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EBSA Notices

Prohibited Transaction Exemptions and Grant of Individual Exemptions Involving   [4/30/2010]
[PDF]
FR Doc 2010-10064
[Federal Register: April 30, 2010 (Volume 75, Number 83)]
[Notices]               
[Page 22847-22852]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ap10-127]                         

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Prohibited Transaction Exemptions and Grant of Individual 
Exemptions Involving: 2010-13, Putnam Fiduciary Trust Company, D-11425; 
2010-14, UBS Financial Services Inc. and its Affiliates (UBS), D-11502; 
and 2010-15, Subaru of America, Inc. (Subaru), D-11531

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.

Putnam Fiduciary Trust Company (PFTC), Located in Boston, 
Massachusetts.
[Prohibited Transaction Exemption 2010-13; Exemption Application No. D-
11425.]

Exemption

Section I--Exemption

    Effective as of January 19, 2010, the restrictions of section 
406(a) and (b) of the Act, and the taxes imposed by section 4975(a) and 
(b) of the Code, by reason of section 4975(c)(1)(A) through (F) of the 
Code, shall not apply to either (a) the purchase or sale by a 
Collective Fund (as defined in Section III(b) below) of shares of a 
Mutual Fund (as defined in Section III(d) below) where Putnam Fiduciary 
Trust Company (``PFTC'' or the ``Applicant'') or its affiliate (PFTC 
and its affiliates are referred to herein as ``Putnam'') is the 
investment advisor of the Mutual Fund as well as a fiduciary with 
respect to the Collective Fund (or an affiliate of such fiduciary) or 
(b) the receipt of fees by Putnam from a Mutual Fund for acting as an 
investment advisor for the Mutual Fund and/or for providing other 
services to the Mutual Fund which are Secondary Services (as defined in 
Section III(g) below) in connection with the investment by the 
Collective Fund in shares of the Mutual Fund, provided that the 
following conditions and the general conditions of Section II are met:
    (a) Each Collective Fund satisfies either (but not both) of the 
following:
    (1) The Collective Fund receives a cash credit equal to such 
Collective Fund's proportionate share of all fees charged to the Mutual 
Fund by Putnam for investment advisory services. Such credit shall be 
paid to the Collective Fund no later than the same day on which such 
investment advisory fees are paid to Putnam. The crediting of all such 
fees to the Collective Funds by Putnam is audited by an independent 
accounting firm on at least an annual basis to verify the proper 
crediting of the fees to each Collective Fund. The audit report shall 
be completed not later than six months after the period to which it 
relates; or
    (2) No management fees, investment advisory fees, or similar fees 
are paid to Putnam with respect to any of the assets of such Collective 
Fund that are invested in shares of the Mutual Fund. This condition 
does not preclude the payment of investment advisory or similar fees by 
the Mutual Fund to Putnam under the terms of an investment management 
agreement adopted in accordance with section 15 of the Investment 
Company Act of 1940 (the 1940 Act), nor does it preclude the payment of 
fees for Secondary Services to Putnam pursuant to a duly adopted 
agreement between Putnam and the Mutual Fund if the conditions of this 
exemption are otherwise met.

[[Page 22848]]

