EBSA Notices

Exemptions From Certain Prohibited Transaction Restrictions   [12/12/2011]
Federal Register, Volume 76 Issue 238 (Monday, December 12, 2011)
[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Pages 77264-77267]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31742]



Employee Benefits Security Administration

Exemptions From Certain Prohibited Transaction Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.


SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). 
This notice includes the following: D-11661, Bayer Corporation (Bayer 
or the Applicants), PTE 2011-23; L-11618, Oregon-Washington Carpenters 
Employers Apprenticeship and Training Trust Fund (the Plan), PTE 2011-
24: 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

[[Page 77265]]

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.

Bayer Corporation (Bayer or the Applicant) Located in Pittsburgh, PA
[Prohibited Transaction Exemption 2011-23; Exemption Application No. D-


    The restrictions of sections 406(a)(1)(A) and 406(b)(1) and (b)(2) 
of the Act and the sanctions resulting from the application of section 
4975(c)(1)(A) and (E) of the Code, shall not apply, effective September 
14, 2011, to the one-time, in kind contribution (the Contribution) of 
certain U.S. Treasury Bills (the Securities) to the Bayer Corporation 
Pension Plan (the Plan) by the Applicant, a party in interest with 
respect to the Plan, provided that the following conditions are 
    (a) In addition to the Securities, Bayer contributed to the Plan, 
by September 15, 2011, such cash amounts as are needed to allow the 
Plan to attain an Adjusted Funding Target Attainment Percentage (AFTAP) 
of 90%, as determined by the Plan's actuary (the Actuary);
    (b) The fair market value of the Securities was determined by Bayer 
on the date of the Contribution (the Contribution Date) based on the 
average of the bid and ask prices as of 3 p.m. Eastern Time, as quoted 
in The Wall Street Journal on the Contribution Date;
    (c) The Securities represented less than 20% of the Plan's assets.
    (d) The terms of the Contribution were no less favorable to the 
Plan than those negotiated at arm's length under similar circumstances 
between unrelated parties;
    (e) The Plan paid no commissions, costs or fees with respect to the 
Contribution; and
    (f) The Plan fiduciaries reviewed and approved the methodology used 
to value to the Securities and ensured that such methodology was 
properly applied in determining the fair market value of the 

DATES: Effective Date: This exemption is effective as of September 14, 

Written Comments

    In the Notice of Proposed Exemption (76 FR 49795, August 11, 
2011)(the Notice), the Department invited all interested persons to 
submit written comments and requests for a hearing on the Notice within 
forty (40) days of the date of the publication of such Notice in the 
Federal Register. All comments and requests for a hearing from 
interested persons were due by September 20, 2011.
    During the comment period, the Department received over 150 
telephone calls, 15 written comments, which included one from Bayer, 
and 3 requests for a public hearing. The majority of telephone callers 
requested an explanation of the Notice while a minority expressed 
opposition to the granting of the Notice because of concern that the 
Securities were not safe investments for the Plan.
    With respect to the written comments that were submitted by Plan 
participants or beneficiaries, four commenters said they were in favor 
of the Department granting the exemption while ten commenters said they 
were opposed due to concern that the Securities were not a safe 
investment for the Plan. Three such commenters requested that a public 
hearing be convened, but they did not raise any material issues that 
would warrant a hearing.
    The sole substantive written comments received by the Department 
were submitted by 2 commenters in identical letters requesting that 
Bayer explain: (1) Certain benefit restrictions that would be imposed 
on Plan participants in the absence of the Contribution; (2) Bayer's 
rationale for making bonus payments to active employees rather than 
making up Plan losses; and (3) Bayer's rationale for allowing profits 
from its U.S. operations to be taken overseas while neglecting the 
    With respect to their first comment regarding benefit restrictions, 
the commenters asked why Bayer had mentioned the potential restrictions 
of sections 206(g) of the Act and section 436(d)(3) of the Code in its 
application, which would limit lump sum payments to 50% of the 
participant's benefit and would defer Plan Social Security level income 
payouts. In response, to the commenters' concern, Bayer stated that the 
Pension Protection Act required it to fund a minimum required amount 
based on an actuarial calculation, which for Plan Year 2010 was 
approximately $13 million. Consistent with past practice, Bayer 
explained that its goal for Plan Year 2010 was to fund the Plan at 90% 
or greater AFTAP level. To reach this objective, Bayer said it would 
contribute $300 million in Securities to the Plan. As a result, Bayer 
believed the exemption would benefit the participants by adding an 
extra $285 million of value into the Plan above the minimum funding 
    In their second comment, the commenters asked Bayer why it had paid 
out generous bonuses to all active employees over the last two years 
instead of paying lost monies when the Plan had investment losses of 
28% in 2008. In response, Bayer explained that it would meet its 
minimum funding obligation requirement for Plan Year 2010. Since 2008, 
Bayer noted that it had consistently exceeded the minimum funding 
requirement. Bayer also explained it had an obligation to pay bonuses 
in order to attract and retain talent.
    In their third comment, the commenters questioned why Bayer had 
been allowed to take profits made from its U.S. operations out of the 
country, when the Plan had not been paid up to the extent required. In 
response, Bayer explained that since 2008, it has exceeded the funding 
requirements irrespective of its financial performance.

