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EBSA Notices

Exemptions From Certain Prohibited Transaction Restrictions   [1/19/2012]
[PDF]
Federal Register, Volume 77 Issue 12 (Thursday, January 19, 2012)
[Federal Register Volume 77, Number 12 (Thursday, January 19, 2012)]
[Notices]
[Pages 2761-2764]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-930]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Exemptions From Certain Prohibited Transaction Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). 
This notice includes the following: PTE 2012-01, D-11676, The Kemper 
Corporation Pension Plan (the Plan); PTE 2012-02, D-11683, First 
Federal Bancshares of Arkansas, Inc. Employees' Savings and Profit 
Sharing Plan (the Plan); PTE 2012-03, L-11647, R+L Carriers Shared 
Services, LLC, et al.

SUPPLEMENTARY INFORMATION: A notice was published in the Federal 
Register of the pendency before the Department of a proposal to grant 
such exemption. The notice set forth a summary of facts and 
representations contained in the application for exemption and referred 
interested persons to the application for a complete statement of the 
facts and representations. The application has been available for 
public inspection at the Department in Washington, DC. The notice also 
invited interested persons to submit comments on the requested 
exemption to the Department. In addition the notice stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicant has represented that it has 
complied with the requirements of the notification to interested 
persons. No requests for a hearing were received by the Department. 
Public comments were received by the Department as described in the 
granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, effective December 31, 
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue exemptions of the type proposed to the Secretary of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

The Kemper Corporation Pension Plan (the Plan) Located in Chicago, 
Illinois

[Prohibited Transaction Exemption 2012-01; Exemption Application Number 
D-11676]

Exemption

    The restrictions of section 406(a)(1)(A) and (D), and 406(b)(1) and 
(2) of the Act and the sanctions resulting from the application of 
section 4975 of the Code, by reason of section 4975(c)(1)(A), (D) and 
(E) of the Code, shall not apply, effective September 1, 2011, to the 
one-time, in-kind contribution (the Contribution) of shares of the 
common stock of Intermec, Inc. (the Stock) to the Kemper Corporation 
Pension Plan (the Plan) \1\ by the Kemper Corporation (Kemper or the 
Applicant), a party in interest with respect to the Plan, provided that 
the following conditions are satisfied:
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    \1\ Prior to August 25, 2011, the Plan was known as the Unitrin, 
Inc. Pension Plan.
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    (a) The Applicant makes cash contributions to the Plan to the 
extent that the cumulative proceeds from the sale of the Stock at each 
contribution due date (determined under section 303(j) of the Act) are 
less than the cumulative cash contributions the Applicant would have 
been required to make to the Plan, in the absence of the Contribution. 
Such cash contributions shall be made until all of the Stock 
contributed to the Plan is sold;
    (b) The Applicant contributes to the Plan such cash amounts as are 
needed

[[Page 2762]]

for the Plan to attain an Adjusted Funding Target Attainment Percentage 
(AFTAP) of at least 80% as of January 1, 2012, as determined by the 
Plan's actuary (the Actuary), without taking into account any unsold 
Stock as of April 1, 2012;
    (c) Solely for purposes of determining the Plan's minimum funding 
requirements, AFTAP and funding target attainment percentage, the 
Actuary will not count as a Plan asset any Stock that has not been 
liquidated as a contribution to the Plan;
    (d) For purposes of determining Plan contribution amounts, the 
Stock shall be considered a contribution only at the time it is sold, 
with the contribution amount being the lesser of the proceeds from the 
sale of the Stock, or the value of the Stock on the date of the 
Contribution as determined by the Independent Fiduciary described 
below;
    (e) The Stock represents no more than 20% of the fair market value 
of the total assets of the Plan at the time it is contributed to the 
Plan;
    (f) The Plan pays no commissions, costs or other expenses in 
connection with the contribution, holding or subsequent sale of the 
Stock and any such expenses paid by the Applicant are not treated as a 
contribution to the Plan;
    (g) The terms of the Contribution between the Plan and the 
Applicant are no less favorable to the Plan than terms negotiated at 
arm's length under similar circumstances between unrelated parties;
    (h) The Independent Fiduciary represents the interests of the Plan, 
the participants and beneficiaries with respect to the Contribution;
    (i) The Independent Fiduciary determines that the Contribution is 
in the interests of the Plan and of its participants and beneficiaries 
and is protective of the rights of participants and beneficiaries of 
the Plan; and
    (j) The Independent Fiduciary monitors the transaction on a 
continuing basis and takes all appropriate actions to safeguard the 
interests of the Plan to ensure that the transaction remains in the 
interests of the Plan, and, if not, takes appropriate action available 
under the circumstances.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on September 26, 2011 at 76 
FR 59434.
    Effective Date: This exemption is effective as of September 1, 
2011.