    (b) The price paid or received by a Collective Fund for shares in 
the Mutual Fund is the net asset value (NAV) per share (as defined in 
Section III(h)) and is the same price that would have been paid or 
received for the shares by any other investor in the Mutual Fund at 
that time, and all other dealings between the Collective Funds and the 
Mutual Fund will be on a basis no less favorable to the Collective Fund 
than such dealings will be with the other shareholders of the same 
class of shares of the Mutual Fund.\1\
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    \1\ The selection of a particular class of shares of a Mutual 
Fund as an investment for a Collective Fund is a fiduciary decision 
that must be made in accordance with the provisions of section 
404(a) of the Act. In this exemption, the Department is not 
addressing any issues under section 404 or 406 of the Act resulting 
from the selection of one class of shares of a Mutual Fund over 
another class of shares (e.g., where there may be higher fees or 
prices associated with one or more of the classes of shares). 
Consistent with the above duties, the Applicant has represented that 
the Collective Fund will invest in the lowest priced class of shares 
in the Mutual Fund.
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    (c) Putnam, including any officer or director of Putnam, does not 
purchase or sell shares of the Mutual Fund from or to any Collective 
Fund; provided that this condition shall not preclude the purchase or 
redemption of such shares between a Collective Fund and an affiliate of 
PFTC acting solely in its capacity as underwriter for the Mutual Fund, 
if such affiliate acts as a riskless principal, the purchase or 
redemption is at NAV at the time of the transaction, and the affiliate 
does not receive any direct or indirect compensation, spread or other 
consideration in connection with such purchase or redemption.
    (d) No sales commissions, redemption fees, or other similar fees 
are paid by the Collective Funds in connection with the purchase or 
sale of shares of the Mutual Fund.
    (e) For each Collective Fund, the combined total of all fees 
received by Putnam for the provision of services to the Collective 
Fund, and in connection with the provision of services to the Mutual 
Fund in which the Collective Fund may invest, are not in excess of 
``reasonable compensation'' within the meaning of section 408(b)(2) of 
the Act.
    (f) Putnam does not receive any fees payable pursuant to Rule 12b-1 
under the 1940 Act in connection with the transactions covered by this 
exemption.
    (g) The Second Fiduciary (as defined in Section III (f) below) with 
respect to each plan having an interest in a Collective Fund (a 
``Client Plan'') receives in writing, in advance of any investment by 
the Collective Fund in the Mutual Fund, full and detailed disclosure of 
information concerning the Mutual Fund, including but not limited to: 
(1) A current prospectus issued by the Mutual Fund; (2) a statement 
describing the fees for investment advisory or similar services, any 
Secondary Services and all other fees to be charged to or paid by (or 
with respect to) the Collective Fund and by the Mutual Fund, including 
the nature and extent of any differential between the rates of such 
fees; (3) the reasons why PFTC may consider such investment to be 
appropriate for the Collective Fund; (4) a statement describing whether 
there are any limitations applicable to PFTC with respect to which 
Collective Fund assets may be invested in shares of the Mutual Fund 
and, if so, the nature of such limitations; and (5) upon request of the 
Second Fiduciary, a copy of both the notice of proposed exemption and a 
copy of the final exemption, and any other reasonably available 
information regarding the transactions covered by this exemption.
    (h) On the basis of the information described in paragraph (g) 
above, the Second Fiduciary authorizes in writing the investment of 
assets of the Collective Fund in the Mutual Fund and the fees to be 
paid by the Mutual Fund to Putnam.
    (i) Except as otherwise indicated in this paragraph (i), on an 
annual basis, Putnam will provide to the Second Fiduciary of each 
Client Plan having an interest in the Collective Fund: (1) a current 
prospectus issued by the Mutual Fund in which the Collective Fund 
invests, and, upon the Second Fiduciary's request, a copy of the 
Statement of Additional Information for such Mutual Fund that contains 
a description of all fees paid by the Mutual Fund to Putnam; (2) a copy 
of the annual financial disclosure report prepared by Putnam that 
includes information about the Mutual Fund portfolios, as well as audit 
findings of an independent auditor, within 60 days of the preparation 
of the report; (3) oral or written responses to inquiries of the Second 
Fiduciary as they arise; (4) a statement (i) of the approximate 
percentage (which may be in the form of a range) of the assets of the 
Collective Fund that were invested in the Mutual Fund during the year 
and (ii) that, if the Second Fiduciary objects to the continued 
investment by the Collective Fund in the Mutual Fund, the Client Plan 
may withdraw from the Collective Fund; and (5) a form (Termination 
Form) expressly providing an election to withdraw from the Collective 
Fund, together with instructions on the use of such form. The 
instructions will inform the Second Fiduciary that: (i) The prior 
written authorization is terminable at will by the Plan, without 
penalty to the Plan, upon receipt by Putnam of written notice from the 
Second Fiduciary, and (ii) failure to return the form will result in 
continued authorization for Putnam to engage in the transactions 
described above on behalf of the Plan.
    However, if the Termination Form has been provided to the Second 
Fiduciary pursuant to Section I(j), the Termination Form need not be 
provided again for an annual reauthorization pursuant to this Section 
I(i) unless at least six months has elapsed since the form was 
previously provided.
    (j) Except as provided in Section I(j)(E), paragraph (h) of this 
Section I does not apply if:
    (A) The purchase, holding and sale of Mutual Fund shares by the 
Collective Fund is performed subject to the prior and continuing 
authorization, in the manner described in this paragraph (j), of a 
Second Fiduciary with respect to each Client Plan whose assets are 
invested in the Collective Fund.
    (B) (1) For each Collective Fund using the fee structure described 
in paragraph (a)(2) above with respect to investments in the Mutual 
Fund, in the event of an increase in the rate of fees paid by the 
Mutual Fund to Putnam regarding any investment management services, 
investment advisory services, or similar services that Putnam provides 
to the Mutual Fund over an existing rate for such services that had 
been authorized by a Second Fiduciary in accordance with paragraph (h) 
above or this paragraph (j); or
    (2) For each Collective Fund under this exemption (regardless of 
whether the fee structure described in paragraph (a)(1) or (a)(2) is 
used), in the event an additional Secondary Service is provided by 
Putnam to the Mutual Fund for which a fee is charged, or an increase in 
the rate of any fee paid by the Mutual Fund to Putnam for any Secondary 
Service that results either from an increase in the rate of such fee or 
from a decrease in the number or kind of services performed by Putnam 
for such fee over an existing rate for such Secondary Service that had 
been authorized by a Second Fiduciary in accordance with paragraph (h) 
above or this paragraph (j):
    Putnam will, at least 30 days in advance of the implementation of 
any direct or indirect increase in fees described in this paragraph 
(j), provide a written notice (which may take the form of a letter or 
similar communication that is separate from the prospectus of the Fund 
and that explains the nature and amount of the additional service for 
which a fee is

