fair and 
reasonable to Ford hourly retirees.
    It is represented that the calculation of the Mitigation payments 
is subject to the strict scrutiny of actuaries retained by the DC VEBA 
and requires the ultimate approval of the Committee. The process by 
which the Mitigation payments are established ensures that the monthly 
Mitigation payments will reflect an actuarially sound estimate of the 
projected mitigation costs.
    The Committee, acting as independent fiduciary of the Defined 
Contribution Plan and the DC VEBA, ensures that the cash contributions 
based on the value of Notional Shares are correctly calculated and 
timely contributed to the DC VEBA.
    Finally, the interest rate used to calculate the true-up payments 
is a reasonable rate, as set forth in the DC VEBA Settlement Agreement 
and does not present a windfall or detriment to either Ford or the DC 
VEBA.
    16. Ford and the Committee will each maintain records of covered 
transactions for a period of six (6) years. The Committee maintains 
records of payments made or received by the DC VEBA, quarterly reports, 
and dental claims records, but no other health benefit claims records. 
Ford has provided the reports required under the Settlement Agreement 
with respect to the estimated Mitigation and the true-up. Ford will 
continue to provide all reports and records concerning the Mitigation 
required under the Settlement Agreement, and such reports have been and 
will continue to be subject to review and audit by the Committee, as 
provided in the Settlement Agreement.
    17. It is represented that ultimately, the DC VEBA will be 
terminated and its assets transferred to a new VEBA (the New VEBA). 
However, several steps will occur before this happens. These steps were 
first described in the MOU, dated November 3, 2007, and agreed to by 
Ford and the UAW. The terms of the MOU were subsequently embodied in 
the New Settlement Agreement between Ford and the UAW, and the Class 
representatives, on behalf of the applicable class in: (a) The class 
action of Int'l Union, UAW, et. al. v. Ford Motor Company, Civil Action 
No. 07-14845 (E.D. Mich. filed Nov. 9, 2007) and/or (b) the class 
action of the Hardwick I Case. The New Settlement Agreement resolves 
and settles any and all claims for Ford contributions to the DC VEBA, 
and provides for the termination of the DC VEBA and the transfer of all 
assets and liabilities of the DC VEBA to the New VEBA. In the event of 
an inconsistency between the New Settlement Agreement and any prior 
agreements or documents, including the MOU, the New Settlement 
Agreement will control.
    In the negotiations leading to the MOU and the New Settlement 
Agreement, Ford advised the UAW of its intent to terminate the Hardwick 
I Case Settlement Agreement in accordance with its terms in 2011 and 
exercise its right to terminate and/or modify retiree health coverage 
for all UAW retirees and their dependents, and the UAW reasserted its 
position that post-retirement medical coverage for current UAW retirees 
is vested and unalterable.
    The New Settlement Agreement provides that as of the day following 
the ``Implementation Date'' (as defined in the New Settlement 
Agreement), the ``New Plan'' (as defined in the New Settlement 
Agreement) and the New VEBA shall be the employee welfare benefit plan 
and trust that are exclusively responsible for all retiree medical 
benefits for which Ford, the Ford Retiree Health Plan (as defined in 
the New Settlement Agreement), and any other Ford entity or benefit 
plan

[[Page 30641]]