The Applicant's Comment

    Bayer submitted a written comment requesting certain clarifications 
to the Notice. First, in order to comply with the wishes of its Tax 
Department, Bayer requested that it be allowed to make the

[[Page 77266]]

Contribution on September 14, 2011 instead of September 15, 2011.
    The Department concurred with this date change shortly before the 
Contribution and it has revised the grant notice in the operative 
language in the transaction description and in the section captioned 
``Effective Date'' to reflect the actual Contribution date of September 
14, 2011. The Department also notes a corresponding change to the 
Notice on page 49796 in Representation 13.
    Second, Bayer requested that on page 49795, Representation 2 of the 
Notice should be amended to state that the Plan had total assets of 
``$2,126,444,422'' instead of ``$2,126,444,442.'' In response, the 
Department notes this revision to Representation 2 of the Notice.
    Third, Bayer requested that the heading ``Plan Funding for Plan 
Year 2011'' on page 49795 of the Notice be modified to read ``Plan 
Funding for Plan Year 2010'' instead. The Department notes this change 
to page 49795 of the Notice.
    Fourth, Bayer requested that on page 49795 of the Notice, the first 
sentence of Representation 4, which states that the AFTAP funding level 
for the Plans ranges from ``90% to 96%'' should be changed to ``90% to 
98%.'' The Department notes this modification to Representation 4 of 
the Notice.
    Fifth, Bayer requested that on page 49796 of the Notice, the third 
sentence of Representation 12 which reads: ``The Applicant states that 
the proposed Contribution also would violate sections 406(b)(1) and (2) 
of the Act,'' should be revised by changing the words ``would violate'' 
to ``may implicate.'' In response to this comment, the Department 
disagrees with this modification requested by Bayer because the 
Contribution would have constituted a violation of section 406(b)(1) 
and (2) of the Act, absent an administrative exemption. Accordingly, 
the Department has not noted this clarification to the Notice.