[[Page 22849]]

charged or of the increase in the rate of fee) to the Second Fiduciary 
of each Client Plan having an interest in the Collective Fund. Such 
written notice will include a Termination Form expressly providing an 
election to withdraw from the Collective Fund, together with 
instructions on the use of such form.
    (C) In the event a Second Fiduciary submits a notice in writing to 
PFTC objecting to the initial investment by the Collective Fund in the 
Mutual Fund or the implementation of such additional service for which 
a fee is charged or such rate of fee increase, whichever is applicable, 
the Client Plan on whose behalf the objection was intended is given the 
opportunity to terminate its investment in the Collective Fund, without 
penalty to such Client Plan, within such time as may be necessary to 
effect the withdrawal in an orderly manner that is equitable to all 
withdrawing Client Plans and to the non-withdrawing Client Plans. In 
the case of a Client Plan that elects to withdraw under this 
subparagraph (C), the withdrawal shall be effected prior to the initial 
investment by the Collective Fund in the Mutual Fund or the 
implementation of such additional service for which a fee is charged or 
such rate of fee increase, whichever is applicable.
    (D) Notwithstanding the foregoing subparagraphs (B) and (C), Putnam 
may commence providing an additional Secondary Service for a fee or 
implement any increase in the rate of fee paid by the Mutual Fund to 
Putnam prior to providing the notice referred to in subparagraph (B) 
above or prior to the withdrawal of an objecting Client Plan, whichever 
is applicable, provided that, in either such event, the Collective Fund 
receives a cash credit equal to the Collective Fund's proportionate 
share of the fee for the additional Secondary Service or such fee 
increase charged to the Mutual Fund by Putnam, whichever is applicable, 
for the period from the date of such commencement or implementation to 
the later of the date that is 30 days after the notice referred to in 
subparagraph (B) above has been provided or, if applicable, the date on 
which any Client Plan that objects to the provision of such additional 
Secondary Service or to such fee increase has withdrawn from the 
Collective Fund pursuant to subparagraph (C) above. Any such cash 
credits shall be paid to the Collective Fund, with interest thereon at 
the prevailing Federal funds rate plus two percent (2%), no later than 
the fifth business day following the receipt of the increased fee by 
Putnam.\2\ The crediting of all such fees to the Collective Fund by 
Putnam will be audited by an independent accounting firm on at least an 
annual basis to verify the proper crediting of the fees and interest to 
the Collective Fund. The audit report shall be completed not later than 
six months after the period to which it relates.
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    \2\ Putnam will pay interest on any such amounts from the date 
it receives such incremental amounts to the date it makes the rebate 
payment to the Collective Fund.
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    (E) In the case of a Client Plan whose assets are proposed to be 
invested in the Collective Fund subsequent to the implementation of the 
arrangement and that has not authorized the investment of assets of the 
Collective Fund in the Mutual Fund, the Client Plan's investment in the 
Collective Fund is subject to: (1) The receipt by a Second Fiduciary of 
the full and detailed disclosures concerning the Mutual Fund pursuant 
to Section I(g), above, and (2) the prior written authorization of a 
Second Fiduciary pursuant to Section I(h), above (i.e., the 
authorization must be provided by such new Client Plan investor in 
advance of the initial investment).
    (k) For each Collective Fund using the fee structure described in 
paragraph (a)(1) above with respect to investments in the Mutual Fund, 
the Second Fiduciary of the Client Plan receives full written 
disclosure in a Fund prospectus or otherwise of any increases in the 
rates of fees charged by Putnam to the Mutual Fund for investment 
advisory services, or of a decrease in the number or kind of services 
performed by Putnam.

