EBSA
Notices
Exemptions From Certain Prohibited Transaction Restrictions
[ 6/1/2012]
[ PDF]
Federal Register, Volume 77 Issue 106 (Friday, June 1, 2012)
[Federal Register Volume 77, Number 106 (Friday, June 1, 2012)]
[Notices]
[Pages 32672-32686]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13263]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
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-11579, Delaware Charter Guarantee
& Trust Co. d\b\a Principal Trust Company (Principal Trust), 2012-11;
D-11677, Weyerhaeuser Company (Weyerhaeuser) and Federalway Asset
Management LP (collectively, the Applicants), 2012-12; and D-11679,
Sammons Enterprises, Inc. Employee Stock Ownership ESOP (the ESOP),
2012-13.
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 (76 FR 66637, 66644, October 27, 2011) \1\ and based
upon the entire record, the Department makes the following findings:
---------------------------------------------------------------------------
\1\ The Department has considered exemption applications
received prior to December 27, 2011 under the exemption procedures
set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August
10, 1990).
---------------------------------------------------------------------------
(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.
[[Page 32673]]
Delaware Charter Guarantee & Trust Co. d\b\a Principal Trust Company
(Principal Trust); Principal Life Insurance Company (Principal Life)
and Any Affiliates, Thereof (collectively, Principal or the Applicants)
Located in Wilmington, Delaware and in Des Moines, Iowa
[Prohibited Transaction 2012-11; Exemption Application No. D-11579]
Exemption
Section I--Transactions
The restrictions of sections 406(a)(1)(D) and 406(b) of the Act and
the taxes resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(D) through (F) of the Internal Revenue
Code (the Code),\2\ shall not apply, as of the effective date of this
exemption, to:
---------------------------------------------------------------------------
\2\ For purposes of this exemption reference to specific
provisions of Title I of the Act, unless otherwise specified, refer
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------
(a) The receipt of a fee by Principal, as Principal is defined,
below, in Section IV(a), from an open-end investment company or open-
end investment companies (Affiliated Fund(s)), as defined, below, in
Section IV(e), in connection with the direct investment in shares of
any such Affiliated Fund, by an employee benefit plan or by employee
benefit plans (Client Plan(s)), as defined, below, in Section IV(b),
where Principal serves as a fiduciary with respect to such Client Plan,
and where Principal:
(1) Provides investment advisory services, or similar services to
any such Affiliated Fund; and
(2) Provides to any such Affiliated Fund other services (Secondary
Service(s)), as defined, below, in Section IV(i); and
(b) In connection with the indirect investment by a Client Plan in
shares of an Affiliated Fund through investment in a pooled investment
vehicle or pooled investment vehicles (Collective Fund(s)),\3\ as
defined, below, in Section IV(j), where Principal serves as a fiduciary
with respect to such Client Plan, the receipt of fees by Principal
from:
---------------------------------------------------------------------------
\3\ The Department, herein, is expressing no opinion in this
exemption regarding the reliance of the Applicants on the relief
provided by section 408(b)(8) of the Act with regard to the purchase
and with regard to the sale by a Client Plan of an interest in a
Collective Fund and the receipt by Principal, thereby, of any
investment management fee, any investment advisory fee, and any
similar fee (a Collective Fund-Level Management Fee), as defined,
below, in Section IV(n), where Principal serves as an investment
manager or investment adviser with respect to such Collective Fund
and also serves as a fiduciary with respect to such Client Plan, nor
is the Department offering any view as to whether the Applicants
satisfy the conditions, as set forth in section 408(b)(8) of the
Act.
---------------------------------------------------------------------------
(1) An Affiliated Fund for the provision of investment advisory
services, or similar services by Principal to any such Affiliated Fund;
and
(2) An Affiliated Fund for the provision of Secondary Services by
Principal to any such Affiliated Fund; provided that the conditions, as
set forth, below, in Section II and Section III, are satisfied, as of
the effective date of this exemption and thereafter.
Section II--Specific 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.
(a)(1) Each Client Plan which is invested directly in shares of an
Affiliated Fund either:
(i) Does not pay to Principal for the entire period of such
investment any investment management fee, or any investment advisory
fee, or any similar fee at the plan-level (the Plan-Level Management
Fee), as defined, below, in Section IV(m), with respect to any of the
assets of such Client Plan which are invested directly in shares of
such Affiliated Fund; or
(ii) Pays to Principal a Plan-Level Management Fee, based on total
assets of such Client Plan under management by Principal at the plan-
level, from which a credit has been subtracted from such Plan-Level
Management Fee, where the amount subtracted represents such Client
Plan's pro rata share of any investment advisory fee and any similar
fee (the Affiliated Fund-Level Advisory Fee), as defined, below, in
Section IV(o), paid by such Affiliated Fund to Principal.
If, during any fee period, in the case of a Client Plan invested
directly in shares of an Affiliated Fund, such Client Plan has prepaid
its Plan-Level Management Fee, and such Client Plan purchases shares of
an Affiliated Fund directly, the requirement of this Section
II(a)(1)(ii) shall be deemed met with respect to such prepaid Plan-
Level Management Fee, if, by a method reasonably designed to accomplish
the same, the amount of the prepaid Plan-Level Management Fee that
constitutes the fee with respect to the assets of such Client Plan
invested directly in shares of an Affiliated Fund:
(A) Is anticipated and subtracted from the prepaid Plan-Level
Management Fee at the time of the payment of such fee; or
(B) Is returned to such Client Plan, no later than during the
immediately following fee period; or
(C) Is offset against the Plan-Level Management Fee for the
immediately following fee period or for the fee period immediately
following thereafter.
For purposes of Section II(a)(1)(ii), a Plan-Level Management Fee
shall be deemed to be prepaid for any fee period, if the amount of such
Plan-Level Management Fee is calculated as of a date not later than the
first day of such period.
(2) Each Client Plan invested in a Collective Fund the assets of
which are not invested in shares of an Affiliated Fund:
(i) Does not pay to Principal for the entire period of such
investment any Plan-Level Management Fee with respect to any assets of
such Client Plan invested in such Collective Fund.
The requirements of this Section II(a)(2)(i) do not preclude the
payment of a Collective Fund-Level Management Fee by such Collective
Fund to Principal, based on the assets of such Client Plan invested in
such Collective Fund; or
(ii) Does not pay directly to Principal or indirectly to Principal
through the Collective Fund for the entire period of such investment
any Collective Fund-Level Management Fee with respect to any assets of
such Client Plan invested in such Collective Fund.
The requirements of this Section II(a)(2)(ii) do not preclude the
payment of a Plan-Level Management Fee by such Client Plan to
Principal, based on total assets of such Client Plan under management
by Principal at the plan-level; or
(iii) Such Client Plan pays to Principal a Plan-Level Management
Fee, based on total assets of such Client Plan under management by
Principal at the plan-level, from which a credit has been subtracted
from such Plan-Level Management Fee (the ``Net'' Plan-Level Management
Fee), where the amount subtracted represents such Client Plan's pro
rata share of any Collective Fund-Level Management Fee paid by such
Collective Fund to Principal.
The requirements of this Section II(a)(2)(iii) do not preclude the
payment of a Collective Fund-Level Management Fee by such Collective
Fund to Principal, based on the assets of such Client Plan invested in
such Collective Fund.
(3) Each Client Plan invested in a Collective Fund the assets of
which are invested in shares of an Affiliated Fund:
(i) Does not pay to Principal for the entire period of such
investment any Plan-Level Management Fee (including
[[Page 32674]]
any ``Net'' Plan-Level Management Fee, as described, above, in Section
II(a)(2)(iii)), and does not pay directly to Principal or indirectly to
Principal through the Collective Fund for the entire period of such
investment any Collective Fund-Level Management Fee with respect to the
assets of such Client Plan which are invested in such Affiliated Fund;
or
(ii) Pays indirectly to Principal through the Collective Fund a
Collective Fund-Level Management Fee, in accordance with Section
II(a)(2)(i), above, based on the total assets of such Client Plan
invested in such Collective Fund, from which a credit has been
subtracted from such Collective Fund-Level Management Fee, where the
amount subtracted represents such Client Plan's pro rata share of any
Affiliated Fund-Level Advisory Fee paid to Principal by such Affiliated
Fund; and does not pay to Principal for the entire period of such
investment any Plan-Level Management Fee with respect to any assets of
such Client Plan invested in such Collective Fund; or
(iii) Pays to Principal a Plan-Level Management Fee, in accordance
with Section II(a)(2)(iii), above, based on the total assets of such
Client Plan under management by Principal at the plan-level, from which
a credit has been subtracted from such Plan-Level Management Fee, where
the amount subtracted represents such Client Plan's pro rata share of
any Affiliated Fund-Level Advisory Fee paid to Principal by such
Affiliated Fund; and does not pay directly to Principal or indirectly
to Principal through the Collective Fund for the entire period of such
investment any Collective Fund-Level Management Fee with respect to any
assets of such Client Plan invested in such Collective Fund; or
(iv) Pays to Principal a ``Net'' Plan-Level Management Fee, in
accordance with Section II(a)(2)(iii), above, from which a further
credit has been subtracted from such ``Net'' Plan-Level Management Fee,
where the amount of such further credit which is subtracted represents
such Client Plan's pro rata share of any Affiliated Fund-Level Advisory
Fee paid to Principal by such Affiliated Fund.
Provided that the conditions of this exemption are satisfied, the
requirements of Section II(a)(1)(i)-(ii), and Section II(a)(3)(i)-(iv)
do not preclude the payment of an Affiliated Fund-Level Advisory Fee by
an Affiliated Fund to Principal under the terms of an investment
advisory agreement adopted in accordance with section 15 of the
Investment Company Act of 1940 (the Investment Company Act). Further,
the requirements of Section II(a)(1)(i)-(ii), and Section II(a)(3)(i)-
(iv) do not preclude the payment of a fee by an Affiliated Fund to
Principal for the provision by Principal of Secondary Services to such
Affiliated Fund under the terms of a duly adopted agreement between
Principal and such Affiliated Fund.
