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EBSA Notices

Application Nos. and Proposed Exemptions; D-11400, Wasatch Advisors, Inc.; D-11585, Retirement Plan for Employees of the Rehabilitation Institute of Chicago (the Plan); D-11603-07, Chrysler Group LLC and Daimler AG; et al.   [9/16/2010]
[PDF]
FR Doc 2010-23059
[Federal Register: September 16, 2010 (Volume 75, Number 179)]
[Notices]               
[Page 56568-56578]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16se10-94]                         

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[D-11400; D-11585; D-11603-07]

 
Application Nos. and Proposed Exemptions; D-11400, Wasatch 
Advisors, Inc.; D-11585, Retirement Plan for Employees of the 
Rehabilitation Institute of Chicago (the Plan); D-11603-07, Chrysler 
Group LLC and Daimler AG; et al.

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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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

[[Page 56569]]

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.

    Warning: If you submit written comments or hearing requests, do 
not include any personally-identifiable or confidential business 
information that you do not want to be publicly-disclosed. All 
comments and hearing requests are posted on the Internet exactly as 
they are received, and they can be retrieved by most Internet search 
engines. The Department will make no deletions, modifications or 
redactions to the comments or hearing requests received, as they are 
public records.

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). 
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.

Wasatch Advisers, Inc., Located in Salt Lake City, Utah

[Exemption Application Number D-11400.]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974 (ERISA or the Act) and section 4975(c)(2) of the Internal 
Revenue Code of 1986, as amended (the Code), and in accordance with the 
procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 
32847, August 10, 1990).\1\
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    \1\ For purposes of this proposed exemption, references to 
section 406 of ERISA should be read to refer as well to the 
corresponding provisions of section 4975 of the Code.
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Section I--Exemption and Conditions
    If the proposed exemption is granted, Wasatch Advisors, Inc. 
(Wasatch) shall not be precluded from qualifying as a ``qualified 
professional asset manager'' (a QPAM) pursuant to Prohibited 
Transaction Exemption 84-14 (hereinafter, either PTE 84-14 or the QPAM 
Class Exemption) \2\ for the period from April 19, 2006 through July 
13, 2007, solely because of its failure to satisfy the shareholders' 
equity requirement of PTE 84-14, section V(a)(4) (the Shareholders' 
Equity Requirement), provided that the following conditions were met:
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    \2\ 49 FR 9494 (Mar. 13, 1984), as corrected at 50 FR 41430 
(Oct. 10, 1985), and amended at 70 FR 49305 (Aug. 23, 2005) and at 
75 FR 38837 (Jul. 6, 2010).
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    (a) Upon learning that it did not have adequate shareholders' 
equity to satisfy the Shareholders' Equity Requirement, Wasatch took 
all steps necessary to protect the interests of its ERISA Clients (as 
defined in section II(b)), including obtaining a letter of credit (the 
Letter of Credit);
    (b) The Letter of Credit was an irrevocable standby letter of 
credit for $1,000,000, structured in a manner that covered any ERISA 
Claim (as defined in section II(a)) occurring from April 19, 2006 (the 
date Wasatch learned it did not satisfy the Shareholders' Equity 
Requirement) through July 13, 2007 (the date on which Wasatch 
determined it satisfied the Shareholders' Equity Requirement);
    (c) The Letter of Credit was issued by Zions First National Bank, 
which was independent of Wasatch and regulated by Federal banking 
authorities;
    (d) The Letter of Credit was held by Zions First National Bank for 
the benefit of all ERISA Clients;
    (e) The Letter of Credit was payable on demand solely to an ERISA 
Client (or its agent) if the ERISA Client provided:
    (1) A certified copy of the final order for damages against Wasatch 
based on an ERISA Claim from a court of competent jurisdiction with all 
rights of appeal having expired or having been exhausted; or a true 
copy of a settlement agreement between the ERISA Client and Wasatch 
providing for damages to the ERISA Client with respect to an ERISA 
Claim;
    (2) In the case of a final court judgment, a certified true copy of 
a Sheriff's or Marshall's levy and execution on the judgment, returned 
unsatisfied, or such other documentation, certified by an officer of 
the court in which the judgment was entered, stating that the judgment 
remains unsatisfied following attempts to collect the judgment in 
accordance with local court rules; and
    (3) A certificate of an authorized representative of the ERISA 
Client stating the amount of the judgment or settlement which remains 
unsatisfied;
    (f) From 1996 through 2007, Joseph S. Call, a certified public 
accountant who is independent of Wasatch, performed a yearly audit on 
Wasatch, using generally acceptable accounting principles to quantify 
Wasatch's shareholders' equity; and
    (g) From 1996 through 2007, Wasatch's reliance on Mr. Call's 
determinations as to the dollar amount relevant to the Shareholders' 
Equity Requirement was reasonable.
Section II--Definitions
    (a) The term ``ERISA Claim'' means: a civil proceeding for monetary 
relief which is commenced by the filing or service of a civil complaint 
or similar pleading or a request for monetary relief which could have 
been the subject of such a complaint or pleading but for a settlement 
agreement, filed against Wasatch or with respect to which a settlement 
is reached prior to July 13, 2007, by reason of Wasatch's breach or 
violation of a duty described in sections 404 or 406 of ERISA;
    (b) The term ``ERISA Client'' means any employee benefit plan 
covered by Title I of ERISA to which Wasatch provides or provided 
investment management services on or before July 13, 2007;
    (c) A person will be ``independent'' of another person only if:
    (i) For purposes of this exemption, such person is not an affiliate 
of that other person; and
    (ii) The other person, or an affiliate thereof, is not a fiduciary 
that has investment management authority or

[[Page 56570]]

renders investment advice with respect to the assets of such person;
    (d) An ``affiliate'' of a person means:
    (i) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person. For purposes of this paragraph, the term ``control'' 
means the power to exercise a controlling influence over the management 
or policies of a person other than an individual;
    (ii) Any officer, director, employee or relative (as defined in 
section 3(15) of the Act) of any such other person or any partner in 
any such person; and
    (iii) Any corporation or partnership of which such person is an 
officer, director or employee or in which such person is a partner.