Section II--General Conditions

    (a) PFTC maintains for a period of six years the records necessary 
to enable the persons described in paragraph (b) below to determine 
whether the conditions of this exemption have been met, except that:
    (1) A separate prohibited transaction will not be considered to 
have occurred if, solely because of circumstances beyond the control of 
PFTC, the records are lost or destroyed prior to the end of the six-
year period; and
    (2) No party in interest other than Putnam shall be subject to the 
civil penalty that may be assessed under Section 502(i) of the Act or 
to the taxes imposed by Section 4975(a) and (b) of the Code, if the 
records are not maintained or are not available for examination as 
required by paragraph (b) below.
    (b)(1) Except as provided in paragraph (b)(2) below and 
notwithstanding any provisions of Section 504(a)(2) of the Act, the 
records referred to in paragraph (a) above are unconditionally 
available at their customary location for examination during normal 
business hours by:
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the Securities & Exchange 
Commission,
    (ii) Any fiduciary of a Client Plan who has authority to acquire or 
dispose of the interest in the Collective Fund owned by such Client 
Plan, or any duly authorized employee or representative of such 
fiduciary, and
    (iii) Any participant or beneficiary of a Client Plan having an 
interest in the Collective Fund or duly authorized employee or 
representative of such participant or beneficiary.
    (2) None of the persons described in paragraph (b)(1)(ii) or (iii) 
above shall be authorized to examine trade secrets of Putnam, or 
commercial or financial information that is privileged or confidential.

Section III--Definitions

    (a) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (b) The term ``Collective Fund'' means any common or collective 
trust fund maintained by PFTC.
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (d) The term ``Mutual Fund'' means the Putnam Money Market 
Liquidity Fund and any other money market fund that is a diversified 
open-end investment company registered under the 1940 Act and operated 
in accordance with Rule 2a-7 under the 1940 Act as to which Putnam 
serves as an investment adviser. Putnam may also serve as a custodian, 
dividend disbursing agent, shareholder servicing agent, transfer agent, 
fund accountant, or provider of some other ``Secondary Service'' (as 
defined below in paragraph (g) below).
    (e) The term ``relative'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or a ``member of the family'') as 
that term is defined in section 4975(e)(6) of the Code), or a

[[Page 22850]]

brother, a sister, or a spouse of a brother or a sister.
    (f) The term ``Second Fiduciary'' means a fiduciary of a Client 
Plan who is independent of, and unrelated to, Putnam. For purposes of 
this exemption, the Second Fiduciary will not be deemed to be 
independent of and unrelated to Putnam if:
    (1) Such fiduciary directly or indirectly controls, is controlled 
by, or is under common control with Putnam;
    (2) Such fiduciary, or any officer, director, partner, employee, or 
relative of the fiduciary is an officer, director, partner or employee 
of Putnam (or is a relative of such persons); or
    (3) Such fiduciary directly or indirectly receives any compensation 
or other consideration for his or her own personal account in 
connection with any transaction described in this exemption.
    If an officer, director, partner or employee of Putnam (or a 
relative of such a person), is a director of such Second Fiduciary, and 
if he or she abstains from participation in (i) the decision of the 
Client Plan to invest in, and remain invested in, the Collective Fund 
and (ii) the granting of any authorization contemplated by Section I(h) 
or any deemed authorization contemplated by Section I(i) and (j) with 
respect to the Collective Fund, then paragraph (f)(2) above shall not 
apply.
    (g) The term ``Secondary Service'' means a service other than an 
investment management, investment advisory, or similar service, which 
is provided by Putnam to the Mutual Fund, including but not limited to 
custodial, accounting, administrative, or any other service.
    (h) The term ``net asset value (i.e., NAV)'' means the amount for 
purposes of pricing all purchases and sales, calculated by dividing the 
value of all securities, determined by a method as set forth in a 
Mutual Fund's prospectus and statement of additional information, and 
other assets belonging to the Mutual Fund or portfolio of the Mutual 
Fund, less the liabilities charged to each such portfolio or Mutual 
Fund, by the number of outstanding shares.
    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 January 19, 2010 at 75 FR 
3054.