For the purpose of Section II(a)(1)(ii), and Section II(a)(3)(ii)-
(iv), in calculating a Client Plan's pro rata share of an Affiliated
Fund-Level Advisory Fee, Principal must use an amount representing the
``gross'' advisory fee paid to Principal by such Affiliated Fund. For
purposes of this paragraph, the ``gross'' advisory fee is the amount
paid to Principal by such Affiliated Fund, including the amount paid by
such Affiliated Fund to sub-advisers.
(b) The purchase price paid and the sales price received by a
Client Plan for shares in an Affiliated Fund purchased or sold
directly, and the purchase price paid and the sales price received by a
Client Plan for shares in an Affiliated Fund purchased or sold
indirectly through a Collective Fund, is the net asset value per share
(NAV), as defined, below, in Section IV(f), at the time of the
transaction, and is the same purchase price that would have been paid
and the same sales price that would have been received for such shares
by any other shareholder of the same class of shares in such Affiliated
Fund at that time.\4\
---------------------------------------------------------------------------
\4\ The selection of a particular class of shares of an
Affiliated Fund as an investment for a Client Plan indirectly
through a Collective Fund is a fiduciary decision that must be made
in accordance with the provisions of section 404(a) of the Act. In
this exemption, the Department is not providing any relief for any
fiduciary violations, pursuant to section 404 of the Act, or
violations of the prohibited transaction provisions, as set forth in
section 406 of the Act that may arise from the selection of one
class of shares of an Affiliated Fund over another class of shares.
---------------------------------------------------------------------------
(c) Principal, including any officer and any director of Principal,
does not purchase any shares of an Affiliated Fund from and does not
sell any shares of an Affiliated Fund to any Client Plan which invests
directly in such Affiliated Fund, and Principal, including any officer
and director of Principal, does not purchase any shares of any
Affiliated Fund from and does not sell any shares of an Affiliated Fund
to any Collective Fund in which a Client Plan invests indirectly in
shares of such Affiliated Fund.
(d) No sales commissions, no redemption fees, and no other similar
fees are paid in connection with any purchase and in connection with
any sale by a Client Plan directly in shares of an Affiliated Fund, and
no sales commissions, no redemption fees, and no other similar fees are
paid by a Collective Fund in connection with any purchase and in
connection with any sale of shares in an Affiliated Fund by a Client
Plan indirectly through such Collective Fund. However, this Section
II(d) does not prohibit the payment of a redemption fee, if:
(1) Such redemption fee is paid only to an Affiliated Fund; and
(2) The existence of such redemption fee is disclosed in the
summary prospectus for such Affiliated Fund in effect both at the time
of any purchase of shares in such Affiliated Fund and at the time of
any sale of such shares.
(e) The combined total of all fees received by Principal is not in
excess of reasonable compensation within the meaning of section
408(b)(2) of the Act, for services provided:
(1) By Principal to each Client Plan;
(2) By Principal to each Collective Fund in which a Client Plan
invests;
(3) By Principal to each Affiliated Fund in which a Client Plan
invests directly in shares of such Affiliated Fund; and
(4) By Principal to each Affiliated Fund in which a Client Plan
invests indirectly in shares of such Affiliated Fund through a
Collective Fund.
(f) Principal does not receive any fees payable pursuant to Rule
12b-1 under the Investment Company Act in connection with the
transactions covered by this exemption;
(g) No Client Plan is an employee benefit plan sponsored or
maintained by Principal.
(h)(1) In the case of a Client Plan investing directly in shares of
an Affiliated Fund, a second fiduciary (the Second Fiduciary), as
defined, below, in Section IV(h), acting on behalf of such Client Plan,
receives, in writing, in advance of any investment by such Client Plan
directly in shares of such Affiliated Fund, a full and detailed
disclosure via first class mail or via personal delivery of (or, if the
Second Fiduciary consents to such means of delivery, through electronic
email, in accordance with Section II(q), as set forth, below) of
information concerning such Affiliated Fund, including but not limited
to the items listed, below:
(i) A current summary prospectus issued by each such Affiliated
Fund;
(ii) A statement describing the fees, including the nature and
extent of any differential between the rates of such fees for:
(A) Investment advisory and similar services to be paid to
Principal by each Affiliated Fund;
(B) Secondary Services to be paid to Principal by each such
Affiliated Fund; and
[[Page 32675]]
(C) All other fees to be charged by Principal to such Client Plan
and to each such Affiliated Fund and all other fees to be paid to
Principal by each such Client Plan and by each such Affiliated Fund;
(iii) The reasons why Principal may consider investment directly in
shares of such Affiliated Fund by such Client Plan to be appropriate
for such Client Plan;
(iv) A statement describing whether there are any limitations
applicable to Principal with respect to which assets of such Client
Plan may be invested directly in shares of such Affiliated Fund, and if
so, the nature of such limitations; and
(v) Upon the request of the Second Fiduciary acting on behalf of
such Client Plan, a copy of the Notice of Proposed Exemption (the
Notice), a copy of the final exemption, if granted, and any other
reasonably available information regarding the transactions which are
the subject of this exemption.
(2) In the case of a Client Plan whose assets are proposed to be
invested in a Collective Fund after such Collective Fund has begun
investing in shares of an Affiliated Fund, a Second Fiduciary, acting
on behalf of such Client Plan, receives, in writing, in advance of any
investment by such Client Plan in such Collective Fund, a full and
detailed disclosure via first class mail or via personal delivery (or,
if the Second Fiduciary consents to such means of delivery, through
electronic email, in accordance with Section II(q), as set forth,
below) of information concerning such Collective Fund and information
concerning each such Affiliated Fund in which such Collective Fund is
invested, including but not limited to the items listed, below:
(i) A current summary prospectus issued by each such Affiliated
Fund;
(ii) A statement describing the fees, including the nature and
extent of any differential between the rates of such fees for:
(A) Investment advisory and similar services to be paid to
Principal by each Affiliated Fund;
(B) Secondary Services to be paid to Principal by each such
Affiliated Fund; and
(C) All other fees to be charged by Principal to such Client Plan,
to such Collective Fund, and to each such Affiliated Fund and all other
fees to be paid to Principal by such Client Plan, by such Collective
Fund, and by each such Affiliated Fund;
(iii) The reasons why Principal may consider investment by such
Client Plan in shares of each such Affiliated Fund indirectly through
such Collective Fund to be appropriate for such Client Plan;
(iv) A statement describing whether there are any limitations
applicable to Principal with respect to which assets of such Client
Plan may be invested indirectly in shares of each such Affiliated Fund
through such Collective Fund, and if so, the nature of such
limitations;
(v) Upon the request of the Second Fiduciary, acting on behalf of
such Client Plan, a copy of the Notice, a copy of the final exemption,
if granted, and any other reasonably available information regarding
the transactions which are the subject of this exemption; and
(vi) A copy of the organizational documents of such Collective Fund
which expressly provide for the addition of one or more Affiliated
Funds to the portfolio of such Collective Fund.
(3) In the case of a Client Plan whose assets are proposed to be
invested in a Collective Fund before such Collective Fund has begun
investing in shares of any Affiliated Fund, a Second Fiduciary, acting
on behalf of such Client Plan, receives, in writing, in advance of any
investment by such Client Plan in such Collective Fund, a full and
detailed disclosure via first class mail or via personal delivery (or,
if the Second Fiduciary consents to such means of delivery, through
electronic email, in accordance with Section II(q), as set forth,
below) of information, concerning such Collective Fund, including but
not limited to the items listed, below:
(i) A statement describing the fees, including the nature and
extent of any differential between the rates of such fees for all fees
to be charged by Principal to such Client Plan and to such Collective
Fund and all other fees to be paid to Principal by such Client Plan,
and by such Collective Fund;
(ii) Upon the request of the Second Fiduciary, acting on behalf of
such Client Plan, a copy of the Notice, a copy of the final exemption,
if granted, and any other reasonably available information regarding
the transactions which are the subject of this exemption; and
(iii) A copy of the organizational documents of such Collective
Fund which expressly provide for the addition of one or more Affiliated
Funds to the portfolio of such Collective Fund.
(i) On the basis of the information described, above, in Section
II(h), a Second Fiduciary, acting on behalf of a Client Plan:
(1) Authorizes in writing the investment of the assets of such
Client Plan, as applicable:
(i) Directly in shares of an Affiliated Fund;
(ii) Indirectly in shares of an Affiliated Fund through a
Collective Fund where such Collective Fund has already invested in
shares of an Affiliated Fund; and
(iii) In a Collective Fund which is not yet invested in shares of
an Affiliated Fund but whose organizational document expressly provides
for the addition of one or more Affiliated Funds to the portfolio of
such Collective Fund; and
(2) Authorizes in writing, as applicable:
(i) The Affiliated Fund-Level Advisory Fee received by Principal
for investment advisory services and similar services provided by
Principal to such Affiliated Fund;
(ii) The fee received by Principal for Secondary Services provided
by Principal to such Affiliated Fund;
(iii) The Collective Fund-Level Management Fee received by
Principal for investment management, investment advisory, and similar
services provided by Principal to such Collective Fund in which such
Client Plan invests;
(iv) The Plan-Level Management Fee received by Principal for
investment management and similar services provided by Principal to
such Client Plan at the plan-level; and
(v) The selection by Principal of the applicable fee method, as
described, above, in Section II(a)(1)-(3).