Summary of Facts and Representations

    1. The applicant is Wasatch (hereinafter, either Wasatch or the 
Applicant), a registered investment advisor located in Salt Lake City, 
Utah. Wasatch, which was founded in 1976, has more than $9 billion in 
assets under its management, including approximately $1.5 billion in 
ERISA plan assets. Wasatch employs approximately 110 people, and has 
been structured as a privately-held, 100% employee-owned Subchapter S 
corporation since 1996.
    2. The Applicant represents that for several years prior to April 
19, 2006, Wasatch acted as a ``qualified professional asset manager,'' 
as such term is defined in section V(a)(4) of the QPAM Class Exemption. 
The Applicant states that, to the best of its knowledge, during that 
time, Wasatch complied with all relevant provisions of that class 
exemption.
    3. The Applicant also represents that, for the period from April 
19, 2006 through July 13, 2007, Wasatch failed to satisfy section 
V(a)(4) of the QPAM Class Exemption. In this regard, section V(a)(4) of 
the QPAM Class Exemption requires, among other things, that an 
investment advisor have in excess of $1,000,000 in shareholders' or 
partners' equity; and section VI(m) of the QPAM Class Exemption defines 
``shareholders' or partners' equity'' as meaning the equity shown in 
the most recent balance sheet prepared within the two years immediately 
preceding a transaction undertaken pursuant to the QPAM Class 
Exemption, in accordance with generally accepted accounting 
principles.\3\
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    \3\ As noted in footnote 2, the QPAM Class Exemption was amended 
on August 23, 2005. Among other things, the amendment increases the 
dollar amount set forth in section V(a)(4) of the QPAM Class 
Exemption from $750,000 to $1,000,000. This increase, as it applies 
to Wasatch, is effective December 31, 2006, which is the last day of 
the first fiscal year of Wasatch beginning on or after August 23, 
2005. References herein to the Shareholders' Equity Requirement with 
respect to any date that occurs prior to December 31, 2006 thus 
corresponds to the lesser (i.e., $750,000) dollar amount.
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    4. The Applicant describes Wasatch's failure to meet the 
Shareholders' Equity Requirement as a one-time event resulting from 
unanticipated changes in certain factors affecting: deferred 
compensation agreements (the Compensation Agreements) covering key 
Wasatch employees (the Recipients); and a stock buy-sell agreement (the 
Buy-Sell Agreement). The Applicant makes the following representations 
regarding the Compensation Agreements.
    Beginning in 1996, Wasatch entered into Compensation Agreements 
with Recipients to pay the Recipients a multiple of net revenue for 
each of the sixteen quarters following a Recipient's termination of 
employment with Wasatch. Many of the factors involved (i.e., the 
separation dates of the Recipients and Wasatch's revenues during the 
four years following these dates) were difficult to quantify prior to 
2005.
    5. The Applicant makes the following representation regarding the 
Buy-Sell Agreement. The Buy-Sell Agreement was put in place to address 
succession planning. The Agreement, among other things, limits stock 
ownership to current employees and places a specific value on the 
shares. As with the Compensation Agreements, the value of the stock is 
based on a set multiple of net revenues and is paid out over the 
sixteen quarters following sale of the stock (which is required upon 
termination.)
    6. For the years 1996-2004, Wasatch did not accrue for deferred 
compensation liability on its balance sheets. During this period, 
Wasatch took the position that there were too many variables to 
reasonably estimate its liabilities under the Compensation Agreements 
and the Buy-Sell Agreements (collectively, the Agreements). In this 
regard, the Applicants represent that: (1) Future revenues were 
extremely difficult to predict historically since: (A) Client assets 
can flood or exit a manager very rapidly; (B) during the fifteen years 
from 1989-2004 Wasatch's gross revenues showed a compound annual growth 
rate of 35%, with a standard deviation of 44%, a low of -11% and a high 
of 130%; and (C) Wasatch had a relatively small number of employees and 
many of Wasatch's assets were new, such that it was reasonable to 
expect a large portion of those assets would exit the company upon the 
departure of key employees; (2) it was extremely difficult to predict 
retirement dates given that the average age of employees was 33; and 
(3) structural aspects of the Agreements caused the timing of payments 
to be quite variable.\4\
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    \4\ According to the Applicant, the nature and terms of the 
Agreements have been fully disclosed in Wasatch's audited financial 
statements since 1996.
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    7. The Applicant represents that with respect to Wasatch's 2005 
calendar year, Mr. Joseph S. Call, Wasatch's independent auditor, 
determined that enough of these key variables had changed such that it 
was: (1) Possible to reasonably estimate the liability accrued under 
the Compensation Agreements; and (2) necessary to accrue a discounted 
value for the liability on Wasatch's financial statements. This 
determination was described in an audit report received by Wasatch on 
April 19, 2006 (the Audit Report). Specifically, the Audit Report 
stated that: (1) Wasatch had observed a relative stabilization in its 
business; (2) at least one key retirement date was set; and (3) changes 
in the tax law for deferred compensation caused Wasatch to modify the 
Compensation Agreements by taking away some of the provisions for pre-
payment or delay of payment. Accordingly, Wasatch's 2005 balance sheet 
took into account accrued liability for the Compensation Agreements, 
and quantified such liability as approximating $25 million, putting 
Wasatch in an unexpected and unplanned-for negative equity position of 
$13 million.
    8. The Applicant states that, prior to April 19, 2006, Wasatch did 
not know, nor have reason to anticipate, that its financial statements 
for the year ending December 31, 2005 would reflect less than the 
minimum amount of shareholders' equity set forth in the Shareholders' 
Equity Requirement. In this regard, the Applicant represents that 
Wasatch received no prior notice (other than in the Audit Report) that 
certain factors relevant to the quantification of Wasatch's 
shareholders' equity had stabilized and/or that the amount of Wasatch's 
shareholders' equity was in jeopardy of dropping below the amount 
required by the Shareholders' Equity Requirement. The Applicant 
represents further that Wasatch's reliance on the financial audits 
performed by Mr. Call, including those covering Wasatch's fiscal years 
prior to 2005, was reasonable.

[[Page 56571]]

    9. The Applicant represents that Wasatch, upon learning it no 
longer had an amount of shareholders' equity necessary to satisfy the 
Shareholders' Equity Requirement, took immediate steps to protect its 
ERISA clients. In this regard, the Applicant states that after 
receiving the April 19, 2006 Audit Report, Wasatch stopped paying 
dividends and bonuses, and began retaining cash in an effort to offset 
the accrued deferred compensation liability. The Applicant represents 
that unaudited financial statements prepared by Wasatch for the quarter 
ended September 30, 2006 reflected shareholders' equity in excess of 
$1,000,000 due to Wasatch's efforts to retain cash.
    10. The Applicant represents further that Wasatch, upon learning it 
no longer had a sufficient amount of shareholders' equity, set in 
motion the process of obtaining an irrevocable letter of credit in 
order to protect the interests of its ERISA Clients until Wasatch was 
able to once again meet the Shareholders' Equity Requirement. In this 
regard, on October 30, 2006, Wasatch executed the Letter of Credit, 
which is a $1,000,000 Letter of Credit with Zions First National Bank. 
The Applicant represents that, following October 30, 2006, Zions First 
National Bank held the Letter of Credit for the benefit of all ERISA 
Clients. The Applicant represents that the Letter of Credit was 
structured in a manner that allowed it to be applicable to ERISA Claims 
arising on or after April 19, 2006. The Applicant states further that 
the Letter of Credit remained in effect through July 13, 2007, which is 
the date on which Wasatch determined that it met the Shareholders' 
Equity Requirement. The Applicant notes that the Letter of Credit could 
be reduced only by ERISA Claims paid on behalf of ERISA Clients, if the 
ERISA Client provided: A certified copy of the final order for damages 
against Wasatch; or (2) a true copy of a settlement agreement between 
the ERISA Client and Wasatch. The Applicant states that there have been 
no judgments or settlements made by ERISA Clients, and there are no 
pending ERISA Claims.
    11. In summary, the Applicant represents that the transactions 
described herein satisfy the statutory criteria set forth in section 
408(a) of the Act and section 4975(c)(2) of the Code because:
    (a) Wasatch, upon learning that it did not have adequate 
shareholders' equity to satisfy the Shareholders' Equity Requirement, 
took all steps necessary to protect the interests of its ERISA Clients, 
including obtaining the Letter of Credit from Zions First National 
Bank;
    (b) The Letter of Credit was structured to cover any ERISA Claim 
occurring from April 19, 2006 through July 13, 2007;
    (c) The amount available under the Letter of Credit was at least 
$1,000,000 on both October 31, 2006 and July 13, 2007, the former date 
being the date on which Wasatch obtained the Letter of Credit from 
Zions First National Bank and the latter date being the date on which 
Wasatch determined it satisfied the Shareholders' Equity Requirement;
    (d) Wasatch caused the Letter of Credit to be issued by Zions First 
National Bank, and Zions First National Bank held the Letter of Credit 
for the benefit of all ERISA Clients;
    (e) The Letter of Credit was payable on demand solely to an ERISA 
Client (or its agent) if the ERISA Client provided:
    (1) A certified copy of the final order for damages against Wasatch 
based on the ERISA Claim from a court of competent jurisdiction with 
all rights of appeal having expired or having been exhausted; or a true 
copy of a settlement agreement between the ERISA Client and Wasatch 
providing for damages to the ERISA Client with respect to the ERISA 
Claim;
    (2) In the case of a final court judgment, a certified true copy of 
a Sheriff's or Marshall's levy and execution on the judgment, returned 
unsatisfied, or such other documentation, certified by an officer of 
the court in which the judgment was entered, stating that the judgment 
remains unsatisfied following attempts to collect the judgment in 
accordance with local court rules; and
    (3) A certificate of an authorized representative of the ERISA 
Client stating the amount of the judgment or settlement which remains 
unsatisfied;
    (f) From 1996 through 2007, Joseph S. Call, a certified public 
accountant who is independent of Wasatch, performed a yearly audit on 
Wasatch, using generally accepted accounting principles to quantify 
Wasatch's shareholders' equity; and
    (g) Each year, from 1996 through 2007, Wasatch's reliance on Mr. 
Call's determinations as to the dollar amount of Wasatch's 
shareholders' equity was reasonable.