Written Comments and Hearing Requests

    The Department received one written comment letter in response to 
the notice of proposed exemption, which was submitted by the Applicant. 
There were no requests for a hearing.
    In its comment letter, the Applicant requested that the Department 
make three changes to the operative language of the proposed exemption. 
First, the Applicant asked the Department to revise section I(b) in 
order to reflect the possibility that a Mutual Fund might have more 
than one class of shares. The Department has made the requested change 
by adding the words, ``of the same class of shares'' to the condition. 
The Applicant also suggested that the Department clarify the language 
of section I(j)(B)(2), and agreed with the Department's re-wording of 
the condition which requires that Putnam will, at least 30 days in 
advance of the implementation of any direct or indirect increase in 
fees described in paragraph (j), provide a written notice to the Second 
Fiduciary of each Client Plan having an interest in the Collective 
Fund. Third, the Applicant asked the Department to revise section 
III(d) to reflect the fact that the Putnam Prime Money Market Fund is 
no longer in existence.
    In addition, the Applicant provided the following changes and 
updated information for the ``Summary of Facts and Representations'' 
(the Summary) section of the proposed exemption:
    (1) PFTC became a New Hampshire (not Massachusetts) trust company 
on April 3, 2009 and, as such, is subject to supervision by the New 
Hampshire Banking Department;
    (2) As a result of an internal corporate reorganization, which 
occurred on August 3, 2007, PFTC is now a wholly-owned subsidiary of 
Putnam U.S. Holdings, LLC (not of Putnam, LLC). Accordingly, all 
references to Putnam, LLC should be read to mean Putnam U.S. Holdings, 
LLC;
    (3) Putnam U.S. Holdings, LLC has been an indirect majority-owned 
subsidiary of Great-West Lifeco U.S. Inc. at all times since Great-West 
Lifeco U.S. Inc. acquired Putnam on August 3, 2007;
    (4) In paragraph 2 of the Summary, the word ``2006'' should be 
deleted;
    (5) Paragraph 5 of the Summary refers to the Putnam Prime Money 
Market Fund. As noted above, this fund was terminated subsequent to the 
filing of the exemption application. The successor to this fund is the 
Putnam Money Market Liquidity Fund, which was established in 2009. As a 
result of the foregoing, the reference in the first sentence of 
paragraph 5 of the Summary should be changed from Putnam Prime Money 
Market Fund to Putnam Money Market Liquidity Fund. The third sentence 
of paragraph 5 of the Summary should be revised to state that, ``The 
Applicant represents that since January 2006, the yields generated by 
the institutional money market funds managed by Putnam have generally 
been superior to the yield generated by the STIF''; and
    (6) In paragraph 19 of the Summary, the reference to other 
shareholders should be to other shareholders ``of the same class of 
shares'' of the Mutual Fund.
    The Department has given full consideration to the entire record, 
including the comment letter received. The Department has determined to 
grant the exemption, with the changes as noted above.

FOR FURTHER INFORMATION CONTACT: Mr. Gary H. Lefkowitz of the 
Department, telephone (202) 693-8546. (This is not a toll-free number.)

UBS Financial Services Inc. and Its Affiliates (UBS), Located in 
Weehawken, New Jersey.
[Prohibited Transaction Exemption 2010-14; Exemption Application No. D-
11502.]