Written Comments and Hearing Requests

    During the comment period, the Department received approximately 70 
telephone calls and six written comments in response to the notice of 
proposed exemption. None of the interested persons who contacted the 
Department requested a hearing. With one exception (discussed below), 
the telephone calls and written comments raised no substantive issues, 
but rather reflected the commenters' failure to fully understand the 
notice of proposed exemption. The Department provided explanations to 
each of the commenters by telephone, and each was satisfied with the 
responses provided by the Department.
    One comment letter raised four questions and/or substantive issues. 
The Department asked the Applicant and the Independent Fiduciary, 
Fiduciary Counselors Inc., to respond to the issues and questions 
raised.
    The commenter first inquired as to how Kemper acquired the Stock 
from its affiliate, Trinity Universal Insurance Company (Trinity). The 
Applicant responded that Kemper acquired the shares of Intermec from 
Trinity via a cash transaction. Trinity received approximately $50.8 
million in cash for the shares of the Stock sold to Kemper.
    The commenter then inquired if there were other subsidiaries of 
Kemper that own shares of the Stock. The Applicant responded that no 
other subsidiaries of Kemper own any shares of the Stock.
    The third issue raised was that while the Independent Fiduciary 
determined that the Contribution is in the best interests of the Plan 
and its participants and beneficiaries, the commenter stated that there 
was no detail in the notice of proposed exemption to support this 
statement. The Independent Fiduciary responded to this by describing 
the protections that were written into the proposed exemption as 
conditions, citing in particular conditions (a) through (d) of the 
operative language above.
    The Independent Fiduciary then confirmed that it performed a 
financial analysis of Intermec and the Stock to determine if the 
Contribution was an acceptable investment in the Plan. The Independent 
Fiduciary represents that Intermec is a global business that designs, 
develops, integrates sells and resells wired and wireless automated 
identification and data collection products and related services. Its 
products include mobile computers, bar code scanners, printers, label 
media and radio frequency identification products and related software. 
Additionally, due to its acquisition of Vocollect in the first quarter 
of 2011, its products now include voice data and collection terminals. 
Intermec also offers services related to its product offerings such as 
training and repair services. Most of its revenue is currently 
generated through sales of mobile computers, barcode scanners, printers 
and repair services.
    Intermec has, according to its President and CEO, transformed its 
business in recent years from that of a hardware company to a company 
which provides mobile business solutions. The Independent Fiduciary 
states that even while Intermec has repositioned itself in the market 
place, its balance sheet remains strong. As of December 31, 2010, 
assets totaled $749 million, while liabilities were only $288 million, 
with stockholders' equity at $461 million, representing about 62% of 
the assets. As of July 3, 2011, assets increased to $870 million and 
liabilities totaled $414 million. Stockholders' equity of $455 million 
was 52% of assets. During the quarter, Intermec borrowed $77 million 
under its $100 million credit facility. (Intermec had borrowed $97 
million to fund the acquisition of Vocollect and had repaid $20 million 
as of the end of the second quarter.) This $77 million represents only 
9% of total assets and the debt to equity ratio is just 17%.
    The comment letter also asked the Independent Fiduciary if it would 
recommend to a pension plan the purchase of such a large number of 
shares of a stock that does not pay any dividends to that plan. The 
Independent Fiduciary responded that a dividend, or lack of a dividend, 
is not a determinate of whether a stock is an acceptable investment 
under ERISA. The letter also asked the Independent Fiduciary whether a 
pension plan should have 13.5% of its assets invested in one stock or 
own more than 10% of any one company. The Independent Fiduciary 
responded that it reviewed the Plan's Investment Policy to ensure that 
the Contribution would be an acceptable investment for the Plan. The 
Investment Policy permits investments in individual stocks. The 
Independent Fiduciary did note that this asset would account for a 
greater percentage of the portfolio than is typical for a single asset. 
However, as the proposed exemption requires liquidation of the Stock 
over a relatively short time period, and the conditions agreed to by 
Kemper provide effective downside protection with respect to the 
Contribution, the Independent Fiduciary determined that it was 
permissible for the Contribution to temporarily overweight the Plan's 
portfolio.