All authorizations made by a Second Fiduciary, pursuant to this
Section II(i), must be consistent with the responsibilities,
obligations, and duties imposed on fiduciaries by Part 4 of Title I of
the Act;
(j)(1) Any authorization, described, above, in Section II(i), and
any authorization made pursuant to negative consent, as described,
below, in Section II(k) and in Section II(l), made by a Second
Fiduciary, acting on behalf of a Client Plan, shall be terminable at
will by such Second Fiduciary, without penalty to such Client Plan,
upon receipt by Principal via first class mail, via personal delivery,
or via electronic email of a written notification of the intent of such
Second Fiduciary to terminate any such authorization.
(2) A form (the Termination Form) expressly providing an election
to terminate any authorization, described, above, in Section II(i), or
to terminate any authorization made pursuant to negative consent, as
described, below, in Section II(k) and in Section II(l), with
instructions on the use of such Termination Form must be provided to
such Second Fiduciary at least annually, either in writing via first
class mail or
[[Page 32676]]
via personal delivery (or if such Second Fiduciary consents to such
means of delivery, through electronic email, in accordance with Section
II(q), as set forth, below). However, if a Termination Form has been
provided to such Second Fiduciary, pursuant to Section II(k) or
pursuant to Section II(l), below, then a Termination Form need not be
provided again, pursuant to this Section II(j), until at least six (6)
months but no more than twelve (12) months have elapsed, since a
Termination Form was provided;
(3) The instructions for the Termination Form must include the
following statements:
(i) Any authorization, described, above, in Section II(i), and any
authorization made pursuant to negative consent, as described, below,
in Section II(k) or in Section II(l), is terminable at will by a Second
Fiduciary, acting on behalf of a Client Plan, without penalty to such
Client Plan, upon receipt by Principal via first class mail or via
personal delivery or via electronic email of the Termination Form, or
some other written notification of the intent of such Second Fiduciary
to terminate such authorization;
(ii) Within 30 days from the date the Termination Form is sent to
such Second Fiduciary by Principal, the failure by such Second
Fiduciary to return such Termination Form or the failure by such Second
Fiduciary to provide some other written notification of the Client
Plan's intent to terminate any authorization, described in Section
II(i), or intent to terminate any authorization made pursuant to
negative consent, as described, below, in Section II(k) or in Section
II(l), will be deemed to be an approval by such Second Fiduciary;
(4) In the event that a Second Fiduciary, acting on behalf of a
Client Plan, at any time returns a Termination Form or returns some
other written notification of intent to terminate any authorization, as
described, above, in Section II(i), or intent to terminate any
authorization made pursuant to negative consent, as described, below,
in Section II(k) or in Section II(l);
(i)(A) In the case of a Client Plan which invests directly in
shares of an Affiliated Fund, the termination will be implemented by
the withdrawal of all investments made by such Client Plan in the
affected Affiliated Fund, and such withdrawal will be effected by
Principal within one (1) business day of the date that Principal
receives such Termination Form or receives from the Second Fiduciary,
acting on behalf of such Client Plan, some other written notification
of intent to terminate any such authorization;
(B) From the date a Second Fiduciary, acting on behalf of a Client
Plan that invests directly in shares of an Affiliated Fund, returns a
Termination Form or returns some other written notification of intent
to terminate such Client Plan's investment in such Affiliated Fund,
such Client Plan will not be subject to pay a pro rata share of any
Affiliated Fund-Level Advisory Fee and will not be subject to pay any
fees for Secondary Services paid to Principal by such Affiliated Fund;
(ii)(A) In the case of a Client Plan which invests in a Collective
Fund, the termination will be implemented by the withdrawal of such
Client Plan from all investments in such affected Collective Fund, and
such withdrawal will be implemented by Principal within such time as
may be necessary for withdrawal in an orderly manner that is equitable
to the affected withdrawing Client Plan and to all non-withdrawing
Client Plans, but in no event shall such withdrawal be implemented by
Principal more than five (5) business days after the day Principal
receives from the Second Fiduciary, acting on behalf of such
withdrawing Client Plan, a Termination Form or receives some other
written notification of intent to terminate the investment of such
Client Plan in such Collective Fund, unless such withdrawal is
otherwise prohibited by a governmental entity with jurisdiction over
the Collective Fund, or the Second Fiduciary fails to instruct
Principal as to where to reinvest or send the withdrawal proceeds; and
(B) From the date Principal receives from a Second Fiduciary,
acting on behalf of a Client Plan, that invests in a Collective Fund, a
Termination Form or receives some other written notification of intent
to terminate such Client Plan's investment in such Collective Fund,
such Client Plan will not be subject to pay a pro rata share of any
fees arising from the investment by such Client Plan in such Collective
Fund, including any Collective Fund-Level Management Fee, nor will such
Client Plan be subject to any other charges to the portfolio of such
Collective Fund, including a pro rata share of any Affiliated Fund-
Level Advisory Fee and any fee for Secondary Services arising from the
investment by such Collective Fund in an Affiliated Fund.
(k)(1) Principal, at least thirty (30) days in advance of the
implementation of each fee increase (Fee Increase(s)), as defined,
below, in Section IV(l), must provide, in writing via first class mail
or via personal delivery (or if the Second Fiduciary consents to such
means of delivery, through electronic email, in accordance with Section
II(q), as set forth, below), a notice of change in fees (the Notice of
Change in Fees) (which may take the form of a proxy statement, letter,
or similar communication which is separate from the summary prospectus
of such Affiliated Fund) and which explains the nature and the amount
of such Fee Increase to the Second Fiduciary of each affected Client
Plan. Such Notice of Change in Fees shall be accompanied by a
Termination Form and by instructions on the use of such Termination
Form, as described, above, in Section II(j)(3);
(2) For each Client Plan affected by a Fee Increase, Principal may
implement such Fee Increase without waiting for the expiration of the
30-day period, described, above, in Section II(k)(1), provided
Principal does not begin implementation of such Fee Increase before the
first day of the 30-day period, described, above in Section II(k)(1),
and provided further that the following conditions are satisfied:
(i) Principal delivers, in the manner described in Section
II(k)(1), to the Second Fiduciary for each affected Client Plan, the
Notice of Change of Fees, as described in Section II(k)(1), accompanied
by the Termination Form and by instructions on the use of such
Termination Form, as described, above, in Section II(j)(3);
(ii) Each affected Client Plan receives from Principal a credit in
cash equal to each such Client Plan's pro rata share of such Fee
Increase to be received by Principal for the period from the date of
the implementation of such Fee Increase to the earlier of:
(A) The date when an affected Client Plan, pursuant to Section
II(j), terminates any authorization, as described, above, in Section
II(i), or, terminates any negative consent authorization, as described,
in Section II(k) or in Section II(l); or
(B) The 30th day after the day that Principal delivers to the
Second Fiduciary of each affected Client Plan the Notice of Change of
Fees, described in Section II(k)(1), accompanied by the Termination
Form and by the instructions on the use of such Termination Form, as
described, above, in Section II(j)(3).
(iii) Principal pays to each affected Client Plan the cash credit,
described, above, in Section II(k)(2)(ii), with interest thereon, no
later than five (5) business days following the earlier of:
(A) The date such affected Client Plan, pursuant to Section II(j),
terminates any authorization, as described, above, in Section II(i), or
terminates, any negative consent
[[Page 32677]]
authorization, as described, in Section II(k) or in Section II(l); or
(B) The 30th day after the day that Principal delivers to the
Second Fiduciary of each affected Client Plan, the Notice of Change of
Fees, described in Section II(k)(1), accompanied by the Termination
Form and instructions on the use of such Termination Form, as
described, above, in Section II(j)(3);
(iv) Interest on the credit in cash is calculated at the prevailing
Federal funds rate plus two percent (2%) for the period from the day
Principal first implements the Fee Increase to the date Principal pays
such credit in cash, with interest thereon, to each affected Client
Plan;
(v) An independent accounting firm (the Auditor) at least annually
audits the payments made by Principal to each affected Client Plan,
audits the amount of each cash credit, plus the interest thereon, paid
to each affected Client Plan, and verifies that each affected Client
Plan received the correct amount of cash credit and the correct amount
of interest thereon;
(vi) Such Auditor issues an audit report of its findings no later
than six (6) months after the period to which such audit report
relates, and provides a copy of such audit report to the Second
Fiduciary of each affected Client Plan; and
(3) Within 30 days from the date Principal sends to the Second
Fiduciary of each affected Client Plan, the Notice of Change of Fees
and the Termination Form, the failure by such Second Fiduciary to
return such Termination Form and the failure by such Second Fiduciary
to provide some other written notification of the Client Plan's intent
to terminate the authorization, described in Section II(i), or to
terminate the negative consent authorization, as described, in Section
II(k) or in Section II(l), will be deemed to be an approval by such
Second Fiduciary of such Fee Increase.