Notice to Interested Persons

    The persons who may be interested in the publication in the Federal 
Register of the Notice of Proposed Exemption (the Notice) include ERISA 
plans that used Wasatch as a QPAM during the period from April 19, 2006 
through July 13, 2007 and that still (currently) use Wasatch as a QPAM. 
Wasatch will notify this class of interested persons, by mail, within 
fifteen (15) calendar days of publication of the Notice in the Federal 
Register; and such mailing will contain a copy of the Notice, a 
supplemental statement (as required pursuant to 29 CFR 2570.43(b)(2)), 
and a supplemental letter explaining the circumstances that gave rise 
for the need for a temporary exemption. Any written comments and/or 
requests for a hearing must be received by the Department from 
interested persons within 45 days of the publication of this proposed 
exemption in the Federal Register.

For Further Information Contact: Chris Motta of the Department, 
telephone (202) 693-8540. (This is not a toll-free number.)

Retirement Plan for Employees of the Rehabilitation Institute of 
Chicago (the Plan), Located in Chicago, Illinois.

[Application No. D-11585]

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).
Section I--Transactions
    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(B), 406(a)(1)(D), and 406(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)(B) and 4975(c)(1)(D) of the Code,\5\ shall not 
apply:
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    \5\ For purposes of this proposed exemption, references to 
specific provisions of Title I of the Act, unless otherwise 
specified, refer also to the corresponding provisions of the Code.
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    (1) To a series of interest-free Advances in the aggregate amount 
of $701,117 (the Advances or individually, an Advance), made to Hewitt 
Associates, LLC (Hewitt), the Pension Benefit Guaranty Corporation 
(PBGC), the Internal Revenue Service (the IRS), and Deloitte and 
Touche, LLP (Deloitte),\6\ during the period from September 28, 2006, 
through June 2, 2009, by the Rehabilitation Institute of Chicago (RIC), 
for the purpose of paying ordinary operating expenses incurred on 
behalf of the Plan; and
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    \6\ Hewitt, PBGC, IRS, and Deloitte are collectively referred 
to, herein, as the Service Providers.
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    (2) To the reimbursement to RIC by the Plan of such Advances made 
during the period from September 28, 2006, through June 2, 2009, in an 
aggregate amount not to exceed $701,117, where

[[Page 56572]]

each such reimbursement occurred at least sixty (60) days but no more 
than 365 days after the date of each such Advance; provided that the 
conditions as set forth in section II of this proposed exemption were 
satisfied.
Section II--Conditions
    (1) During the period from September 28, 2006, through June 2, 
2009, when RIC made each of the Advances and during the period at least 
sixty (60) days but no more than 365 days after the date of each such 
Advance, when the Plan reimbursed each such Advance, all of the 
requirements of Prohibited Transaction Exemption 80-26 (PTE 80-26), as 
amended, effective December 15, 2004,\7\ were satisfied, except for the 
requirement in Section IV (f)(1) of PTE 80-26 that loans made on or 
after April 7, 2006, with a term of sixty (60) days or longer be made 
pursuant to a written loan agreement that contains all of the material 
terms of such loan;
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    \7\ 71 FR 17917, April 7, 2006.
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    (2) With regard to any reimbursement covered by the proposed 
exemption, an independent, qualified auditor certifies that such 
reimbursement matches each of the Advances, during the period from 
September 28, 2006, through June 2, 2009, made by RIC to the Service 
Providers on behalf of the Plan; and such reimbursements were made by 
the Plan to RIC during the period at least sixty (60) days but no more 
than 365 days after the date of each such Advance;
    (3) The Advances made by RIC to the Service Providers, during the 
period from September 28, 2006, through June 2, 2009, were for the 
payment of ordinary operating expenses of the Plan which were properly 
incurred on behalf of the Plan;
    (4) Within ninety (90) days of the publication in the Federal 
Register of the final exemption for the transactions which are the 
subject of this proposed exemption, RIC must refund to the Plan an 
amount equal to $74,555 (the Refund Amount), plus earning and interest. 
Such Refund Amount represents the total for certain reimbursements to 
RIC by the Plan in connection with payments by RIC to Monticello 
Associates Inc. (Monticello), Deloitte, the IRS, and the Department in 
the amounts, respectively of $55,500, $18,530, $375, and $150. 
Furthermore, RIC must refund to the Plan an additional amount 
attributable to lost earnings experienced by the Plan on the Refund 
Amount, and interest on such lost earnings, for the period from April 
7, 2006, to the date upon which RIC has returned to the Plan the entire 
Refund Amount, the lost earnings on such Refund Amount, plus interest 
on such lost earnings. For the purpose of calculating the lost earnings 
on the Refund Amount due to the Plan, plus interest, on such lost 
earnings, RIC must use the Online Calculator for the Voluntary 
Fiduciary Correction Program \8\ that appears on the Web site of the 
Employee Benefits Security Administration; and
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    \8\ 70 FR 17516, April 6, 2005.
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    (5) Within ninety (90) days of the publication in the Federal 
Register of the final exemption for the transactions which are the 
subject of this proposed exemption, RIC must file a Form 5330 with the 
IRS and pay to the IRS all applicable excise taxes, and any interest on 
such excise taxes deemed to be due and owing with respect to the Refund 
Amount.
    Effective Date: This proposed exemption, if granted, will be 
effective, for each Advance to the Service Providers made by RIC from 
September 28, 2006, through June 2, 2009, and for reimbursements to RIC 
by the Plan of such Advances covered by this proposed exemption.