[[Page 2763]]

    The final set of questions raised by the comment letter concerned 
whether the Applicant would incur all of the costs associated with the 
transaction. The Applicant confirmed that one of the conditions of the 
proposed exemption is that Kemper will pay all commissions, costs or 
other expenses in connection with the Contribution, holding or 
subsequent sale of the Stock. Thus, the Plan will not bear any of the 
costs associated with the transaction.
    The commenter also questioned what is to be gained by contributing 
the Stock to the Plan, as opposed to having Trinity sell the Stock, 
dividend the proceeds to Kemper and have Kemper put cash into the Plan. 
The Applicant responded that the participants in the Plan are better 
off having the Stock in the Plan because the Contribution is 
substantially in excess of the required minimum contributions. The 
proposed exemption is structured so that the Contribution only counts 
for funding purposes once the Stock has been liquidated by the Plan. 
The representations made by Kemper, as detailed in the proposed 
exemption, effectively eliminate any downside to the Plan from the 
Contribution. If the Stock were retained by Trinity, the participants 
would have no guarantee that the Plan would receive the proceeds from 
the sale of the Stock.
    The Department has given full consideration to the entire record, 
including the comment letter received and the responses by the 
Applicant and the Independent Fiduciary thereto. The Department has 
determined to grant the exemption as it was proposed.
    For Further Information Contact: Gary H. Lefkowitz of the 
Department, telephone (202) 693-8546. (This is not a toll-free number.)

First Federal Bancshares of Arkansas, Inc. Employees' Savings and 
Profit Sharing Plan (the Plan) Located in Harrison, Arkansas

[Application No. D-11683; Prohibited Transaction Exemption No. 2012-02]

Exemption

Section I: Transactions

    Effective May 10, 2011, the restrictions of sections 406(a)(1)(A), 
406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407(a)(1)(A) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1)(A) and 4975(c)(1)(E) of the 
Code,\2\ shall not apply:
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    \2\ For purposes of this 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 the acquisition of certain rights (the Rights) by the Plan 
in connection with an offering (the Offering) of shares of the common 
stock (the Stock) of First Federal Bancshares of Arkansas, Inc. 
(Bancshares) by Bancshares, a party in interest with respect to the 
Plan, and
    (2) To the holding of the Rights received by the Plan during the 
subscription period of the Offering; provided that the conditions as 
set forth in section II of this exemption were satisfied for the 
duration of the acquisition and holding.

Section II: Conditions

    The relief provided in this exemption is conditioned upon adherence 
to the material facts and representations described, herein, and as set 
forth in the application file and upon compliance with the conditions, 
as set forth in this exemption.
    (1) The receipt of the Rights by the Plan occurred in connection 
with the Offering and was made available by Bancshares on the same 
terms to all shareholders of the Stock of Bancshares;
    (2) The acquisition of the Rights by the Plan resulted from an 
independent act of Bancshares, as a corporate entity, and all holders 
of the Rights, including the Plan, were treated in the same manner with 
respect to the acquisition of such Rights;
    (3) Each shareholder of the Stock, including the Plan, received the 
same proportionate number of Rights based on the number of shares of 
Stock of Bancshares held by such shareholder;
    (4) The Rights were acquired pursuant to provisions under the Plan 
for individually directed investments of the accounts of the individual 
participants (the Invested Participants), all or a portion of whose 
accounts in the Plan hold the Stock;
    (5) The decisions with regard to the holding and disposition of the 
Rights by the Plan were made by each of the Invested Participants in 
accordance with the provisions under the Plan for individually-directed 
accounts; and
    (6) No brokerage fees, no commissions, no subscription fees, and no 
other charges were paid by the Plan with respect to the Offering, and 
no brokerage fees, no commissions, and no other monies were paid by the 
Plan to any broker in connection with the exercise of the Rights.
    Effective Date: This exemption is effective, May 10, 2011, the 
commencement date of the Offering.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice of Proposed Exemption published on November 14, 2011, at 76 
FR 70505.
    For Further Information Contact: Ms. Angelena C. Le Blanc of the 
Department, telephone (202) 693-8540. (This is not a toll-free number.)