(l) Effective on the date the final exemption is granted, in the
case of a Client Plan which has received the disclosures, as set forth,
above, in Section II(h)(2)(i), II(h)(2)(ii)(A), II(h)(2)(ii)(B),
II(h)(2)(ii)(C), II(h)(2)(iii), II(h)(2)(iv), II(h)(2)(v), and
II(h)(2)(vi), and has authorized the investment by a Client Plan in a
Collective Fund, in accordance with Section II(i)(1)(ii), above; and,
as applicable, effective on the date the final exemption is granted, in
the case of a Client Plan which has received the disclosures, as set
forth, above, in Section II(h)(3)(i), II(h)(3)(ii), and II(h)(3)(iii),
and has authorized the investment by a Client Plan in a Collective
Fund, in accordance with Section II(i)(1)(iii), above, then, the
authorization, pursuant to negative consent, in accordance with this
Section II(l), applies to:
(1) The purchase, as an addition to the portfolio of such
Collective Fund, of shares of an Affiliated Fund (a New Affiliated
Fund) where such New Affiliated Fund has not been previously
authorized, pursuant to Section II(i)(1)(ii) or, as applicable, Section
II(i)(1)(iii), above, and such Collective Fund may commence investing
in such New Affiliated Fund without further written authorization from
the Second Fiduciary of each Client Plan invested in such Collective
Fund provided that:
(i) The organizational documents of such Collective Fund expressly
provide for the addition of one or more Affiliated Funds to the
portfolio of such Collective Fund, and such documents were disclosed in
writing via first class mail or via personal delivery (or, if the
Second Fiduciary consents to such means of delivery, through electronic
email, in accordance with Section II(q), as set forth, below) to the
Second Fiduciary of each such Client Plan invested in such Collective
Fund, in advance of any investment by such Client Plan in such
Collective Fund;
(ii) At least thirty (30) days in advance of the purchase by a
Client Plan of shares of such New Affiliated Fund indirectly through a
Collective Fund, Principal provides, either in writing via first class
or via personal delivery (or if the Second Fiduciary consents to such
means of delivery, through electronic email, in accordance with Section
II(q), as set forth, below), to the Second Fiduciary of each Client
Plan having an interest in such Collective Fund, full and detailed
disclosures about such New Affiliated Fund, including but not limited
to:
(A) A notice of Principal's intent to add a New Affiliated Fund to
the portfolio of such Collective Fund. Such notice may take the form of
a proxy statement, letter, or similar communication that is separate
from the summary prospectus of such New Affiliated Fund to the Second
Fiduciary of each affected Client Plan;
(B) Such notice of Principal's intent to add a New Affiliated Fund
to the portfolio of such Collective Fund shall be accompanied by the
information, as described, above, in Section II(h)(2)(i),
II(h)(2)(ii)(A), II(h)(2)(ii)(B), II(h)(2)(ii)(C), II(h)(2)(iii),
II(h)(2)(iv), and II(2)(v) with respect to each such New Affiliated
Fund to be added to the portfolio of such Collective Fund; and
(C) A Termination Form, and instructions on the use of such
Termination Form, as described, above, in Section II(j)(3); and
(2) Within 30 days from the date Principal sends to the Second
Fiduciary of each affected Client Plan, the information described,
above, in Section II(l)(1)(ii), the failure by such Second Fiduciary to
return the Termination Form or to provide some other written
notification of the Client Plan's intent to terminate the
authorization, described in Section II(i)(1)(ii), or, as appropriate,
to terminate the authorization, described in Section II(i)(1)(iii), or
to terminate any authorization, pursuant to negative consent, as
described, in this Section II(l), will be deemed to be an approval by
such Second Fiduciary of the addition of a New Affiliated Fund to the
portfolio of such Collective Fund in which such Client Plan invests,
and will result in the continuation of the authorization of Principal
to engage in the transactions which are the subject of this exemption
with respect to such New Affiliated Fund.
(m) Principal is subject to the requirement to provide within a
reasonable period of time any reasonably available information
regarding the covered transactions that the Second Fiduciary of such
Client Plan requests Principal to provide.
(n) All dealings between a Client Plan and an Affiliated Fund,
including all such dealings when such Client Plan is invested directly
in shares of such Affiliated Fund and when such Client Plan is invested
indirectly in such shares of such Affiliated Fund through a Collective
Fund, are on a basis no less favorable to such Client Plan, than
dealings between such Affiliated Fund and other shareholders of the
same class of shares in such Affiliated Fund.
(o) In the event a Client Plan invests directly in shares of an
Affiliated Fund, and, as applicable, in the event a Client Plan invests
indirectly in shares of an Affiliated Fund through a Collective Fund,
if such Affiliated Fund places brokerage transactions with Principal,
Principal will provide to the Second Fiduciary of each such Client
Plan, so invested, at least annually a statement specifying:
(1) The total, expressed in dollars of brokerage commissions that
are paid to Principal by each such Affiliated Fund;
(2) The total, expressed in dollars, of brokerage commissions that
are paid by each such Affiliated Fund to brokerage firms unrelated to
Principal;
(3) The average brokerage commissions per share, expressed as cents
per share, paid to Principal by each such Affiliated Fund; and
(4) The average brokerage commissions per share, expressed as
[[Page 32678]]
cents per share, paid by each such Affiliated Fund to brokerage firms
unrelated to Principal.
(p)(1) Principal provides to the Second Fiduciary of each Client
Plan invested directly in shares of an Affiliated Fund, with the
disclosures, as set forth, below, and at the times set forth below, in
Section II(p)(1)(i), II(p)(1)(ii), II(p)(1)(iii), II(p)(1)(iv), and
II(p)(1)(v), either in writing via first class mail or via personal
delivery (or if the Second Fiduciary consents to such means of
delivery, through electronic email, in accordance with Section II(q),
as set forth, below);
(i) Annually, with a copy of the current summary prospectus for
each Affiliated Fund in which such Client Plan invests directly in
shares of such Affiliated Fund;
(ii) Upon the request of such Second Fiduciary, a copy of the
statement of additional information for each Affiliated Fund in which
such Client Plan invests directly in shares of such Affiliated Fund
which contains a description of all fees paid by such Affiliated Fund
to Principal;
(iii) With regard to any Fee Increase received by Principal,
pursuant to Section II(k)(2), above, a copy of the audit report
referred to in Section II(k)(2)(v), above, within sixty (60) days of
the completion of such audit report;
(iv) Oral or written responses to the inquiries posed by the Second
Fiduciary of such Client Plan, as such inquiries arise; and
(v) Annually, with a Termination form, as described in Section
II(j)(1), and instructions on the use of such form, as described in
Section II(j)(3), except that if a Termination Form has been provided
to such Second Fiduciary, pursuant to Section II(k) or pursuant to
Section II(l), above, then a Termination Form need not be provided
again, pursuant to this Section II(p)(1)(v), until at least six (6)
months but no more than twelve (12) months have elapsed, since a
Termination Form was provided.
(2) Principal provides to the Second Fiduciary of each Client Plan
invested in a Collective Fund, with the disclosures, as set forth,
below, and at the times set forth below, in Section II(p)(2)(i),
II(p)(2)(ii), II(p)(2)(iii), II(p)(2)(iv), II(p)(2)(v), II(p)(2)(vi),
II(p)(2)(vii), and II(p)(2)(viii), either in writing via first class
mail or via personal delivery (or if the Second Fiduciary consents to
such means of delivery, through electronic email, in accordance with
Section II(q), as set forth, below);
(i) Annually, with a copy of the current summary prospectus for
each Affiliated Fund in which such Client Plan invests indirectly in
shares of such Affiliated Fund thorough each such Collective Fund;
(ii) Upon the request of such Second Fiduciary, a copy of the
statement of additional information for each Affiliated Fund in which
such Client Plan invests indirectly in shares of such Affiliated Fund
thorough each such Collective Fund which contains a description of all
fees paid by such Affiliated Fund to Principal;
(iii) Annually, with a statement of the Collective Fund-Level
Management Fee for investment management, investment advisory or
similar services paid to Principal by each such Collective Fund,
regardless of whether such Client Plan invests in shares of an
Affiliated Fund through such Collective Fund;
(iv) A copy of the annual financial statement of each such
Collective Fund in which such Client Plan invests, regardless of
whether such Client Plan invests in shares of an Affiliated Fund
through such Collective Fund, within sixty (60) days of the completion
of such financial statement;
(v) With regard to any Fee Increase received by Principal, pursuant
to Section II(k)(2), above, a copy of the audit report referred to in
Section II(k)(2)(v), above, within sixty (60) days of the completion of
such audit report;
(vi) Oral or written responses to the inquiries posed by the Second
Fiduciary of such Client Plan, as such inquiries arise;
(vii) For each Client Plan invested indirectly in shares of an
Affiliated Fund through a Collective Fund, a statement of the
approximate percentage (which may be in the form of a range) on an
annual basis of the assets of such Collective Fund that was invested in
Affiliated Funds during the applicable year; and
(viii) Annually, with a Termination Form, as described in Section
II(j)(1), and instructions on the use of such form, as described in
Section II(j)(3), except that if a Termination Form has been provided
to such Second Fiduciary, pursuant to Section II(k) or pursuant to
Section II(l), above, then a Termination Form need not be provided
again, pursuant to this Section II(p)(2)(viii), until at least six (6)
months but no more than twelve (12) months have elapsed, since a
Termination Form was provided.
(q) Any disclosure required, herein, to be made by Principal to a
Second Fiduciary may be delivered by electronic email containing direct
hyperlinks to the location of each such document required to be
disclosed, which are maintained on a Web site by Principal, provided:
(1) Principal obtains from such Second Fiduciary prior consent in
writing to the receipt by such Second Fiduciary of such disclosure via
electronic email;
(2) Such Second Fiduciary has provided to Principal a valid email
address; and
(3) The delivery of such electronic email to such Second Fiduciary
is provided by Principal in a manner consistent with the relevant
provisions of the regulations of the Department of Labor (the
Department) at 29 CFR section 2520.104b-1(c) (substituting the word,
``Principal,'' for the word, ``administrator,'' as set forth therein,
and substituting the phrase, ``Second Fiduciary,'' for the phrase,
``the participant, beneficiary or other individual,'' as set forth
therein).
Section III--General Conditions
(a) Principal maintains for a period of six (6) years the records
necessary to enable the persons described, below, in Section III(b) to
determine whether the conditions of this exemption have been met,
except that:
(1) A prohibited transaction will not be considered to have
occurred, if solely because of circumstances beyond the control of
Principal, the records are lost or destroyed prior to the end of the
six-year period; and
(2) No party in interest other than Principal shall be subject to
the civil penalty that may be assessed under section 502(i) of the Act
or to the taxes imposed by section 4975(a) and (b) of the Code, if the
records are not maintained or are not available for examination as
required by Section III(b); below.