Summary of Facts and Representations

    1. The Plan is a defined benefit pension plan. The estimated number 
of participants and beneficiaries in the Plan, as of November 3, 2009, 
was 2,457. The fair market value of the total assets of the Plan, as of 
August 31, 2009, was $52,895,253.39.
    2. The administrator of the Plan is a committee (the Committee) 
composed of members who are appointed by the Board of Directors of RIC. 
The members of the Committee are employees and officers of RIC. As of 
March 13, 2006, and at the start of the relevant period for which 
relief is requested in this proposed exemption, the members of the 
Committee, were: (a) Wayne M. Lerner, President and Chief Executive 
Officer of RIC; (b) Edward B. Case (Mr. Case), Executive Vice President 
and Chief Financial Officer of RIC; (c) Susan H. Cerletty, Executive 
Vice President, Clinical, of RIC and (d) Nancy Paridy, Esq. (Ms. 
Paridy), Senior Vice President of RIC and General Counsel to RIC. The 
following individuals have been members of the Committee, since 
December 1, 2007: (a) Joanne C. Smith, M.D., President and Chief 
Executive Officer of RIC, (b) Mr. Case, and (c) Ms. Paridy. The 
Committee is a party in interest with respect to the Plan, as the 
administrator of the Plan, pursuant to section 3(14)(A) of the Act.
    The persons who have investment discretion over the assets involved 
in the proposed transactions are the Executive Vice President, the 
Chief Executive Officer, and the Chief Financial Officer of RIC, the 
members of the investment committee, and the advisors to RIC at 
Monticello. As persons or entities who have investment discretion over 
the assets of the Plan, each is a fiduciary with respect to the Plan, 
pursuant to section 3(21)(A) of the Act. As fiduciaries of the Plan, 
each is also a party in interest with respect to such Plan, pursuant to 
section 3(14)(A) of the Act.
    Northern Trust Company, as the trustee for the Plan, is a fiduciary 
with respect to such Plan, pursuant to section 3(21)(A) of the Act. 
Further, as trustee for the Plan, Northern Trust Company is a party in 
interest with respect to such Plan, pursuant to section 3(14)(A) of the 
Act.
    3. RIC, the sponsor of the Plan, is an Illinois not-for-profit 
corporation. RIC is a provider of rehabilitative medicine and services 
to severely injured and handicapped individuals. As an employer any of 
whose employees are covered by the Plan, RIC is a party in interest 
with respect to the Plan, pursuant to section 3(14)(C) of the Act.
    4. The applicant has requested a retroactive administrative 
exemption for Advances and for the reimbursement of such Advances to 
RIC by the Plan. Such transactions constitute the lending of money or 
other extension of credit between the Plan and RIC in violation of 
section 406(a)(1)(B) of the Act, and constitute the transfer to, or use 
by or for the benefit of RIC of the assets of the Plan in violation of 
406(a)(1)(D) of the Act. The subject transactions also raise conflict 
of interest issues by fiduciaries of the Plan for which relief from the 
prohibitions of 406(b)(2) of the Act is needed.
    Specifically, the applicants have requested retroactive relief for: 
(a) Advances made by RIC to the Service Providers for expenses incurred 
on behalf of the Plan, during the period from April 7, 2006, through 
August 28, 2009; and (b) for the subsequent reimbursements of such 
Advances to RIC by the Plan during the period at least sixty (60) days 
but no more than 365 days after the date of each such Advance.
    Although, as stated above, the applicant requested relief for the 
period from April 7, 2006, through August 28, 2009, the Department has 
determined to propose relief for a shorter period of time than that 
requested by the applicant. In this regard, the Department is proposing 
relief only for Advances made during the period from September 28, 
2006, through June 2, 2009, because

[[Page 56573]]

an audit prepared by Deloitte, as described in more detail in paragraph 
number 15, below, covers transactions only for the period from 
September 28, 2006, through June 2, 2009.
    Further, the Department proposes to limit relief, during the period 
from September 28, 2006, through June 2, 2009, only to those Advances 
which were reimbursed to RIC by the Plan, at least sixty (60) days but 
no more than 365 days from the date of each such Advance, because: (i) 
PTE 80-26 would be available for loans or extensions of credit which 
were repaid in less than sixty (60) days, provided the conditions of 
PTE 80-26 were satisfied; and (ii) as discussed in paragraph number 8, 
below the applicant has already filed a Form 5330, paid excise tax, and 
refunded to the Plan certain reimbursements paid to RIC more than a 
year after RIC advanced payments on behalf of the Plan.
    No relief from the prohibited transaction provisions of the Act is 
proposed, herein, during the period April 7, 2006, when the requirement 
for a written loan agreement, pursuant to PTE 80-26 became effective, 
through September 27, 2006, when RIC failed to comply with the 
conditions of PTE 80-26, as amended, but made payments for expenses 
incurred on behalf of the Plan and received reimbursements from the 
Plan, because an audit prepared by Deloitte, as described in more 
detail in paragraph number 15, below, did not cover that period. 
Further, no relief from the prohibited transaction provisions of the 
Act is proposed, herein, for payments by RIC on behalf of the Plan and 
subsequent reimbursement to RIC by the Plan after Deloitte had informed 
RIC of the amendment to PTE 80-26, on June 3, 2009.
    5. It is represented that RIC did not make the Advances which are 
the subject of this proposed exemption as gifts to the Plan. In this 
regard, it is represented that a significant portion of the operating 
revenue of RIC comes from non-patient sources, such as donors and 
grants. Such sources prefer their awards to be utilized for providing 
patient care and other mission related programs. It is represented that 
including the administrative expenses of the Plan in the general 
administrative expenses of RIC, rather than as benefits expenses, would 
make RIC appear less efficient to such non-patient sources of revenue. 
Accordingly, it is represented that it was always the intention of RIC 
to have the administrative expenses of the Plan paid for from the 
assets of the Plan, rather than from RIC's assets. In this regard, it 
is represented that from the inception of the Plan, the Plan documents 
and the accompanying trust documents have provided that administrative 
expenses of the Plan would be paid out of the assets of the Plan. 
Specifically, section 3.3 of the trust states that the trustee may pay 
out of the trust the administrative expenses of the Plan, including any 
accounting, actuarial, investment and legal expenses and premiums, any 
taxes of any and all kinds that may be levied or assessed under 
existing or future laws upon the trust or the income thereof, and any 
other amounts payable pursuant to Title IV of the Act, as the plan 
administrator shall direct.
    It is represented that RIC has employed an administrative and 
accounting procedure which has been in place for a long time and which 
has been consistently followed with respect to the payments made by RIC 
to certain service providers of various expenses incurred on behalf of 
the Plan. In this regard, the procedure involves RIC paying for such 
expenses directly to such service providers on behalf of the Plan and 
then posting the amount of such payments as receivables from the Plan 
in the accounting records of RIC. It is represented that RIC would 
generally make the payments incurred on behalf of the Plan for up to an 
entire Plan year. Further, it is represented that the reimbursements to 
RIC by the Plan were made in lump sums generally on an annual basis.
    6. It is represented that RIC intended the accounting procedure, 
described in paragraph number 5, above, to comply with PTE 80-26.\9\ 
PTE 80-26 is a class exemption that, among other transactions, permits 
parties in interest with respect to an employee benefit plan to make 
certain interest free loans or other extensions of credit to such plan 
and permits such parties in interest to receive repayment of such loans 
or other extensions of credit. The relief provided by PTE 80-26 is 
subject to the conditions that the proceeds of such loans or extensions 
of credit are unsecured, are not, directly or indirectly, made by an 
employee benefit plan, and are used only for the payment of ordinary 
operating expenses of a plan, including the payment of benefits in 
accordance with the terms of such plan and periodic premiums under an 
insurance or annuity contract or are used for a purpose incidental to 
the ordinary operation of such plan.
---------------------------------------------------------------------------

    \9\ The Department is offering no view, herein, as to RIC's 
reliance on PTE 80-26 for payments RIC made on behalf of the Plan or 
to reimbursements of such payments to RIC by the Plan. Further, the 
Department is not opining as to whether RIC satisfied the conditions 
of PTE 80-26 in connection with such payments made by RIC on behalf 
of the Plan, or in connection with the reimbursement of such 
payments to RIC by the Plan. Further, the Department, herein, is not 
providing relief for any payments made by RIC on behalf of the Plan 
or any reimbursements of such amounts to RIC by the Plan beyond that 
which is proposed herein.
---------------------------------------------------------------------------

    Pursuant to an amendment of PTE 80-26, effective as of December 15, 
2004, any loan or extension of credit the proceeds of which are used 
for the payment of ordinary operating expenses that are entered into on 
or after April 7, 2006, and that have a term of sixty (60) days or 
longer must be made pursuant to a written loan agreement that contains 
all of the material terms of such loan or extension of credit. Any loan 
or extension of credit made for a purpose incidental to the ordinary 
operation of a plan that has a term of sixty (60) days or longer must 
also be made pursuant to a written loan agreement that contains all of 
the material terms of such loan or extension of credit.
    7. After the December 15, 2004, amendment to PTE 80-26 and after 
April 6, 2006, the effective date of the requirement for a written loan 
agreement for certain loans, RIC continued to make payments to service 
providers on behalf of the Plan and to seek reimbursements of such 
payments from the Plan, pursuant to the accounting procedure which is 
described in paragraph number 4, above. In this regard, on and after 
April 7, 2006, it is represented that any payments made on behalf of 
the Plan by RIC to service providers with a term of sixty (60) days or 
longer were not made pursuant to written loan agreements that contained 
all of the material terms of such loan or extension of credit.
    On or about June 2, 2009, during the course of audits for the Plan 
Years ending August 31, 2007, and August 31, 2008, Deloitte, the 
auditor of the Plan, brought to the attention of RIC the amendment to 
PTE 80-26, effective December 15, 2004. It is represented by the 
applicant that after the amendment to PTE 80-26, the accounting 
procedure employed by RIC no longer met the requirements of PTE 80-26, 
with respect to the payments by RIC on behalf of the Plan to service 
providers (and subsequent reimbursements to RIC by the Plan of such 
payments).
    8. Upon consultation with its legal counsel, Greenberg Traurig, 
LLP, RIC determined that the subject transactions are similar to the 
terms of a revolving note which typically must be paid down on at least 
an annual basis. It is represented that RIC evaluated payments made by 
RIC on behalf of the Plan to certain service providers and the 
subsequent receipt of reimbursements by RIC from the Plan and 
determined that any such payments made on behalf