R+L Carriers Shared Services, LLC, Located in Wilmington, Ohio

[Prohibited Transaction Exemption 2012-03; Exemption Application No. L-
11647]

Exemption

    The restrictions of sections 406(a) and (b) of the Act shall not 
apply to the reinsurance of risks, and receipt of premiums related 
therefrom, by Royal Assurance, Inc. (Royal Assurance), in connection 
with insurance contracts sold by Unum Life Insurance Company of America 
(Unum), or any successor insurance company to Unum which is unrelated, 
to the R+L Carriers Shared Services, LLC to provide group life, short-
term disability (STD), long-term disability (LTD), and Accidental Death 
and Dismemberment (AD&D) insurance benefits to employees of the R+L 
Companies \3\ under an employee welfare benefit plan (the Plan) \4\ 
sponsored by the R+L Carriers Shared Services, LLC, provided the 
following conditions are met:
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    \3\ The individual related employers comprising the R+L 
Companies are: (1) R+L Carriers Shared Services, LLC; (2) Strategic 
Management, LLC; (3) Paramount Transportation Logistics Services, 
LLC; (4) R+L Carriers Payroll, LLC; (5) Paramount Labor Leasing 
Southern, LLC; (6) Paramount Labor Leasing Eastern, LLC; (7) Golden 
Ocala Management, Inc.; (8) Royal Resorts, LLC; (9) ABCO 
Transportation, Inc.; (10) Spirit Express Trucking, Inc.; (11) Royal 
Shell Property Management, Inc.; (12) Quality Quest Linen Service, 
Inc.; (13) Royal Shell Vacations, Inc.; (14) AFC LS, LLC; and (15) 
AFC Worldwide Express, Inc. The foregoing employers, along with the 
captive insurer, Royal Assurance, constitute the applicants 
requesting an individual exemption for the transaction described 
herein.
    \4\ The applicants represent that Mr. Ralph ``Larry'' Roberts, 
Sr., the founder of the R+L Companies, is the owner (either 
directly, or indirectly through the combined voting interests of his 
spouse and his children) of 50 percent or more of the combined 
voting power of all classes of stock entitled to vote of each of the 
employers constituting the R+L Companies whose employees are covered 
under the Plan. Therefore, according to the applicants, Mr. Roberts 
is a party in interest with respect to the Plan for purposes of 
section 3(14)(E) of the Act. The applicants further represent that 
Mr. Roberts is the owner, either directly or indirectly, of 50 
percent or more of the combined voting power of all classes of stock 
entitled to vote of the captive, Royal Assurance; accordingly, the 
applicants represent that Royal Assurance is a party in interest 
with respect to the Plan for purposes of section 3(14)(G) of the 
Act. In this regard, the Department is providing no opinion herein 
as to whether Mr. Roberts is a party in interest with respect to the 
Plan for purposes of section 3(14)(E) of the Act; similarly, the 
Department is providing no opinion herein as to whether Royal 
Assurance is a party in interest with respect to the Plan for 
purposes of section 3(14)(G) of the Act.
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    (a) Royal Assurance--

[[Page 2764]]