Contribution Amount Discrepancy

    At the Department's request, Bayer confirmed that it had made the 
Contribution to the Plan on September 14, 2011. The face value of the 
Securities as of 3 p.m. Eastern Time on September 14, 2011 was 
$299,997,330. Bayer contributed an additional $2,670 in cash to bring 
the Contribution to $300,000,000. Then, Bayer made an additional cash 
contribution of $4,997,330 to the Plan. Bayer represented that the 
Contribution and the additional cash contribution raised the Plan's 
AFTAP to 92.56%. However, the total cash contribution of $5,000,000 
differed from the estimated $58 million cash contribution discussed in 
Representation 14 of the Notice. This discrepancy concerned the 
Department, which requested a written explanation from Bayer.
    Subsequently, Bayer submitted an explanation prepared by the Plan's 
Actuary, which attributed this discrepancy to in large part to 2010 
investment returns of approximately 14% instead of the assumed 8% rate 
of return. Additional factors considered by the Plan's Actuary included 
the use of actual census data and the reflection of updated prescribed 
assumptions, including an actual 6.29% effective interest rate instead 
of an assumed 6.20% effective interest rate. As a result, Bayer had 
only to contribute approximately $305 million in cash and the 
Securities to obtain an AFTAP of 92.56%.
    The Department reviewed the Actuary's explanation, the Actuary's 
Plan estimates as of November 1, 2010, the Bayer Corporation Pension 
Plan Actuarial Valuation Report for Plan Year Beginning January 1, 2011 
(the Actuary's Report), the Actuary's Report for Plan Year Beginning 
January 1, 2010, and supporting memoranda. The Department used the 
submitted information to estimate what would have been (1) the Plan's 
assets as of January 1, 2011, (2) the funding target, and (3) the 
funding target asset percentage, based on the Plan's investment rate of 
return for 2010 and the effective interest rate for 2011, that were 
assumed by the Plan's Actuary when it prepared the November 1, 2010 
estimates of the then estimated $358 million contribution. Based on the 
Department's findings, the lowering of the funding contribution by $50 
million to a total contribution of $308 million (which also included a 
$3.5 million cash contribution that Bayer made to the Plan in January 
2011), seemed reasonable.
    Accordingly, after giving full consideration to the entire record, 
including the Applicant's written comments and the written comments and 
requests for a public hearing submitted by Plan participants and 
beneficiaries, the Department has determined to grant the exemption as 
clarified herein. For a more complete statement of the facts and 
representations supporting the Department's decision to grant this 
exemption, refer to the Notice published on August 11, 2011 at 76 FR 

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

Oregon-Washington Carpenters Employers Apprenticeship and Training 
Trust Fund (the Plan) Located in Portland, Oregon

[Prohibited Transaction Exemption 2011-24; Exemption Application No. L-


    The restrictions of sections 406(a)(1)(A) and (D) of the Act, shall 
not apply to the sale by the Plan of certain unimproved real property 
known as ``Tax Lot 300'' and ``Tax Lot 400'' (together, the Tax Lots or 
the Property), to the Pacific Northwest Regional Council of Carpenters 
(the Union), a party in interest with respect to the Plan, provided 
that the following conditions are satisfied:
    (a) The sale is a one-time transaction for cash;
    (b) At the time of the sale, the Plan receives the greater of 
either: (1) $390,000; or (2) the fair market value of the Property as 
established by a qualified, independent appraiser in an updated 
appraisal of such Property on the date of the sale;
    (c) The Plan pays no fees, commissions or other expenses associated 
with the sale;
    (d) The terms and conditions of the sale are at least as favorable 
to the Plan as those obtainable in an arm's length transaction with an 
unrelated third party;
    (e) The Plan trustees appointed by the Union recuse themselves from 
discussions and voting with respect to the Plan's decision to enter 
into the proposed sale; and
    (f) The Plan trustees appointed by the employer associations, who 
have no interest in the proposed sale, (1) determine, among other 
things, whether it is in the best interest of the Plan to proceed with 
the sale of the Property; (2) review and approve the methodology used 
in the appraisal that is being relied upon; and (3) ensure that such 
methodology is applied by the qualified, independent appraiser in 
determining the fair market value of the Property on the date of the 
    For a complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on September 26, 2011 in the 
Federal Register at 76 FR 59438.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department at 
(202) 693-8556. (This is not a toll-free number.)

[[Page 77267]]

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 7th day of December, 2011.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2011-31742 Filed 12-9-11; 8:45 am]