(b)(1) Except as provided in Section III(b)(2) and notwithstanding
any provisions of section 504(a)(2) of the Act, the records referred to
in Section III(a) are unconditionally available at their customary
location for examination during normal business hours by--
(i) Any duly authorized employee or representative of the
Department or the Internal Revenue Service, or the Securities &
Exchange Commission;
(ii) Any fiduciary of a Client Plan invested directly in shares of
an Affiliated Fund, any fiduciary of a Client Plan who has the
authority to acquire or to dispose of the interest in a Collective Fund
in which a Client Plan invests, any fiduciary of a Client Plan invested
indirectly in an Affiliated Fund through a Collective Fund where such
fiduciary has the authority to acquire or to dispose of the interest in
such
[[Page 32679]]
Collective Fund, and any duly authorized employee or representative of
such fiduciary; and
(iii) Any participant or beneficiary of a Client Plan invested
directly in shares of an Affiliated Fund or invested in a Collective
Fund, and any participant or beneficiary of a Client Plan invested
indirectly in shares of an Affiliated Fund through a Collective Fund,
and any representative of such participant or beneficiary; and
(2) None of the persons described in Section III(b)(1)(ii) and
(iii) shall be authorized to examine trade secrets of Principal, or
commercial or financial information which is privileged or
confidential.
Section IV--Definitions
For purposes of this exemption:
(a) The term, ``Principal,'' means Principal Trust, Principal Life,
and any affiliate thereof, as defined, below, in Section IV(c).
(b) The term, ``Client Plan(s),'' means a 401(k) plan(s), an
individual retirement account(s), other tax-qualified plan(s), and
other plan(s) as defined in the Act and Code, but does not include any
employee benefit plan sponsored or maintained by Principal, as defined,
above, in Section IV(a).
(c) An ``affiliate'' of a person includes:
(1) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with the person;
(2) Any officer, director, employee, relative, or partner in any
such person; and
(3) Any corporation or partnership of which such person is an
officer, director, partner, or employee.
(d) The term, ``control,'' means the power to exercise a
controlling influence over the management or policies of a person other
than an individual.
(e) The term, ``Affiliated Fund(s),'' means Principal Funds, Inc.,
a series of mutual funds managed by Principal Management Corporation,
an affiliate of Principal, as defined, above in Section IV(c), and any
other diversified open-end investment company or companies registered
with the Securities and Exchange Commission under the Investment
Company Act and operated in accordance with Rule 2a-7 under the
Investment Company Act, as amended, established and maintained by
Principal now or in the future for which Principal serves as an
investment adviser.
(f) The term, ``net asset value per share,'' and the term, ``NAV,''
mean the amount for purposes of pricing all purchases and sales of
shares of an Affiliated Fund, calculated by dividing the value of all
securities, determined by a method as set forth in the summary
prospectus for such Affiliated Fund and in the statement of additional
information, and other assets belonging to such Affiliated Fund or
portfolio of such Affiliated Fund, less the liabilities charged to each
such portfolio or each such Affiliated Fund, by the number of
outstanding shares.
(g) The term, ``relative,'' means a relative as that term is
defined in section 3(15) of the Act (or a member of the family as that
term is defined in section 4975(e)(6) of the Code), or a brother, a
sister, or a spouse of a brother or a sister.
(h) The term, ``Second Fiduciary,'' means the fiduciary of a Client
Plan who is independent of and unrelated to Principal. For purposes of
this exemption, the Second Fiduciary will not be deemed to be
independent of and unrelated to Principal if:
(1) Such Second Fiduciary, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with Principal;
(2) Such Second Fiduciary, or any officer, director, partner,
employee, or relative of such Second Fiduciary, is an officer,
director, partner, or employee of Principal (or is a relative of such
person); or
(3) Such Second Fiduciary, directly or indirectly, receives any
compensation or other consideration for his or her personal account in
connection with any transaction described in this exemption.
If an officer, director, partner, or employee of Principal (or
relative of such person) is a director of such Second Fiduciary, and if
he or she abstains from participation in:
(i) The decision of a Client Plan to invest in and to remain
invested in shares of an Affiliated Fund directly, the decision of a
Client Plan to invest in shares of an Affiliated Fund indirectly
through a Collective Fund, and the decision of a Client Plan to invest
in a Collective Fund that may in the future invest in shares of an
Affiliated Fund;
(ii) Any authorization in accordance with Section II(i), and any
authorization, pursuant to negative consent, as described in Section
II(k) or in Section II(l); and
(iii) The choice of such Client Plan's investment adviser; then
Section IV(h)(2), above, shall not apply.
(i) The term, ``Secondary Service(s),'' means a service or services
other than an investment management service, investment advisory
service, and any similar service which is provided by Principal to an
Affiliated Fund, including but not limited to custodial, accounting,
administrative services, and brokerage services. Principal may also
serve as a dividend disbursing agent, shareholder servicing agent,
transfer agent, fund accountant, or provider of some other Secondary
Service, as defined, in this Section IV(i).
(j) The term, ``Collective Fund(s),'' means a separate account of
an insurance company, as defined in section 2510.3-101(h)(1)(iii) of
the Department's plan assets regulations,\5\ maintained by Principal,
and a bank-maintained common or collective investment trust maintained
by Principal.
---------------------------------------------------------------------------
\5\ 51 FR 41262 (November 13, 1986).
---------------------------------------------------------------------------
(k) The term, ``business day,'' means any day that
(1) Principal is open for conducting all or substantially all of
its business; and
(2) The New York Stock Exchange (or any successor exchange is open
for trading.
(l) The term, ``Fee Increase(s),'' includes any increase by
Principal in a rate of a fee, previously authorized in writing by the
Second Fiduciary of each affected Client Plan, pursuant to Section
II(i)(2)(i)-(iv), above, and in addition includes, but is not limited
to:
(1) Any increase in any fee that results from the addition of a
service for which a fee is charged;
(2) Any increase in any fee that results from a decrease in the
number of services and any increase in any fee that results from a
decrease in the kind of service(s) performed by Principal for such fee
over an existing rate of fee for each such service previously
authorized by the Second Fiduciary, in accordance with Section
II(i)(2)(i)-(iv), above; and
(3) Any increase in any fee that results from Principal changing
from one of the fee methods, as described, above, in Section II(a)(1)-
(3), to using another of the fee methods, as described, above, in
Section II(a)(1)-(3).
(m) The term, ``Plan-Level Management Fee,'' includes any
investment management fee, investment advisory fee, and any similar fee
paid by a Client Plan to Principal for any investment management
services, investment advisory services, and similar services provided
by Principal to such Client Plan at the plan-level. The term, ``Plan-
Level Management Fee'' does not include a separate fee paid by a Client
Plan to Principal for asset allocation service(s) (Asset Allocation
Service(s)), as defined, below, in Section
[[Page 32680]]
IV(p), provided by Principal to such Client Plan at the plan-level.\6\
---------------------------------------------------------------------------
\6\ For the receipt by Principal from a Client Plan of a fee for
Asset Allocation Services provided by Principal to such Client Plan
at the plan-level, Principal relies on the relief provided by the
statutory exemption, as set forth in section 408(b)(2) of the Act
and the Department's regulations, pursuant to 29 CFR 2550.408b-2.
The Department is offering no view, herein, as to whether the
receipt by Principal of such an asset allocation fee is covered by
such statutory exemption, nor is the Department, herein, offering
any view as to whether Principal satisfies the conditions set forth
in such statutory exemption.
---------------------------------------------------------------------------
(n) The term, ``Collective Fund-Level Management Fee,'' includes
any investment management fee, investment advisory fee, and any similar
fee paid by a Collective Fund to Principal for any investment
management services, investment advisory services, and any similar
services provided by Principal to such Collective Fund at the
collective fund level.
(o) The term, ``Affiliated Fund-Level Advisory Fee'' includes any
investment advisory fee and any similar fee paid by an Affiliated Fund
to Principal under the terms of an investment advisory agreement
adopted in accordance with section 15 of the Investment Company Act.
(p) The term, ``Asset Allocation Service(s),'' means a service or
services to a Client Plan relating to the selection of appropriate
asset classes or target-date ``glidepath,'' and the allocation or
reallocation (including rebalancing) of the assets of a Client Plan
among the selected asset classes. Such services do not include the
management of the underlying assets of a Client Plan, the selection of
specific funds or managers, and the management of the selected
Affiliated Funds or Collective Funds.
Effective Date: This exemption is effective as of the date of the
publication of the final exemption in the Federal Register.
Written Comments
In the Notice, the Department invited all interested persons to
submit written comments and requests for a hearing within 45 days of
the date of the publication of the Notice in the Federal Register on
December 13, 2011. All comments and requests for hearing were due by
January 27, 2012. During the comment period, the Department received no
requests for hearing. However, the Department did receive a comment
(the Original Comment) from the Applicants via an email, dated January
27, 2012. In the email, the Applicants requested certain modifications
to the language of three (3) of the conditions of the exemption, as set
forth in the Notice. Subsequently, after further consideration, the
Applicants, in a letter dated March 19, 2012, amended the Original
Comment (the Amended Comment). The Applicants' Amended Comment is
discussed in paragraphs 1-3, below, in an order that corresponds to the
appearance of the relevant language in the Notice.
1. The Applicants have requested a modification to the language of
Section II(j)(4)(ii)(A), as set forth on page 77601, column 3, lines
10-30 of the Notice. Section II(j)(4)(ii)(A) in the Notice reads, as
follows:
In the case of a Client Plan which invests in a Collective Fund,
the termination will be implemented by the withdrawal of such Client
Plan from all investments in such affected Collective Fund, and such
withdrawal will be implemented by Principal within such time as may
be necessary for withdrawal in an orderly manner that is equitable
to the affected withdrawing Client Plan and to all non-withdrawing
Client Plans, but in no event shall such withdrawal be implemented
by Principal more than five (5) business days after the day
Principal receives from the Second Fiduciary, acting on behalf of
such withdrawing Client Plan, a Termination Form or receives some
other written notification of intent to terminate the investment of
such Client Plan in such Collective Fund.