    (1) Is a party in interest with respect to the Plan by reason of a 
stock or partnership affiliation with R+L Carriers Shared Services LLC 
that is described in section 3(14)(E) or (G) of the Act;
    (2) Is licensed to sell insurance or conduct reinsurance operations 
in at least one State as defined in section 3(10) of the Act;
    (3) Has obtained a Certificate of Authority from the Director of 
the Department of Insurance of its domiciliary state which has neither 
been revoked nor suspended;
    (4)(A) Has undergone and shall continue to undergo an examination 
by an independent certified public accountant for its last completed 
taxable year immediately prior to the taxable year of the reinsurance 
transaction; or (B) Has undergone a financial examination (within the 
meaning of the law of its domiciliary State, Arizona) by the Director 
of the Arizona Department of Insurance within 5 years prior to the end 
of the year preceding the year in which the reinsurance transaction 
occurred; and
    (5) Is licensed to conduct reinsurance transactions by a State 
whose law requires that an actuarial review of reserves be conducted 
annually by an independent firm of actuaries and reported to the 
appropriate regulatory authority;
    (b) The Plan pays no more than adequate consideration for the 
insurance contracts;
    (c) No commissions are paid by the Plan with respect to the 
reinsurance of such contracts;
    (d) In the initial year of any contract involving Royal Assurance, 
there will be an immediate and objectively determined benefit to the 
Plan's participants and beneficiaries in the form of increased 
benefits;
    (e) In subsequent years, the formula used to calculate premiums by 
Unum or any successor insurer will be similar to formulae used by other 
insurers providing comparable coverage under similar programs. 
Furthermore, the premium charge calculated in accordance with the 
formula will be reasonable and will be comparable to the premium 
charged by the insurer and its competitors with the same or a better 
rating providing the same coverage under comparable programs;
    (f) The Plan only contracts with insurers with a financial strength 
rating of ``A'' or better from A. M. Best Company (A. M. Best). The 
reinsurance arrangement between the insurer and Royal Assurance will be 
indemnity insurance only, i.e., the insurer will not be relieved of 
liability to the Plan should Royal Assurance be unable or unwilling to 
cover any liability arising from the reinsurance arrangement;
    (g) The Plan retains an independent fiduciary to analyze the 
transaction and render an opinion that the requirements of sections (a) 
through (f) have been satisfied. For purposes of the exemption, the 
independent fiduciary is a person who:
    (1) Is not directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with an applicant (this relationship hereinafter referred to as an 
affiliate);
    (2) Is not an officer, director, employee of, or partner in, Royal 
Assurance or any other applicant (or an affiliate of either);
    (3) Is not a corporation or partnership in which Royal Assurance or 
any other applicant has an ownership interest or is a partner;
    (4) Does not have an ownership interest in Royal Assurance, or any 
of the other applicants, or their Affiliates;
    (5) Is not a fiduciary with respect to the Plan prior to the 
appointment; and
    (6) Has acknowledged in writing acceptance of fiduciary 
responsibility and has agreed not to participate in any decision with 
respect to any transaction in which the independent Fiduciary has an 
interest that might affect its best judgment as a fiduciary.
    For purposes of this definition of an ``independent fiduciary,'' no 
organization or individual may serve as an independent fiduciary for 
any fiscal year if the gross income received by such organization or 
individual (or partnership or corporation of which such individual is 
an officer, director, or 10 percent or more partner or shareholder) 
from Royal Assurance, any other applicant, or their affiliates 
(including amounts received for services as independent fiduciary under 
any prohibited transaction exception granted by the Department) for 
that fiscal year exceeds one percent of that organization or 
individual's annual gross income from all sources for the prior fiscal 
year.
    In addition, no organization or individual who is an independent 
fiduciary, and no partnership or corporation of which such organization 
or individual is an officer, director, or 10 percent or more partner or 
shareholder, may acquire any property from, sell any property to, or 
borrow funds from Royal Assurance, any other applicant, or their 
affiliates during the period that such organization or individual 
serves as independent fiduciary, and continuing for a period of six 
months after such organization or individual ceases to be an 
independent fiduciary, or negotiates any such transaction during the 
period that such organization or individual serves as independent 
fiduciary.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on September 26, 2011 at 76 
FR 59441.
    For Further Information Contact: Mr. Gary Lefkowitz of the 
Department at (202) 693-8546. This is not a toll-free number.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemption does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) This exemption is supplemental to and not in derogation of, any 
other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 13th day of January, 2012.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2012-930 Filed 1-18-12; 8:45 am]
BILLING CODE 4510-29-P