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Secretary of Labor Hilda L. Solis
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EBSA Notices

Prohibited Transaction Exemptions and Grant of Individual Exemptions Involving: 2009-33, Cotter Merchandise Storage Company Defined Benefit Pension Plan (the Plan), D-11423; and 2009-34, Unaka Company Incorporated Employees Profit Sharing Plan (the Plan), D-11445   [12/21/2009]
[PDF]
FR Doc E9-30263
[Federal Register: December 21, 2009 (Volume 74, Number 243)]
[Notices]               
[Page 67925-67926]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21de09-88]                         

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Prohibited Transaction Exemptions and Grant of Individual 
Exemptions Involving: 2009-33, Cotter Merchandise Storage Company 
Defined Benefit Pension Plan (the Plan), D-11423; and 2009-34, Unaka 
Company Incorporated Employees Profit Sharing Plan (the Plan), D-11445

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(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.

Exemption

    The restrictions of sections 406(a), 406(b) 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 (1) the proposed sale by the Plan to the Cotter 
Merchandise Storage Company (Cotter or the Applicant), the Plan sponsor 
and a party in interest with respect to the Plan, of certain promissory 
notes (the Notes) which are currently held by the Plan; and (2) the 
assignment, by the Plan to Cotter, of a civil judgment (the Judgment) 
against the Plan's former trustee, Robert Geib (Mr. Geib).
    This exemption is subject to the following conditions:
    (a) The terms and conditions of the proposed sale transaction 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) As consideration for the Notes, the Plan receives either (1) 
the greater of $372,197 or (2) the fair market of the Notes (based upon 
the value of the Plan's proportionate share of Mr. Geib's ownership 
interest in Cotter common stock), as determined by a qualified, 
independent appraiser on the date of the sale transaction;
    (c) The proposed sale is a one-time transaction for cash;
    (d) The Plan pays no fees, commissions, costs or other expenses in 
connection with the proposed sale;
    (e) Cotter pays the Plan all future recoveries resulting from the 
Judgment; and
    (f) An independent fiduciary (1) determines that the sale is an 
appropriate transaction for the Plan and is in the best interests of 
the Plan and its participants and beneficiaries; (2) monitors the sale 
on behalf of the Plan; and (3) ensures that the Plan receives all 
future recoveries resulting from the Judgment.

Written Comments

    In the notice of proposed exemption (the Notice), the Department 
invited all interested persons to submit written comments and requests 
for a hearing within 35 days from the date of publication of the Notice 
in the Federal Register. All comments and requests for a hearing were 
due by October 30, 2009.
    During the comment period, the Department received no requests for 
a hearing. The Department did, however, receive a comment letter from 
the Applicant, dated October 6, 2009, concerning Conditions (e) and 
(f)(3) of the Notice. Condition (e) requires that Cotter pay the Plan 
all future recoveries resulting from the Judgment. Condition (f)(3) 
requires the independent fiduciary to ensure that the Plan receives all 
future recoveries from the Judgment. The Applicant explains that once 
it obtains the Notes from the Plan, it will seize the underlying common 
stock collateralizing the Notes that is currently owned by Mr. Geib. 
The Applicant represents that the seized Cotter stock will be retired 
as Treasury stock. As a result, the retirement of the seized Cotter 
stock will not give rise to any cash recoveries.

[[Page 67926]]

    The Applicant believes that the aforementioned conditions of the 
Notice should be amended to clarify that it will apply only to future 
cash recoveries that may arise from the Judgment. Therefore, the 
Applicant has revised Conditions (e) and (f)(3) of the final exemption 
to read as follows:

    (e) Cotter pays the Plan future cash recoveries, if any, 
resulting from the Judgment; and * * *
    (f)(3) [The independent fiduciary] ensures that the Plan 
receives all future cash recoveries, if any, resulting from the 
Judgment.

    The Department does not concur with the Applicant's comment. 
Therefore, it has not revised Conditions (e) and (f)(3) of the 
operative language. Although the Department is aware of Mr. Geib's 
financial circumstances, it wishes to emphasize that to the extent 
Cotter recovers any consideration (either in cash or in kind) resulting 
from the Judgment, that such consideration should be paid to the Plan.
    After giving full consideration to the entire record, the 
Department has decided to grant the exemption. The complete application 
file is made available for public inspection in the Public Disclosure 
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 September 25, 2009 at 74 
FR 49025.

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

 Exemption

    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,\1\ by reason of section 4975(c)(1)(A) through (E) of the 
Code, shall not apply to the proposed sale by the Plan (the Sale) to 
Unaka Company Incorporated (Unaka), a party in interest with respect to 
the Plan, of two promissory notes (the Notes) that are secured by deeds 
of trust on certain parcels of real property.
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    \1\ Unless otherwise noted herein, reference to specific 
provisions of the Act refer also to the corresponding provisions of 
the Code.
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    This exemption is subject to the following conditions:
    (a) The Sale is a one-time transaction for cash;
    (b) As consideration, the Plan receives the greater of the current 
outstanding balance of the Notes, plus all accrued but unpaid interest 
to the date of the Sale (Sale Date), or the fair market value of the 
Notes as determined by qualified, independent appraisers in updated 
appraisals on the Sale Date.
    (c) The Plan pays no commissions, costs, fees, or other expenses 
with respect to the Sale; and
    (d) As soon as it is feasible following the Sale, the Plan releases 
the deeds of trust securing the Notes.
    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 25, 2009 at 74 
FR 49029.

FOR FURTHER INFORMATION CONTACT: Mr. Anh-Viet Ly of the Department at 
(202) 693-8648. (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 15th day of December 2009.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E9-30263 Filed 12-18-09; 8:45 am]

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