In the comment letter, the Applicants agreed to accept the
condition of a firm five (5) business day limitation on withdrawals
from any Collective Fund that is operating in reliance on this
exemption. However, Principal requests that this condition be waived in
the event that (a) any governmental authority forbids Principal from
distributing the funds within five (5) days due to an emergency (e.g.,
a market closure); or (b) the withdrawing Client Plan fails to direct
Principal as to where to reinvest or send the withdrawal proceeds.
Principal also requests that if the Second Fiduciary specifies an
effective date for the withdrawal that is later than the date the
Termination Form is delivered to Principal that Principal may treat
such later date as the date of receipt.
In order to clarify the language, as set forth in Section
II(j)(4)(ii)(A) in the Notice, the Applicants request that the language
of Section II(j)(4)(ii)(A) in the exemption be amended as follows:
In the case of a Client Plan which invests in a Collective Fund,
the termination will be implemented by the withdrawal of such Client
Plan from all investments in such affected Collective Fund, and such
withdrawal will be implemented by Principal within such time as may
be necessary for withdrawal in an orderly manner that is equitable
to the affected withdrawing Client Plan and to all non-withdrawing
Client Plans, but in no event shall such withdrawal be implemented
by Principal more than five (5) business days after the day
Principal receives from the Second Fiduciary, acting on behalf of
such withdrawing Client Plan, a Termination Form or receives some
other written notification of intent to terminate the investment of
such Client Plan in such Collective Fund, unless such withdrawal is
otherwise prohibited by a governmental entity with jurisdiction over
the Collective Fund, or the Second Fiduciary fails to instruct
Principal as to where to reinvest or send the withdrawal proceeds;
The Department concurs, and accordingly, language of Section
II(j)(4)(ii)(A) in the exemption has been amended, as requested by the
Applicants.
2. The Applicants have requested deletion of the language of
Section II(j)(4)(ii)(B), as set forth on page 77601, column 3, lines
31-45 of the Notice. Section II(j)(4)(ii)(B) in the Notice reads, as
follows:
Principal will pay to such withdrawing Client Plan interest on
the settlement amount calculated at the prevailing Federal funds
rate plus two percent (2%) for the period from the day Principal
receives from the Second Fiduciary, acting on behalf of such
withdrawing Client Plan, a Termination Form or receives some other
written notification of intent to terminate the investment of such
Client Plan in such Collective Fund, to the date Principal pays such
settlement amount in cash, with interest thereon, to such
withdrawing Client Plan.
In the comment letter, the Applicants agreed to accept the
condition of a firm five (5) business day limitation on withdrawals
from any Collective Fund, as set forth in Section II(j)(4)(ii)(A) of
this exemption, subject to the elimination of the requirement that the
Applicants pay interest during such five business day period.
The Department concurs, and accordingly, Section II(j)(4)(ii)(B),
as set forth in the Notice, has been deleted from this exemption.
3. The Applicants have requested a modification to the language of
Section II(j)(4)(ii)(C), as set forth on page 77601, column 3, lines
46-61 of the Notice. Section II(j)(4)(ii)(C) in the Notice reads, as
follows:
From the date a Second Fiduciary, acting on behalf of a Client
Plan that invests in a Collective Fund, returns a Termination Form
or returns some other written notification of intent to terminate
such Client Plan's investment in such Collective Fund, such Client
Plan will not be subject to pay a pro rata share of any Collective
Fund-Level Management Fee, nor will such Client Plan be subject to
any other changes to the portfolio of such Collective Fund,
including a pro rata share of any Affiliated Fund-Level Advisory Fee
arising from the investment by such Collective Fund in an Affiliated
Fund.
[[Page 32681]]
In this regard, the Applicants acknowledge that a Client Plan which
timely returns a Termination Form or other notice of termination in
proper form (e.g., with sufficient information to implement the intent
of such Client Plan) will be entitled to receive the NAV of the
Collective Fund ``as of'' the close of business on the date of receipt
by Principal of notice of termination--even if the funds are not
distributed for up to five (5) business days. The Applicants further
acknowledge that this would mean that no further charges--whether
directly at the Collective Fund-Level or indirectly at the Affiliated
Fund-Level will be incurred from and after the effective date of the
receipt of the notification of termination by Principal. Accordingly,
in order to clarify the language, as set forth in Section
II(j)(4)(ii)(C) in the Notice, the Applicants request that Section
II(j)(4)(ii)(C) be renumbered as Section II(j)(4)(ii)(B) and that the
word, ``changes,'' as set forth on page 77601, column 3, line 56 the
Notice be amended to the word, ``charges.''
The Department concurs, with the Applicants' requested amendments
to Section II(j)((4)(ii)(C). In addition, the Department wishes to
clarify that the effective date of a withdrawal request is the day
Principal receives notification of termination from a withdrawing
Client Plan. Further, the Department wishes to clarify that a
withdrawing Client Plan, in addition to not being subject to pay a pro
rata share of any fees arising from the investment by such Client Plan
in such Collective Fund, and any Affiliated Fund-Level Advisory Fee
arising from such Collective Fund investing in an Affiliated Fund, a
withdrawing Client Plan will not be subject to pay a pro rata share of
any fee for Secondary Services arising from the investment by such
Collective Fund in such Affiliated Fund. Accordingly, the Department
has amended the language of Section II(j)(4)(ii)(C), as set forth in,
on page 77601, column 3, lines 46-61 of the Notice, as follows:
From the date Principal receives from a Second Fiduciary, acting
on behalf of a Client Plan, that invests in a Collective Fund, a
Termination Form or receives some other written notification of
intent to terminate such Client Plan's investment in such Collective
Fund, such Client Plan will not be subject to pay a pro rata share
of any fees arising from the investment by such Client Plan in such
Collective Fund, including any Collective Fund-Level Management Fee,
nor will such Client Plan be subject to any other charges to the
portfolio of such Collective Fund, including a pro rata share of any
Affiliated Fund-Level Advisory Fee and any fee for Secondary
Services arising from the investment by such Collective Fund in an
Affiliated Fund.
In addition to the changes to the language of the final exemption
requested by the Applicants, as discussed above, the Department has
decided to clarify the language of several sections of the final
exemption. The amended language of each of these sections is set forth
in paragraphs 4-8, below.
4. Section II(a)(2)(ii), as set forth in the Notice at page 77599,
column 1, lines 33-37, has been deleted. Section II(a)(2)(ii) in the
final exemption reads, as follows:
does not pay directly to Principal or indirectly to Principal
through the Collective Fund for the entire period of such investment
any Collective Fund-Level Management Fee with respect to any assets
of such Client Plan invested in such Collective Fund.
5. Section II(a)(3)(i), as set forth in the Notice at page 77599,
column 1, lines 64-69 and column 2, lines 1-4, has been deleted.
Section II(a)(3)(i) in the final exemption reads, as follows:
does not pay to Principal for the entire period of such investment
any a Plan-Level Management Fee (including any ``Net'' Plan-Level
Management Fee, as described, above, in Section II(a)(2)(iii)), and
does not pay directly to Principal or indirectly to Principal
through the Collective Fund for the entire period of such investment
any Collective Fund-Level Management Fee with respect to the assets
of such Client Plan which are invested in such Affiliated Fund; or
6. Section II(a)(3)(ii), as set forth in the Notice at page 77599,
column 2, lines 9-25, has been deleted. Section II(a)(3)(ii) in the
final exemption reads, as follows:
pays indirectly to Principal through the Collective Fund a
Collective Fund-Level Management Fee, in accordance with Section
II(a)(2)(i), above, based on the total assets of such Client Plan
invested in such Collective Fund, from which a credit has been
subtracted from such Collective Fund-Level Management Fee, where the
amount subtracted represents such Client Plan's pro rata share of
any Affiliated Fund-Level Advisory Fee paid to Principal by such
Affiliated Fund; and does not pay to Principal for the entire period
of such investment any Plan-Level Management Fee with respect to any
assets of such Client Plan invested in such Collective Fund; or
7. Section II(a)(3)(iii), as set forth in the Notice at page 77599,
column 2, lines 26-42, has been deleted. Section II(a)(3)(iii) in the
final exemption reads, as follows:
pays to Principal a Plan-Level Management Fee, in accordance with
Section II(a)(2)(iii), above, based on the total assets of such
Client Plan under management by Principal at the plan-level, from
which a credit has been subtracted from such Plan-Level Management
Fee, where the amount subtracted represents such Client Plan's pro
rata share of any Affiliated Fund-Level Advisory Fee paid to
Principal by such Affiliated Fund; and does not pay directly to
Principal or indirectly to Principal through the Collective Fund for
the entire period of such investment any Collective Fund-Level
Management Fee with respect to any assets of such Client Plan
invested in such Collective Fund; or
8. The definition of the term, ``Asset Allocation Services(s),'' as
set forth in Section IV(p) in the Notice at page 77605, column 2, lines
21-37, has been deleted. The amended definition of the term, ``Asset
Allocation'' in the final exemption reads, as follows:
The term, ``Asset Allocation Service(s),'' means a service or
services to a Client Plan relating to the selection of appropriate
asset classes or target-date ``glidepath,'' and the allocation or
reallocation (including rebalancing) of the assets of a Client Plan
among the selected asset classes. Such services do not include the
management of the underlying assets of a Client Plan, the selection
of specific funds or managers, and the management of the selected
Affiliated Funds or Collective Funds.