[[Page 56574]]

of the Plan by RIC which were reimbursed within sixty (60) days 
complied with PTE 80-26. In this regard, the applicant represents that 
there were no reimbursements made on the sixtieth (60th) day following 
the date of any such payments.\10\
---------------------------------------------------------------------------

    \10\ The Department, herein, is expressing no views on the 
conclusions reached regarding the application of PTE 80-26 to these 
amounts.
---------------------------------------------------------------------------

    RIC determined that the receipt by RIC from the Plan of 
reimbursements more than a year after the date of such payments were 
not exempted by PTE 80-26 and that the amount of such payments 
reimbursed to RIC by the Plan should be returned by RIC to the Plan. 
The total amount RIC returned to the Plan on August 28, 2009, is 
represented to have been $110,711, plus lost earnings in the amount of 
$766.96 for a total of $111,477.96. In addition, Form 5330 was 
completed by RIC, filed on September 2, 2009, by RIC with a check in 
the amount of $115.04 to the IRS, as payment of excise taxes due. It is 
represented that the excise taxes were calculated on the $766.96 of 
interest on the amount of $110,711 returned to the Plan by RIC.
    9. It is represented that the total amount of the payments made by 
RIC on behalf of the Plan after April 7, 2006, which were reimbursed to 
RIC by the Plan sixty (60) days or more after the date of each such 
payment is $886,383. After RIC returned $110,711 to the Plan on August 
28, 2009, as described in paragraph number 8, above, in connection with 
the filing by RIC of Form 5330, the amount for which relief is 
requested is $775,672 (i.e., $886,383 minus $110,711).
    Notwithstanding the applicant's request for relief for certain 
payments made by RIC on behalf of the Plan and certain reimbursements 
received by RIC from the Plan in the amount of $775,672, the Department 
is proposing relief for $701,117. In this regard, of the $775,672 for 
which the applicant requested relief, the Department has disallowed, 
for various reasons discussed in the paragraphs immediately below, 
payments made by RIC on behalf of the Plan and reimbursement received 
by RIC from the Plan totaling $74,555. Accordingly, RIC has agreed to 
refund to the Plan an amount equal to $74,555 with interest calculated 
using the Department's online calculator. Further, within ninety (90) 
days of the publication in the Federal Register of the final exemption 
for the transactions which are proposed, herein, RIC will file Form 
5330 with the IRS and pay any excise taxes, deemed to be due and owing 
on such Refund Amount.
    Specifically, the Department is not proposing relief for certain 
payments made by RIC to Monticello, an investment advisor/manager to 
RIC and to the Plan, in the amount of $55,500 that was reimbursed to 
RIC by the Plan. In this regard, rather than the actual cost of 
services provided to the Plan by Monticello, the amount of payments 
made by RIC to Monticello represented an estimated 15 percent (15%) 
allocation of the cost for the investment management consulting 
services provided by Monticello both to the Plan and to RIC.
    Further, the Department is not proposing relief for a certain 
payment made by RIC to the Department in the amount of $150 that was 
reimbursed to RIC by the Plan. In this regard, the applicant did not 
provide documentation that such amount was a Plan expense.
    In addition the Department is not proposing relief for payments 
made by RIC to the IRS that was reimbursed to RIC by the Plan in the 
amount of $375 for fees for a Voluntary Correction Program filing which 
has been deemed a ``settlor function,'' as set forth on January 18, 
2001, in Advisory Opinion 2001-01A (AO 2001-01).\11\
---------------------------------------------------------------------------

    \11\ In AO 2001-01, the Department expressed its view that in 
the context of tax-qualification activities, that ``the formation of 
a plan as a tax-qualified plan is a settlor activity for which a 
plan may not pay. Where a plan is intended to be a tax-qualified 
plan, however, implementation of this settlor decision may require 
plan fiduciaries to undertake activities relating to maintaining the 
plan's tax-qualified status for which a plan may pay reasonable 
expenses (i.e., expenses reasonable in light of the services 
rendered). Implementation activities might include drafting plan 
amendments required by changes in the tax law, nondiscrimination 
testing, and requesting IRS determination letters. If, on the other 
hand, maintaining the plan's tax-qualified status involves analysis 
of options for amending the plan from which the plan sponsor makes a 
choice, the expenses incurred in analyzing the options would be 
settlor expenses.''
---------------------------------------------------------------------------

    Finally, the Department is not proposing relief for certain 
payments made by RIC to Deloitte, an accountant for the Plan and for 
RIC, in the amount of $18,530 that was reimbursed to RIC by the Plan. 
The $18,530 amount consists of overrun charges of $14,530 and out-of-
pocket expenses of $4,000 which were paid to Deloitte by RIC and then 
subsequently reimbursed to RIC by the Plan. The Department is not 
proposing relief for the $14,530 paid by RIC on behalf of the Plan and 
subsequently reimbursed to RIC by the Plan, because, RIC does not have 
a specific invoice to document this amount was a Plan audit expense. 
Further, the Department is not proposing relief for an additional 
$4,000 in out-of-pocket expenses paid to Deloitte by RIC on behalf of 
the Plan and subsequently reimbursed to RIC by the Plan. In this 
regard, RIC has failed to sufficiently document that the $4,000 amount 
represented the correct allocation of out-of-pocket expenses to the 
Plan.
    10. The Department has determined to provide relief, herein, for 
Advances made by RIC on behalf of the Plan, during the period from 
September 28, 2006, through June 2, 2009, and which were reimbursed to 
RIC by the Plan, at least sixty (60) days but no more than 365 days 
from the date of each such Advance to the following Service Providers 
in the following amounts:
    (a) For Advances to Hewitt by RIC and for reimbursements of such 
Advances by the Plan to RIC in an amount totaling $478,857;
    (b) For Advances to IRS by RIC and for reimbursements of such 
Advances by the Plan to RIC in amounts totaling $700, provided that 
such Advances were not expenses associated with settlor functions, as 
set forth in AO 2001-01;
    (c) For Advances for the payment of premiums to the PBGC by RIC and 
to reimbursements of such Advances by the Plan to RIC in amounts 
totaling $139,060, where the payment of PBGC premiums by a plan is 
permitted under Title IV of the Act; \12\ and
---------------------------------------------------------------------------

    \12\ Section 4007(a) of Title IV of the Act provides, in part, 
that the ``designated payor'' of each plan shall pay premiums 
imposed by the PBGC when they are due. Section 4007(e)(1)(A) of 
Title IV of the Act defines the term, ``designated payor,'' to mean 
either the ``contributing sponsor'' or the plan administrator, in 
the case of a single-employer plan. Section 29 CFR 2610.26(a) of the 
PBGC regulations clarifies that both the plan administrator and the 
contributing sponsor of a single employer plan are liable for 
premiums. With respect to ongoing plans, the PBGC has interpreted 
these provisions to permit the payment of premiums from plan assets.
---------------------------------------------------------------------------