Exemption

Section I. Transactions Involving Plans Described in Both Title I and 
Title II of ERISA

    The restrictions of sections 406(a)(1)(A) through (D) and section 
406(b) of the Act, and the taxes imposed by sections 4975(a) and (b) of 
the Code, by reason of section 4975(c)(1) of the Code, shall not apply, 
effective February 1, 2008, to the following transactions, if the 
conditions set forth in Section III have been met: \3\
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    \3\ For purposes of this exemption, references to section 406 of 
the Act should be read to refer as well to the corresponding 
provisions of section 4975 of the Code.
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    (a) The sale or exchange of an Auction Rate Security (as defined in 
Section IV(b)) by a Plan (as defined in Section IV(h)) to the Sponsor 
(as defined in Section IV(g)) of such Plan; or
    (b) A lending of money or other extension of credit to a Plan in 
connection with the holding of an Auction Rate Security by the Plan, 
from: (1) UBS; (2) an Introducing Broker (as defined in Section IV(f)); 
or (3) a Clearing Broker (as defined in Section IV(d)); where the loan 
is: (i) repaid in accordance with its terms; and (ii) guaranteed by the 
Sponsor.

Section II. Transactions Involving Plans Described in Title II of ERISA 
Only

    The sanctions resulting from the application of sections 4975(a) 
and (b) of the Code, by reason of section 4975(c)(1) of the Code, shall 
not apply,

[[Page 22851]]

effective February 1, 2008, to the following transactions, if the 
conditions set forth in Section III have been met:
    (a) The sale or exchange of an Auction Rate Security by a Title II 
Only Plan (as defined in Section IV(i)) to the Beneficial Owner (as 
defined in Section IV(c)) of such Plan; or
    (b) A lending of money or other extension of credit to a Title II 
Only Plan in connection with the holding of an Auction Rate Security by 
the Title II Only Plan, from: (1) UBS; (2) an Introducing Broker; or 
(3) a Clearing Broker; where the loan is: (i) repaid in accordance with 
its terms and; (ii) guaranteed by the Beneficial Owner.

Section III. Conditions

    (a) UBS acted as a broker or dealer, non-bank custodian, or 
fiduciary in connection with the acquisition or holding of the Auction 
Rate Security that is the subject of the transaction;
    (b) For transactions involving a Plan (including a Title II Only 
Plan) not sponsored by UBS for its own employees, the decision to enter 
into the transaction is made by a Plan fiduciary who is independent (as 
defined in Section IV(e)). For transactions involving a Plan sponsored 
by UBS for its own employees, UBS may direct such Plan to engage in a 
transaction described in Section I if all of the other conditions of 
this Section III have been met. Notwithstanding the foregoing, an 
employee of UBS who is the Beneficial Owner of a Title II Only Plan may 
direct such Plan to engage in a transaction described in Section II, if 
all of the other conditions of this Section III have been met;
    (c) The last auction for the Auction Rate Security was 
unsuccessful;
    (d) The Plan does not waive any rights or claims in connection with 
the loan or sale as a condition of engaging in the above-described 
transaction;
    (e) The Plan does not pay any fees or commissions in connection 
with the transaction;
    (f) The transaction is not part of an arrangement, agreement or 
understanding designed to benefit a party in interest;
    (g) With respect to any sale described in Section I(a) or Section 
II(a):
    (1) The sale is for no consideration other than cash payment 
against prompt delivery of the Auction Rate Security; and
    (2) For purposes of the sale, the Auction Rate Security is valued 
at par, plus any accrued but unpaid interest;\4\
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    \4\ This exemption does not address tax issues. The Department 
has been informed by the Internal Revenue Service (the Service) and 
the Department of the Treasury that they are considering providing 
limited relief from the requirements of sections 72(t)(4), 
401(a)(9), and 4974 of the Code with respect to retirement plans 
that hold Auction Rate Securities. The Department has also been 
informed by the Service that if Auction Rate Securities are 
purchased from a Plan in a transaction described in Sections I and 
II at a price that exceeds the fair market value of those 
securities, then the excess value would be treated as a contribution 
for purposes of applying applicable contribution and deduction 
limits under sections 219, 404, 408, and 415 of the Code.
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    (h) With respect to an in-kind exchange described in Section I(a) 
or Section II(a), the exchange involves the transfer by a Plan of an 
Auction Rate Security in return for a Delivered Security, as such term 
is defined in Section IV(j), where:
    (1) The exchange is unconditional;
    (2) For purposes of the exchange, the Auction Rate Security is 
valued at par, plus any accrued but unpaid interest;
    (3) The Delivered Security is valued at fair market value, as 
determined at the time of the in-kind exchange by a third party pricing 
service or other objective source;
    (4) The Delivered Security is appropriate for the Plan and is a 
security that the Plan is otherwise permitted to hold under applicable 
law; \5\ and
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    \5\ The Department notes that the Act's general standards of 
fiduciary conduct also would apply to the transactions described 
herein. In this regard, section 404 of the Act requires, among other 
things, that a fiduciary discharge his duties respecting a plan 
solely in the interest of the plan's participants and beneficiaries 
and in a prudent manner. Accordingly, a Plan fiduciary must act 
prudently with respect to, among other things: (1) The decision to 
exchange an Auction Rate Security for a Delivered Security; and (2) 
the negotiation of the terms of such exchange (or a cash sale or 
loan described above), including the pricing of such securities. The 
Department further emphasizes that it expects Plan fiduciaries, 
prior to entering into any of the transactions, to fully understand 
the risks associated with these types of transactions following 
disclosure by UBS of all relevant information.
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    (5) The total value of the Auction Rate Security (i.e., par plus 
any accrued but unpaid interest) is equal to the fair market value of 
the Delivered Security;
    (i) With respect to a loan described in Sections I(b) or II(b):
    (1) The loan is documented in a written agreement that contains all 
of the material terms of the loan, including the consequences of 
default;
    (2) The Plan does not pay an interest rate that exceeds one of the 
following three rates as of the commencement of the loan:
    (A) The coupon rate for the Auction Rate Security;
    (B) The Federal Funds Rate; or
    (C) The Prime Rate;
    (3) The loan is unsecured; and
    (4) The amount of the loan is not more than the total par value of 
the Auction Rate Securities held by the Plan.