After full consideration and review of the entire record, including
the Original Comment and the Amended Comment filed by the Applicants,
the Department has determined to grant the exemption, as modified,
above. The Original Comment and the Amended Comment submitted to the
Department by the Applicants have been included as part of the public
record of the exemption application. A copy of the Original Comment and
the Amended Comment is posted on the Department's Web site at http://www.regulations.gov. The complete application file (D-11579), including
all supplemental submissions received by the Department, is available
for public inspection in the Public Documents Room of the Employee
Benefits Security Administration, Room N-1513, U.S. Department of
Labor, 200 Constitution Avenue NW., Washington, DC 20210.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption refer to
the Notice published on December 13, 2011, at 76 FR 77598.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 693-8540 (This is not a toll-free number).
[[Page 32682]]
Weyerhaeuser Company (Weyerhaeuser) and Federalway Asset Management LP
(collectively, the Applicants) Located in Federalway, Washington
[Exemption Application No. D-11677; Prohibited Transaction Exemption
2012-12]
Exemption
Section I: Specific Exemption Involving the Contribution In-Kind
The restrictions of sections 406(a)(1)(A), 406(b)(1), 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)(A) and 4975(c)(1)(E)
of the Code,\7\ shall not apply, effective as of the date of the
publication of this exemption in the Federal Register, to the
contribution in-kind by the Weyerhaeuser Company (Weyerhaeuser), the
sponsor of the Weyerhaeuser Pension Plan (the Plan), of a bundle of
assets (the Assets) owned by Weyerhaeuser Asset Management LLC (WAM), a
wholly-owned subsidiary of Weyerhaeuser NR Company which is in turn a
wholly-owned subsidiary of Weyerhaeuser, to the Weyerhaeuser Company
Master Retirement Trust (the Master Trust); provided that the
conditions, as set forth, below, in Section IV, and the following
conditions are satisfied:
---------------------------------------------------------------------------
\7\ 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.
---------------------------------------------------------------------------
(a) Prior to the execution and closing on the in-kind contribution
of the Assets, an independent, qualified fiduciary (the I/F), as
defined in Section V(k), acting on behalf of the Master Trust,
determines whether and on what terms to enter into the in-kind
contribution of such Assets;
(b) The I/F negotiates, reviews, and approves the specific terms
and conditions of the in-kind contribution of the Assets and
determines, prior to entering into such in-kind contribution, that such
transaction is feasible, in the interest of, and protective of the
Master Trust and its participants and beneficiaries;
(c) The I/F takes the necessary steps to ensure compliance by
Weyerhaeuser with the terms and conditions of the in-kind contribution
of the Assets;
(d) As of the date the Assets are contributed to the Master Trust,
the contributed value of the Assets is equal to the fair market value
of the Assets, as determined by the I/F;
(e) The terms and conditions of the in-kind contribution of the
Assets are no less favorable to the Master Trust than terms negotiated
at arm's length under similar circumstances between unrelated parties;
(f) The fair market value of the Assets will constitute less than
one percent (1%) of the assets of the Master Trust at the time such
Assets are contributed to the Master Trust;
(g) The Master Trust incurs no commissions, fees, costs, or other
charges and expenses in connection with the in-kind contribution of the
Assets to the Master Trust;
(h) The in-kind contribution of the Assets is a one-time
transaction;
(i) The fair market value of the Assets is not credited in the
prefunding balance for purposes of calculating the minimum required
contributions of Weyerhaeuser to the Plan;
(j) Pursuant to the royalty interest agreement (the Royalty
Agreement) with Federalway Asset Management LP (Newco), the Master
Trust will be entitled to receive annual royalty payments in the amount
of 12.5 percent (12.5%) on revenues of less than $25 million per year
and 15 percent (15%) on revenues of more than $25 million per year; and
(k) The termination of Newco as investment manager of the Master
Trust will have no impact on the Master Trust's rights under the
Royalty Agreement.
Section II: Specific Exemption Involving the Management by Newco of the
Assets of Employee Benefit Plans
Effective for a period of five (5) years, beginning on the date of
the publication of this exemption in the Federal Register and ending on
the day which is five (5) years from such publication date, the
restrictions of section 406(a)(1)(A) through (D) of the Act and the
taxes imposed by section 4975(a) and (b) of the Code, by reason of
section 4975(c)(1)(A) through (D) of the Code, shall not apply to:
(a) Any transaction between a party in interest, as defined in
Section V(e), with respect to the Plan and the Master Trust in which
such Plan has an interest; and any transaction between a party in
interest, as defined in Section V(e), with respect to any other
employee benefit plan or employee benefit plans sponsored by
Weyerhaeuser (the Other Plan(s)) and the Master Trust in which such
Other Plan(s) have an interest; and
(b) Any transaction between a party in interest, as defined in
Section V(e), and any employee benefit plan or any employee benefit
plans, as defined in Section V(i), (the Client Plan(s)), where such
Client Plan has engaged Newco to act as investment manager within the
meaning of section 3(38) of the Act, or where such Client Plan is
invested in a collective investment vehicle managed by Newco the assets
of which are treated as plan assets under section 3(42) of the Act;
provided that:
(1) Newco has discretionary authority or control with respect to
the assets of the Plan, the assets of the Other Plan(s), or the assets
the Client Plan(s) which are invested in an investment fund (a Managed
Account) involved in any such transaction;
(2) Newco satisfies the definition, as set forth, below, in Section
V(a) of this exemption; and
(3) The conditions as set forth, below, in Section III, and Section
IV, are satisfied.
Section III: Specific Conditions Applicable to Transactions Described
in Section II of This Exemption
(a) At the time of the transaction, as defined in Section V(h),
neither the party in interest, as defined in Section V(e), nor any
affiliate, as defined in Section V(b):
(1) Has the authority to appoint or terminate Newco as a manager of
the Managed Account involved in the transaction, or
(2) Has the authority to negotiate on behalf of the Plan, the Other
Plan(s), or the Client Plan(s), the terms of the management agreement
with Newco (including renewals or modifications thereof) with respect
to the Managed Account involved in the transaction;
Notwithstanding the foregoing, in the case of a Managed Account in
which two (2) or more unrelated plans, as defined in Section V(i), have
an interest, a transaction with a party in interest, as defined in
Section V(e), with respect to a plan will be deemed to satisfy the
requirements of Section III(a), if the assets of the plan managed by
Newco in the Managed Account, when combined with the assets of other
plans established or maintained by the same employer (or affiliate
thereof, as described in Section V(b)(1)) or by the same employee
organization, and managed in the same Managed Account, represent less
than 10 percent (10%) of the assets of the Managed Account;
(b) The transaction is not described in--
(1) Prohibited Transaction Exemption 2006-16 (71 FR 63786; October
31, 2006) (relating to securities lending arrangements) (as amended or
superseded),
(2) Prohibited Transaction Exemption 83-1 (48 FR 895; January 7,
1983) (relating to acquisitions by plans of interests in mortgage
pools) (as amended or superseded), or
(3) Prohibited Transaction Exemption 82-87 (47 FR 21331; May 18,
1982)
[[Page 32683]]
(relating to certain mortgage financing arrangements) (as amended or
superseded);
(c) The terms of the transaction are negotiated on behalf of the
Managed Account by, or under the authority and general direction of,
Newco, and either Newco, or (so long as Newco retains full fiduciary
responsibility with respect to the transaction) a property manager
acting in accordance with written guidelines established and
administered by Newco, makes the decision on behalf of the Managed
Account to enter into the transaction, provided that the transaction is
not part of an agreement, arrangement, or understanding designed to
benefit a party in interest, as defined in Section V(e);
(d) The party in interest, as defined in Section V(e), dealing with
the Managed Account is neither Newco nor a person related to Newco,
within the meaning of Section V(g);
(e) At the time the transaction is entered into, and at the time of
any subsequent renewal or modification thereof that requires the
consent of Newco, the terms of the transaction are at least as
favorable to the Managed Account as the terms generally available in
arm's length transactions between unrelated parties;
(f) Neither Newco nor any affiliate thereof, as defined in Section
V(c), nor any owner, direct or indirect, of a 5 percent (5%) or more
interest in Newco is a person who within the ten (10) years immediately
preceding the transaction has been either convicted or released from
imprisonment, whichever is later, as a result of:
(1) Any felony involving abuse or misuse of such person's employee
benefit plan position or employment, or position or employment with a
labor organization;
(2) Any felony arising out of the conduct of the business of a
broker, dealer, investment adviser, bank, insurance company, or
fiduciary;
(3) Income tax evasion;
(4) Any felony involving the larceny, theft, robbery, extortion,
forgery, counterfeiting, fraudulent concealment, embezzlement,
fraudulent conversion, or misappropriation of funds or securities;
(5) Conspiracy or attempt to commit any such crimes or a crime in
which any of the foregoing crimes is an element; or
(6) Any other crime described in section 411 of the Act. For
purposes of this Section III(f), a person shall be deemed to have been
``convicted'' from the date of the judgment of the trial court,
regardless of whether that judgment remains under appeal.
Section IV-General Requirements Applicable to Transactions Described in
Section I and Section II of This Exemption
(a) Newco or an affiliate, as defined in Section V(l), maintains or
causes to be maintained within the United States, for a period of six
(6) years from the date of each covered transaction, the records
necessary to enable the persons described, below, in Section
IV(b)(1)(A)-(E), to determine whether the conditions of this exemption
have been met, except that:
(1) A separate prohibited transaction will not be considered to
have occurred solely because, due to circumstances beyond the control
of Newco and/or its affiliates, as defined in Section V(l), the records
are lost or destroyed prior to the end of the six (6) year period, and
(2) No party in interest or disqualified person, as defined in
Section V(e), other than Newco, shall be subject to the civil penalty
that may be assessed under section 502(i) of the Act, or to the taxes
imposed by section 4975(a) and (b) of the Code, if the records are not
maintained, or are not available for examination, as required by
Section IV(b)(1).