    (d) For Advances to Deloitte by RIC and to reimbursements by the 
Plan to RIC in amounts totaling $82,500.
    11. It is represented that the total amount of Advances which were 
made on behalf of the Plan by RIC to the Service Providers during the 
period from September 28, 2006, through June 2, 2009, and which were 
reimbursed to RIC by the Plan at least sixty (60) days but not more 
than 365 days after the date of each such Advance is $701,117.
    12. The applicant represents that the transactions which are the 
subject of this proposed exemption were in the interest of the Plan, 
because the Advances made by RIC to the Service Providers on behalf of 
the Plan, permitted the Plan to keep in the trust, until such time as 
the Advances were

[[Page 56575]]

reimbursed to RIC by the Plan, such amounts as would otherwise have 
been payable to such Service Providers. In addition, it is represented 
that the Plan retained any earnings and interest made from the amounts 
that remained invested in the trust for a longer period of time than 
were the Plan to have paid off expenses directly to the Service 
Providers as each such expense became due. Further, it is represented 
that there is no cost to the Plan, because RIC did not charge interest 
or fees to the Plan in connection with the transactions which are the 
subject of this proposed exemption.
    13. The applicant represents that the proposed exemption is 
feasible. In this regard, relief is requested for a finite number of 
Advances that occurred for the period from September 28, 2006, through 
June 2, 2009.
    14. The applicant represents that the proposed exemption provides 
sufficient safeguards for the protection of the Plan and its 
participants and beneficiaries. In this regard, it is represented that 
all of the requirements of PTE 80-26, as amended, effective December 
15, 2004, were satisfied for the period from September 28, 2006, 
through June 2, 2009, except for the requirement, as set forth in 
Section IV (f)(1) of PTE 80-26, as amended. In this regard, Section IV 
(f)(1) of PTE 80-26 requires that loans made on or after April 7, 2006, 
with a term of sixty (60) days or longer must be made pursuant to a 
written loan agreement that contains all of the material terms of such 
loan.
    In addition, Deloitte, an independent, qualified auditor: (a) 
Obtained a schedule prepared by Plan management (the Schedule) of Plan 
expenses, for the period September 28, 2006, through June 2, 2009, 
which were paid by RIC on behalf of the Plan; (b) tested the arithmetic 
accuracy of the Schedule and noted no errors; (c) reconciled each 
amount on the Schedule to a corresponding amount posted on RIC's 
miscellaneous receivables ledger and noted no differences; and (d) for 
all Plan reimbursements to RIC listed on the Schedule, reconciled the 
amount and date to a copy of the wire transfer to RIC's bank statement 
and noted no differences.
    15. It is represented that on September 1, 2009, RIC entered into 
an interest-free written revolving loan agreement for a principal 
amount of $1 million or such lesser amount as shall be advanced from 
time to time. Such principal amount must be paid in full at least 
annually by the month of August, or as soon as administratively 
practicable thereafter. The principal may be prepaid in whole or in 
part at any time without penalty. All payments are applied to reduce 
the principal amount in the order of the earliest to the latest of the 
payments advanced by RIC. RIC has not sought relief for such future 
transactions in reliance on the belief that this revolving loan 
agreement between the RIC and the Plan satisfies the requirements of 
PTE 80-26.\13\
---------------------------------------------------------------------------

    \13\ The Department is offering no view herein, as to whether 
the entry into a revolving loan agreement between RIC and the Plan 
is covered by the relief available under PTE 80-26, as amended, nor 
is the Department opining as to whether the entry into such a 
revolving loan agreement satisfies the conditions of PTE 80-26, as 
amended. Further, the Department is not providing, herein, any 
relief with respect to the entry between RIC and the Plan into any 
revolving loan agreement.
---------------------------------------------------------------------------

    16. In summary, the applicant represents that the subject 
transactions satisfy the statutory criteria of section 408(a) of the 
Act and section 4975(c)(2) of the Code because:
    (a) During the period from September 28, 2006, through June 2, 
2009, when RIC made each of the Advances and during the period of at 
least sixty (60) days but no more than 365 days after the date of each 
such Advance, when RIC received each of the reimbursements, all of the 
requirements of PTE 80-26, as amended, effective December 15, 2004, 
were satisfied, except for the requirement, as set forth in Section IV 
(f)(1) of PTE 80-26;
    (b) With regard to any reimbursement covered by the proposed 
exemption, Deloitte, an independent, qualified auditor certifies that 
such reimbursement matches each of the Advances, during the period from 
September 28, 2006, through June 2, 2009, made by RIC to the Service 
Providers on behalf of the Plan; and such reimbursements were made by 
the Plan to RIC during the period at least sixty (60) days but no more 
than 365 days after the date of each such Advance;
    (c) The Advances made by RIC to the Service Providers, during the 
period from September 28, 2006, through June 2, 2009, were for the 
payment of ordinary operating expenses of the Plan which were properly 
incurred on behalf of the Plan;
    (d) Within ninety (90) days of the publication in the Federal 
Register of the final exemption for the transactions which are the 
subject of this proposed exemption, RIC will refund to the Plan an 
amount equal to $74,555. Such Refund Amount represents the total for 
certain reimbursements to RIC by the Plan in connection with payments 
by RIC to Monticello, Deloitte, IRS, and the Department in amounts, 
respectively of $55,500, $18,530, $375, and $150. Furthermore, RIC will 
refund to the Plan an additional amount attributable to lost earnings 
experienced by the Plan on the Refund Amount, and interest on such lost 
earnings, for the period from April 7, 2006, to the date upon which RIC 
has returned to the Plan the entire Refund Amount, the lost earnings on 
such Refund Amount, plus interest on such lost earnings. For the 
purpose of calculating the lost earnings on the Refund Amount due to 
the Plan, plus interest, on such lost earnings, RIC will use the Online 
Calculator for the Voluntary Fiduciary Correction Program that appears 
on the Web site of the Employee Benefits Security Administration; and
    (e) Within ninety (90) days of the publication in the Federal 
Register of the final exemption for the transactions which are the 
subject of this proposed exemption, RIC must file a Form 5330 with the 
IRS and pay to the IRS all applicable excise taxes, and any interest on 
such excise taxes deemed to be due and owing with respect to the Refund 
Amount.

Notice to Interested Persons

    The persons who may be interested in the publication in the Federal 
Register of the Notice of Proposed Exemption (the Notice) include 
participants and beneficiaries of the Plan and retirees receiving 
benefits.
    It is represented that each of these classes of interested persons 
will be notified of the publication of the Notice by first class mail, 
within fourteen (14) days of publication of the Notice in the Federal 
Register. Such mailing will contain a copy of the Notice, as it appears 
in the Federal Register on the date of publication, plus a copy of the 
Supplemental Statement, as required, pursuant to 29 CFR 2570.43(b)(2), 
which will advise all interested persons of their right to comment and 
to request a hearing.
    All written comments and/or requests for a hearing must be received 
by the Department from interested persons within 44 days of the 
publication of this proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Angelena C. Le Blanc of the 
Department, telephone (202) 693-8540. (This is not a toll-free number.)

Chrysler Group LLC and Daimler AG, Located in Auburn Hills, Michigan 
and Stuttgart, Germany, Respectively

Exemption Application Number D-11603-07.