Section IV. Definitions

    (a) The term ``affiliate'' means: Any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with such other person;
    (b) The term ``Auction Rate Security'' or ``ARS'' means a security:
    (1) That is either a debt instrument (generally with a long-term 
nominal maturity) or preferred stock; and
    (2) With an interest rate or dividend that is reset at specific 
intervals through a Dutch auction process;
    (c) The term ``Beneficial Owner'' means: The individual for whose 
benefit the Title II Only Plan is established and includes a relative 
or family trust with respect to such individual;
    (d) The term ``Clearing Broker'' means: A member of a securities 
exchange that acts as a liaison between an investor and a clearing 
corporation and that helps to ensure that a trade is settled 
appropriately, that the transaction is successfully completed and that 
is responsible for maintaining the paper work associated with the 
clearing and executing of a transaction;
    (e) The term ``independent'' means a person who is: (1) Not UBS or 
an affiliate; and (2) not a relative (as defined in section 3(15) of 
the Act) of the party engaging in the transaction;
    (f) The term ``Introducing Broker'' means: A registered broker that 
is able to perform all the functions of a broker except for the ability 
to accept money, securities, or property from a customer;
    (g) The term ``Sponsor'' means: A plan sponsor as described in 
section 3(16)(B) of the Act and any affiliates;
    (h) The term ``Plan'' means: Any plan described in section 3(3) of 
the Act and/or section 4975(e)(1) of the Code;
    (i) The term ``Title II Only Plan'' means: Any plan described in 
section 4975(e)(1) of the Code which is not an employee benefit plan 
covered by Title I of the Act; and
    (j) The term ``Delivered Security'' means a security that is: (1) 
Listed on a national securities exchange (excluding OTC Bulletin Board-
eligible securities and Pink Sheets-quoted securities); (2) a U.S. 
Treasury obligation; (3) a fixed income security that has a rating at 
the time of the exchange that is in one of the two highest generic 
rating categories from an independent nationally recognized statistical 
rating organization (e.g., a highly rated municipal bond or a highly 
rated corporate bond); or (4) a certificate of deposit insured by the 
Federal Deposit Insurance Corporation. Notwithstanding the above, the 
term ``Delivered Security'' shall not include any Auction Rate 
Security, or any

[[Page 22852]]

related Auction Rate Security, including derivatives or securities 
materially comprised of Auction Rate Securities or any illiquid 
securities.
    Effective Date: This exemption is effective as of February 1, 2008.
    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 January 19, 2010 at 75 FR 
3071.
    For Further Information Contact: Brian Shiker of the Department, 
telephone (202) 693-8552. (This is not a toll-free number.)