formerly would have been responsible with regard to the class and 
covered group.
    With regard to the DC VEBA, section 12.C of the New Settlement 
Agreement states that the ``Approval Order'' (as defined in the New 
Settlement Agreement) shall direct the Committee and the Trustee of the 
DC VEBA to transfer all assets and liabilities of the DC VEBA to the 
New VEBA and terminate the DC VEBA within fifteen (15) days after the 
Implementation Date. This transfer of assets and liabilities shall 
include, but not be limited to, the transfer of all rights and 
obligations granted to or imposed on the DC VEBA under section 14.C of 
the Settlement Agreement. Further, Ford agrees that, on the day 
following the Implementation Date, the New VEBA shall be substituted 
for the DC VEBA for such purposes. The Approval Order shall further 
provide that the DC VEBA shall be terminated after this payment is 
made.
    In addition, the New Settlement Agreement makes certain provisions 
with respect to the wage and COLA deferrals and other contributions 
payable to the DC VEBA, and further provides that Ford shall satisfy 
the Contribution Obligation, set forth in section 13.C of the 
Settlement Agreement by making an aggregate cash contribution of $33 
million to the DC VEBA within five (5) days of the Final Effective Date 
in full satisfaction of its obligations thereunder.
    18. In summary, Ford represents that the transactions have 
satisfied and will continue to satisfy the statutory criteria for an 
exemption under section 408(a) of the Act because:
    (a) The Committee, acting as a fiduciary independent of Ford, has 
represented and will continue to represent the DC VEBA and its 
participants and beneficiaries for all purposes with respect to the 
Mitigation process under the Settlement Agreement.
    (b) The Committee for the DC VEBA has discharged and will continue 
to discharge its duties consistent with the terms of the 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 Ford.
    (d) Outside auditors retained by the Committee, along with an 
administrative company that is partly owned by the DC VEBA, have 
audited and will audit the calculation of the true-up to determine 
whether there are any differences between the estimated Mitigation and 
actual Mitigation amounts and have made and will make such information 
available to Ford.
    (e) Ford has provided various report and records to the Committee 
concerning dental care reimbursements for the period from July 14, 2006 
through February 28, 2007, which were subject to review and audit by 
the Committee, and Ford has provided and will continue to provide 
various reports and records to the Committee concerning the Mitigation 
required under the Settlement Agreement which were and will continue to 
be subject to review and audit by the Committee.
    (f) The terms of the covered 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 not and will 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) Ford and the Committee have maintained and will continue to 
maintain for a period of six (6) years from the date of any of the 
covered transactions, any and all records necessary to determine 
whether conditions of this exemption have been and will continue to be 
met.

Notice to Interested Persons

    Ford will provide notice of the proposed exemption to: (1) The UAW; 
and (2) persons who on or after December 22, 2005, and prior to the 
date of the filing of the application for exemption (i.e., November 27, 
2007) were: (a) Ford/UAW hourly employees who had retired from Ford 
with eligibility to participate during retirement in the Ford health 
plan, or (b) spouses or surviving spouses of Ford/UAW hourly employees, 
who on or after December 22, 2005, were eligible for post-retirement or 
surviving spouse health care coverage from Ford (collectively, 
Interested Persons) within twenty (20) calendar days of the publication 
of the notice of proposed exemption in the Federal Register. Such 
notice will be provided to Interested Persons by first-class mail, at 
the last known mailing address of such Interested Persons and will 
include a photocopy of the notice of proposed exemption as published in 
the Federal Register as well as a supplemental statement, as required 
pursuant to 29 CFR 2570.43(b)(2). The supplemental statement will 
inform interested persons of their right to comment on and/or to 
request a hearing. Comments and requests for a hearing with respect to 
the proposed exemption are due within fifty (50) calendar days of the 
publication of this pendency notice in the Federal Register. If you 
decide to submit written comments to the Department, your comments 
should be limited to the transactions described in this proposed 
exemption. However, if you have concerns about your retiree health 
benefits or any other administrative issues relating to your benefits, 
you should contact NESC, by phone at 1-800-248-4444, by mail P.O. Box 
6214, Dearborn, MI 48121, or by e-mail at nesc@ford.com.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the 
Department, at e-mail address ford@dol.gov, or at telephone number 202-
693-8547 (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the interest of 
the participants and beneficiaries of the plan and in a prudent fashion 
in accordance with section 404(a)(1)(b) of the Act; nor does it affect 
the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;

[[Page 30642]]

    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 22nd day of June, 2009.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E9-15159 Filed 6-25-09; 8:45 am]

BILLING CODE 4510-29-P