Proposed Exemption

    The Department is considering granting an exemption under the

[[Page 56576]]

authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA or the Act), and section 4975(c)(2) of 
the Internal Revenue Code of 1986, as amended (the Code), and in 
accordance with the procedures set forth in 29 CFR Part 2570, Subpart B 
(55 FR 32836, 32847, August 10, 1990).\14\
---------------------------------------------------------------------------

    \14\ For purposes of this proposed exemption, references to 
section 406 of ERISA should be read to refer as well to the 
corresponding provisions of section 4975 of the Code.
---------------------------------------------------------------------------

Section I--Chrysler Group Transactions
    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(A) and 406(b)(1) and (2) of ERISA and the sanctions resulting 
from the application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) and (E) of the Code, shall not apply to the contribution 
(the Contribution) of notes issued by Daimler AG (the Daimler Notes) by 
Chrysler Group LLC (Chrysler Group) to certain employee benefit plans 
sponsored by the Chrysler Group (the Plans), provided that the 
conditions set forth in section III have been met.
Section II--Daimler AG Transactions
    If the proposed exemption is granted, the restrictions of section 
406(a)(1)(A) and (B) of ERISA, and the sanctions resulting from the 
application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) and (B) of the Code, shall not apply to the issuance by 
Daimler of the Daimler Notes for purposes of the Contributions pursuant 
to an agreement that was previously entered into while Daimler was a 
party-in-interest to the Plans, provided that the condition set forth 
in section IV is met.

Section III--Conditions Applicable to Section I

    (a) The terms of each Contribution are consistent with the terms 
set forth in a settlement agreement (the Settlement Agreement), 
effective as of June 5, 2009, between/among CG Investment Group, LLC, 
CG Investor, LLC, Chrysler Holding LLC, CARCO Intermediate HOLDCO I 
LLC, Chrysler LLC, Daimler AG, Daimler North America Finance 
Corporation, Daimler Investments US Corporation, and the Pension 
Benefit Guaranty Corporation (the PBGC). Notwithstanding the above, and 
also for purposes of condition (c) below, the terms of the 
Contributions shall not be viewed as being inconsistent with the terms 
of the Settlement Agreement solely because the Contributions take into 
account the March 1, 2010 merger (the Merger) of the Global Engineering 
Manufacturing Alliance UAW Pension Plan into the Pension Agreement 
between Chrysler Group LLC and the UAW, which occurred after the 
effective date of the Settlement Agreement;
    (b) The fair market value of each Daimler Note will be determined 
as of the date of the Contributions, by a qualified independent 
appraiser;
    (c) The fair market value of each Daimler Note contributed to a 
Plan will represent an amount that equates to the amount contemplated 
for such Plan under the Settlement Agreement;
    (d) Each Daimler Note will represent not more than 20% of the total 
fair market value of the Plan that receives such Note at the time of 
its Contribution;
    (e) Each Plan may immediately sell the Daimler Note it receives 
pursuant to a Contribution, except that neither Chrysler Group nor any 
of its affiliates or subsidiaries may be a party to such sale. 
Notwithstanding the above, restrictions may be imposed on a Plan's 
ability to sell its Daimler Note if such restrictions are required 
under State or Federal securities laws or otherwise required by the 
terms of such Daimler Note;
    (f) The Plans do not waive any rights or claims in connection with 
the Contributions;
    (g) The Plans do not pay any fees, costs, or other charges in 
connection with the Contributions; and
    (h) Chrysler Group shall provide the PBGC with written evidence 
that Chrysler Group: (1) Contributed the Daimler Notes to the Plans; 
and (2) gave the Plans' trustee instructions regarding the allocation 
of the Daimler Notes. Such written evidence must be provided within 
five business days after the receipt by Chrysler Group of such Notes.

Section IV--Conditions Applicable to Section II

    (a) Daimler's entering into the Daimler Notes is not part of an 
arrangement, agreement, or understanding designed to benefit Daimler.
    Effective Date: If granted, this proposed exemption will be 
effective as of September 16, 2010.

Summary of Facts and Representations

    1. The applicants are Chrysler Group LLC, (Chrysler Group) and 
Daimler AG (Daimler). Chrysler Group is the entity that acquired 
certain of the assets of Chrysler LLC (Chrysler LLC) on June 10, 2009 
in a transaction approved by the United States Bankruptcy Court. 
Chrysler Group sponsors various defined benefit plans (the Plans) which 
cover employees of Chrysler Group and its affiliates.\15\ Chrysler 
Group describes the Plans as: (1) The Chrysler Group LLC Pension Plan, 
with 38,635 participants and beneficiaries and approximately 
$2,712,643,000 in total assets as of April 14, 2010; (2) the JEEP 
Corporation-UAW Retirement Income Plan, with 8,705 participants and 
beneficiaries and approximately $774,824,500 in total assets as of 
April 14, 2010; (3) the Pension Agreement between Chrysler Group and 
the UAW, with 131,604 participants and beneficiaries and approximately 
$11,600,000,000 in total asset as of April 14, 2010; and (4) the 
American Motors Union Retirement Income Plan, with 10,496 participants 
and beneficiaries and approximately $701,639,500 in total assets as of 
April 14, 2010.
---------------------------------------------------------------------------

    \15\ Hereinafter, unless expressly stated otherwise, the term 
``Chrysler Group'' shall mean Chrysler LLC (for events that occurred 
prior to June 10, 2009) or Chrysler Group (for events that occur 
after June 9, 2009).
---------------------------------------------------------------------------

    2. Daimler is an automotive manufacturer with its corporate 
headquarters located in Stuttgart, Germany. Daimler states that, at the 
time the arrangements described below were negotiated, agreed to, and 
entered into, Daimler was a ``party in interest'' to the Plans, as such 
term is defined in section 3(14) of ERISA. In this regard, during that 
period, Daimler had a 19.9% ownership interest in Chrysler LLC: The 
sponsor of the Plans.\16\
---------------------------------------------------------------------------

    \16\ The Applicants represent that, effective as of June 4, 
2009, Daimler redeemed its interest in Chrysler LLC, and, as of that 
date, Daimler was no longer a party in interest to the Plans.
---------------------------------------------------------------------------

    3. Chrysler Group and Daimler (collectively, the Applicants) state 
that, on May 13, 2007, Daimler entered into an agreement with the PBGC 
(the 2007 PBGC Agreement), whereby Daimler agreed to guarantee up to $1 
billion of unfunded liabilities of the Plans if: (i) One or more of the 
Plans were terminated in an involuntary or a distress termination; and 
(ii) upon the occurrence of specified events, including certain 
``change of control'' transactions. In a Binding Term Sheet dated April 
27, 2009 (the Binding Term Sheet), the PBGC agreed to reduce the amount 
of this guarantee to $200 million and, in connection therewith, Daimler 
agreed to pay $600 million directly to the Plans.\17\ The Binding Term 
Sheet provides that these payments are to be made in three equal 
installments of $200 million each, with the second and third 
installments to be made on the first and second anniversaries of the 
date of a final settlement agreement. The Binding Term sheet provided 
further that Chrysler LLC would have no right, title

[[Page 56577]]

or interest in the payments, which were intended to belong exclusively 
and unconditionally to the Plans.
---------------------------------------------------------------------------

    \17\ The Applicants represent that Daimler also obtained 
releases for certain claims that are not relevant to the 
transactions described herein.
---------------------------------------------------------------------------

    4. Chrysler Group represents that, on June 5, 2009, Chrysler LLC 
and various of its shareholders, Daimler and various of its affiliates, 
incorporated the terms of the Binding Term Sheet into a settlement 
agreement (the Settlement Agreement) with the Pension Benefit Guaranty 
Corporation (the PBGC). Chrysler Group states that the Settlement 
Agreement expressly supersedes the Binding Term Sheet. Under the terms 
of the Settlement Agreement, the PBGC agreed to release Daimler from 
its $1 billion guaranty and, in exchange, Daimler agreed to pay $600 
million in three $200 million installments to Chrysler Group (the 
Installment Payments).\18\ Chrysler Group represents that Daimler made 
the first $200 million Installment Payment to Chrysler Group, in cash, 
on June 15, 2009; and Chrysler Group, upon receipt of this payment, 
immediately contributed $200 million in cash to the Plans. Chrysler 
Group represents further that Daimler made a second $200 million 
Installment Payment to Chrysler Group, in cash, on June 7, 2010; and 
Chrysler Group, upon receipt of this payment, immediately contributed 
$200 million in cash to the Plans. Chrysler Group represents that, to 
date, of the $400 million in cash transferred from Chrysler Group by 
the Plans: (1) The JEEP Corporation-UAW Retirement Income Plan received 
approximately $62.8 million; (2) the Pension Agreement between Chrysler 
Group and the UAW received approximately $327.2 million; and (3) the 
American Motors Union Retirement Income Plan received approximately 
$9.6 million. Chrysler Group represents that these amounts were 
determined in accordance with the terms set forth in the Settlement 
Agreement (after taking into account the merging two employee benefit 
plans covered by the Settlement Agreement). Chrysler Group states that 
such apportionment reflects the terms of the Settlement Agreement, and 
takes into account, among other things, certain funding characteristics 
of the Plans.
---------------------------------------------------------------------------