Subaru of America, Inc. (Subaru), Located in Cherry Hill, New Jersey.
[Prohibited Transaction Exemption 2010-15; Exemption Application No. D-
11531.]

Exemption

    The restrictions of sections 406(a) and (b) of the Act shall not 
apply to the reinsurance of risks and the receipt of premiums therefrom 
by Pleiades Insurance Company, Ltd. (PIC) in connection with an 
insurance contract sold by Minnesota Life Insurance Company (MN Life) 
or any successor insurance company to MN Life which is unrelated to 
Subaru, to provide group-term life insurance to employees of Subaru 
under the Subaru of America, Inc. Welfare Benefit Plan (the Plan), 
provided the following conditions are met:
    (a) PIC--
    (1) Is a party in interest with respect to the Plan by reason of a 
stock or partnership affiliation with Subaru that is described in 
section 3(14)(E) or (G) of the Act,
    (2) Is licensed to sell insurance or conduct reinsurance operations 
in at least one State as defined in section 3(10) of the Act,
    (3) Has a U.S. branch, the Pleiades Insurance Company Ltd. (U.S. 
Branch), which has obtained a Certificate of Authority from the 
Insurance Commissioner of its domiciliary State which has neither been 
revoked nor suspended,
    (4)(A) Has undergone and shall continue to undergo an examination 
by an independent certified public accountant for its last completed 
taxable year immediately prior to the taxable year of the reinsurance 
transaction; or
    (B) Has undergone a financial examination (within the meaning of 
the law of its domiciliary State, the District of Columbia) by the 
Insurance Commissioner of the District of Columbia within 5 years prior 
to the end of the year preceding the year in which the reinsurance 
transaction occurred, and
    (5) Is licensed to conduct reinsurance transactions by a State 
whose law requires that an actuarial review of reserves be conducted 
annually by an independent firm of actuaries and reported to the 
appropriate regulatory authority;
    (b) The Plan pays no more than adequate consideration for the 
insurance contracts;
    (c) In subsequent years, the formula used to calculate premiums by 
MN Life or any successor insurer will be similar to formulae used by 
other insurers providing comparable coverage under similar programs. 
Furthermore, the premium charge calculated in accordance with the 
formula will be reasonable and will be comparable to the premium 
charged by the insurer and its competitors with the same or a better 
rating providing the same coverage under comparable programs;
    (d) The Plan only contracts with insurers with a rating of A or 
better from A.M. Best Company. The reinsurance arrangement between the 
insurer and PIC will be indemnity insurance only, i.e., the insurer 
will not be relieved of liability to the Plan should PIC be unable or 
unwilling to cover any liability arising from the reinsurance 
arrangement;
    (e) No commissions are paid with respect to the reinsurance of such 
contracts; and
    (f) For each taxable year of PIC, the gross premiums and annuity 
considerations received in that taxable year by PIC for life and health 
insurance or annuity contracts for all employee benefit plans (and 
their employers) with respect to which PIC is a party in interest by 
reason of a relationship to such employer described in section 3(14)(E) 
or (G) of the Act does not exceed 50% of the gross premiums and annuity 
considerations received for all lines of insurance (whether direct 
insurance or reinsurance) in that taxable year by PIC. For purposes of 
this condition (f):
    (1) The term ``gross premiums and annuity considerations received'' 
means as to the numerator the total of premiums and annuity 
considerations received, both for the subject reinsurance transactions 
as well as for any direct sale or other reinsurance of life insurance, 
health insurance or annuity contracts to such plans (and their 
employers) by PIC. This total is to be reduced (in both the numerator 
and the denominator of the fraction) by experience refunds paid or 
credited in that taxable year by PIC.
    (2) All premium and annuity considerations written by PIC for plans 
which it alone maintains are to be excluded from both the numerator and 
the denominator of the fraction.
    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 February 23, 2010 at 75 
FR 8132.
    For Further Information Contact: Gary H. Lefkowitz of the 
Department, telephone (202) 693-8546. (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 26th day of April 2010.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2010-10064 Filed 4-29-10; 8:45 am]
BILLING CODE 4510-29-P