    \18\ Hereinafter, the term ``Chrysler Group'' shall refer also 
to Chrysler LLC.
---------------------------------------------------------------------------

    5. The Settlement Agreement provides that the third Installment 
Payment may be achieved in one of two ways: (1) In the form of a $200 
million cash payment by Daimler to Chrysler Group by June 7, 2011 (the 
Installment Due Date), after which Chrysler Group must immediately 
transfer $200 million in cash to the Plans; or (2) by means of four 
notes issued by Daimler (the Daimler Notes) and delivered to Chrysler 
Group, pursuant to an arrangement whereby Chrysler is obligated to 
immediately contribute the Notes (the Contributions) to the Plans.
    6. Chrysler Group states that the Contributions could be viewed as 
violating sections 406(a)(1)(A) and 406(b)(1) and (b)(2) of ERISA since 
the Contributions would involve an in-kind contribution by Chrysler 
Group to the Plans, which are defined benefit plans. In addition, 
Daimler notes that, when the parties entered into the Binding Term 
Sheet and negotiated the Settlement Agreement, Daimler was a party in 
interest to the Plans. Daimler believes that its agreement to issue the 
Daimler Notes as well as the actual entering into of the Daimler Notes 
under an arrangement whereby the Daimler Notes will be Contributed by 
Chrysler Group to the Plans, as such acts are contemplated by the 
Binding Term Sheet and the Settlement Agreement, could therefore be 
viewed as an impermissible extension of credit or sale or exchange in 
violation of sections 406(a)(1)(A) and (B) of ERISA.
    7. Chrysler Group views the deliverance of the Daimler Notes to 
Chrysler Group for purposes of the Contributions as being more 
beneficial to the Plans than the alternative, which is a cash payment 
by Daimler to Chrysler Group on the Installment Due Date. In this 
regard, Chrysler Group represents that, once a Daimler Note is 
transferred by the Chrysler Group to a Plan, as is required under the 
Settlement Agreement, the obligation under the Note would run directly 
from Daimler to the Plan. Chrysler Group states that this arrangement 
significantly reduces the ability of Chrysler Group's creditors to 
reach the third Installment Payment. Additionally, once a Daimler Note 
is transferred to a Plan, the Plan could immediately sell the Note to 
parties other than Chrysler Group, subject to certain restrictions 
required by applicable securities laws. Accordingly, a Plan may receive 
the proceeds from the sale of a Daimler Note prior to the Installment 
Due Date.
    8. Chrysler Group represents that the Contributions would be 
structured in a manner that is protective of the Plans. In this regard, 
following a Contribution, a Daimler Note will represent not more than 
20 percent of the total fair market value of each Plan that receives 
such Note. Additionally, the Plans will not pay any fees, costs, or 
other charges in connection with the Contributions. Chrysler Group 
represents further that the fair market value of each Daimler Note will 
be determined as of the date of the Contribution, by a qualified 
independent appraiser. In this regard, Chrysler Group has selected 
PriceWaterhouseCoopers (PWC) to determine the fair market value of the 
Daimler Notes. Chrysler Group represents that PWC is independent of 
Chrysler Group, having received less than one percent of its revenue 
from Chrysler Group over the last two fiscal years. In addition, 
Chrysler Group states that PWC anticipates receiving less than one 
percent of its revenue from Chrysler Group during the current fiscal 
year.
    9. Chrysler Group states that the exemption, if granted, will be 
administratively feasible because it involves a finite one-time 
transaction, and Daimler has no ownership in or on-going relationship 
with Chrysler Group or any of its affiliates. According to Chrysler 
Group, the internal fiduciaries of the Plans would have no hesitation 
to enforce the claims of the Plans in the unlikely event that Daimler 
failed to make a payment on the Daimler Note, and the internal 
fiduciaries would have no conflict of interest that could cloud their 
judgment in this regard. Chrysler Group states also that the PBGC, as a 
party to the Settlement Agreement, has the full right on its own 
initiative to enforce the terms of the Settlement Agreement, including 
the obligation of Daimler to make the third $200 million Installment 
Payment to the Plans.
    10. Chrysler Group represent that, in addition to the safeguards 
described above, the Plans will not waive any rights or claims in 
connection with the Contributions. With respect to the issuance by 
Daimler of the Daimler Notes pursuant to an arrangement set forth while 
Daimler was a party-in-interest to the Plans, Daimler states that 
Daimler's entering into the Daimler Note will not be part of an 
arrangement, agreement, or understanding designed to benefit Daimler.
    11. Chrysler Group states that the proposed transactions meet the 
requirements set forth in section 408(a) of ERISA since, among other 
things:
    (a) The terms of each Contribution will be consistent with the 
terms of the Settlement Agreement, after taking into account the 
Merger;
    (b) The fair market value of each Daimler Note will be determined 
as of the date of the Contribution, by a qualified independent 
appraiser;
    (c) The fair market value of each Daimler Note contributed to a 
Plan will represent an amount that equates to the amount contemplated 
for such Plan under the Settlement Agreement, after taking into account 
the Merger;
    (d) Each Daimler Note will represent not more than 20% of the total 
fair

[[Page 56578]]

market value of the Plan that receives such Note at the time of the 
Contribution;
    (e) With only limited exceptions, each Plan may immediately sell 
the Daimler Note it receives pursuant to a Contribution;
    (f) The Plans will not waive any rights or claims in connection 
with the Contributions;
    (g) The Plans will not pay any fees, costs, or other charges in 
connection with the Contributions; and
    (h) Chrysler Group will provide the PBGC with written evidence that 
Chrysler Group: (1) Contributed the Daimler Notes to the Plans; and (2) 
gave the Plans' trustee instructions regarding the allocation of the 
Daimler Notes. Such written evidence will be provided within five 
business days after the receipt by Chrysler Group of such Notes.
    12. Daimler states that the issuance by Daimler of the Daimler 
Notes pursuant to the Settlement Agreement meets the requirements set 
forth in section 408(a) of ERISA since Daimler's entering into the 
Daimler Note will not be part of an arrangement, agreement, or 
understanding designed to benefit Daimler.

Notice to Interested Persons

    Chrysler Group requests that notice be provided by posting a copy 
of the proposed exemption wherever employee notices are posted in the 
work places. In addition, Chrysler Group represents that it will work 
with the UAW, the union representing many of the participants in the 
Plans, to post a copy of the notice in the union halls and arrange for 
a copy of the proposal to be printed in the union newspapers. Chrysler 
Group will also arrange for a copy of the proposed exemption to be 
printed in the local newspapers covering the general vicinity of 
Chrysler Group's current and closed plants and facilities. The notices 
shall advise each recipient of the recipient's right to provide 
comments to the Department and/or to request a hearing with respect to 
the proposed exemption and the due date for any such comments/request.
    Such notice will be completed within 60 days of the issuance of the 
proposed exemption. Any written comments must be received by the 
Department from interested persons within 75 days of the publication of 
this proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Chris Motta of the Department, 
telephone (202) 693-8544. (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;
    (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 10th of September 2010.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2010-23059 Filed 9-15-10; 8:45 am]
BILLING CODE 4510-29-P