(b)(1) Except as provided in Section IV(b)(2), and notwithstanding
any provisions of subsections (a)(2) and (b) of section 504 of the Act,
the records referred to, above, in Section IV(a) are unconditionally
available for examination at their customary location during normal
business hours by:
(A) Any duly authorized employee or representative of the
Department or of the Internal Revenue Service;
(B) Any fiduciary of the Plan, any fiduciary of any Other Plan(s),
any fiduciary of any Client Plan(s), and any duly authorized
representative of such fiduciary;
(C) Any contributing employer to the Plan, any contributing
employer to any Other Plan(s), any contributing employer to any of the
Client Plan(s), and any duly authorized employee representative of such
contributing employer;
(D) Any participant or beneficiary of the Plan, any participant or
beneficiary of any Other Plan(s), any participant or beneficiary of any
Client Plan(s), and any duly authorized representative of such
participants or beneficiaries; and
(E) Any employee organization whose members are covered by the
Plan, any employee organization whose members are covered by the Other
Plan(s), and any employee organization whose members are covered by any
Client Plan(s);
(2) None of the persons, described in Section IV(b)(1)(B) through
(E), shall be authorized to examine trade secrets of Newco or its
affiliates, as defined in Section V(l), or commercial or financial
information which is privileged or confidential.
Section V--Definitions
(a) For purposes of this exemption, the term, Federalway Asset
Management LP, and the term, ``Newco,'' means a fiduciary (as defined
in Section V(j)) which is an investment adviser registered under the
Investment Advisers Act of 1940 that has total client assets under its
management and control in excess of $85,000,000, as of the date Newco
commences operations, and shareholders' or partners' equity (as defined
in Section V(m)) in excess of $1,000,000.
(b) For purposes of Section III(a), an ``affiliate'' of a person
means--
(1) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with the person,
(2) Any corporation, partnership, trust or unincorporated
enterprise of which such person is an officer, director, 10 percent
(10%) or more partner, or highly compensated employee as defined in
section 4975(e)(2)(H) of the Code (but only if the employer of such
employee is the plan sponsor), and
(3) Any director of the person or any employee of the person who is
a highly compensated employee, as defined in section 4975(e)(2)(H) of
the Code, or who has direct or indirect authority, responsibility or
control regarding the custody, management or disposition of plan assets
involved in the transaction. A named fiduciary (within the meaning of
section 402(a)(2) of the Act) of a plan with respect to the plan assets
involved in the transaction and an employer any of whose employees are
covered by the plan will also be considered affiliates with respect to
each other for purposes of Section III(a), if such employer or an
affiliate of such employer has the authority, alone or shared with
others, to appoint or terminate the named fiduciary or otherwise
negotiate the terms of the named fiduciary's employment agreement.
(c) For purposes of Section III(f), an ``affiliate'' of a person
means--
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with the person,
(2) Any director of, relative of, or partner in, any such person,
(3) Any corporation, partnership, trust or unincorporated
enterprise of which such person is an officer, director, or a 5 percent
(5%) or more partner or owner, and
[[Page 32684]]
(4) Any employee or officer of the person who--
(A) Is a highly compensated employee (as defined in section
4975(e)(2)(H)) of the Code or officer (earning 10 percent (10%) or more
of the yearly wages of such person), or
(B) Has direct or indirect authority, responsibility or control
regarding the custody, management or disposition of plan assets.
(d) For purposes of Section V(b), Section V(c), and Section V(l),
the term, ``control,'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(e) For purposes of this exemption, the term, ``party in
interest,'' means a person described in section 3(14) of the Act and
includes a ``disqualified person,'' as defined in Code section
4975(e)(2).
(f) For purposes of Section V(c)(2) and Section V(l)(2), the term,
``relative,'' means a relative as that term is defined in section 3(15)
of the Act, or a brother, a sister, or a spouse of a brother or sister.
(g) Newco is ``related'' to a party in interest for purposes of
Section III(d), if, as of the last day of its most recent calendar
quarter: (i) Newco owns a 10 percent (10%) or more interest in the
party in interest; (ii) a person controlling, or controlled by, Newco
owns a 20 percent (20%) or more interest in the party in interest;
(iii) the party in interest owns a 10 percent (10%) or more interest in
Newco; or (iv) a person controlling, or controlled by, the party in
interest owns a 20 percent (20%) or more interest in Newco.
Notwithstanding the foregoing, a party in interest is ``related'' to
Newco if: (i) A person controlling, or controlled by, the party in
interest has an ownership interest that is less than 20 percent (20%)
but greater than 10 percent (10%) in Newco and such person exercises
control over the management or policies of Newco by reason of its
ownership interest; (ii) a person controlling, or controlled by, Newco
has an ownership interest that is less than 20 percent (20%) but
greater than 10 percent (10%) in the party in interest and such person
exercises control over the management or policies of the party in
interest by reason of its ownership interest. For purposes of this
definition:
(1) The term ``interest'' means with respect to ownership of an
entity--
(A) The combined voting power of all classes of stock entitled to
vote or the total value of the shares of all classes of stock of the
entity if the entity is a corporation,
(B) The capital interest or the profits interest of the entity if
the entity is a partnership, or
(C) The beneficial interest of the entity if the entity is a trust
or unincorporated enterprise; and
(2) A person is considered to own an interest if, other than in a
fiduciary capacity, the person has or shares the authority--
(A) To exercise any voting rights or to direct some other person to
exercise the voting rights relating to such interest, or
(B) To dispose or to direct the disposition of such interest.
(h) For purposes of this exemption, the time as of which any
transaction occurs is the date upon which the transaction is entered
into. In addition, in the case of a transaction that is continuing, the
transaction shall be deemed to occur until it is terminated. If any
transaction is entered into on or after the date of the publication of
this exemption in the Federal Register or a renewal that requires the
consent of Newco occurs on or after the date of the publication of this
exemption in the Federal Register, and the requirements of this
exemption are satisfied at the time the transaction is entered into or
renewed, respectively, the requirements will continue to be satisfied
thereafter with respect to the transaction. Nothing in this paragraph
shall be construed as exempting a transaction entered into by a Managed
Account which becomes a transaction, as described in section 406 of the
Act or section 4975 of the Code while the transaction is continuing,
unless the conditions of this exemption were met either at the time the
transaction was entered into or at the time the transaction would have
become prohibited but for this exemption.
(i) For purposes of this exemption, the terms, ``employee benefit
plan'' and ``plan,'' include an employee benefit plan described in
section 3(3) of the Act and/or a plan described in section 4975(e)(1)
of the Code, but do not include a plan sponsored by Newco or any
affiliate of Newco.
(j) For purposes of Section V(a), the term ``fiduciary'' means a
fiduciary managing the assets of a plan, as defined in Section V(i), in
a Managed Account that is independent of and unrelated to the employer
sponsoring such plan. For purposes of this exemption, a fiduciary will
not be deemed to be independent of and unrelated to the employer
sponsoring the plan, if such fiduciary directly or indirectly controls,
is controlled by, or is under common control with the employer
sponsoring the plan.
(k) For purposes of Section I, the term, ``I/F,'' means a fiduciary
that:
(1) Can demonstrate, through experience and/or education,
proficiency in matters involving the in-kind contribution of assets,
including assets such as the Assets which are the subject of Section I
of this exemption;
(2) Is an expert with respect to the valuation of assets, such as
the Assets, or has the ability to access (itself or through persons
engaged by it) appropriate data regarding the value of assets, such as
the Assets, in the relevant market;
(3) Has not engaged in any criminal activity involving fraud,
fiduciary standards, or securities law violations;
(4) Is appointed to act on behalf of the Master Trust for all
purposes related to in-kind contribution of the Assets; and
(5) Is independent of and unrelated to Weyerhaeuser and its
affiliates, as defined, below, in Section V(l). For purposes of this
exemption, a fiduciary will not be deemed to be independent of and
unrelated to Weyerhaeuser and its affiliates if:
(i) Such fiduciary directly or indirectly controls, is controlled
by, or is under common control with Weyerhaeuser and its affiliates, as
defined, below, in Section V(l),
(ii) Such fiduciary directly or indirectly receives any
compensation or other consideration in connection with any of the
transactions described in this exemption; except that an I/F may
receive compensation for acting as an I/F in connection with the
transactions contemplated herein, if the amount or payment of such
compensation is not contingent upon or in any way affected by the I/F's
ultimate decisions, and
(iii) The annual gross revenue from Weyerhaeuser and its
affiliates, as defined, below, in Section V(l), received by such
fiduciary, during any year of its engagement, does not exceed one
percent (1%) of such fiduciary's annual gross revenue from all sources
for its prior tax year.
(l) For purposes of Section IV(a) and Section V(k), the term,
``affiliate,'' means:
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with the person;
(2) Any officer, director, employee, relative, or partner of any
such person; and
(3) Any corporation or partnership of which such person is an
officer, director, partner, or employee.
(m) For purposes of Section V(a), the term ``shareholders' or
partners' equity'' means the equity shown in the balance sheet, as of
the date Newco commences operations, prepared in accordance with
[[Page 32685]]
generally accepted accounting principles.
Temporary Nature of the Exemption
Effective Date: With regard to the transaction described in Section
I, the Department has determined that the relief granted with respect
to such transaction shall be effective, as of the date of the
publication of this exemption in the Federal Register.
With regard to the transactions described in Section II, the
Department has determined that the relief granted with respect such
transactions is temporary in nature, and shall be effective, beginning
on the date of the publication of this exemption in the Federal
Register and ending on the day which is five (5) years from the date of
the publication of this exemption in the Federal Register. Accordingly,
relief described in this exemption with respect to the transactions
described in Section II will not be available upon the expiration of
such five-year period for any new or additional transactions, as
described herein, after such date, but would continue to apply beyond
the expiration of such five-year period for continuing transactions
entered into within the five-year period; provided that the conditions
of this exemption continue to be satisfied. Should the applicant wish
to extend, beyond the expiration of such five-year period, the relief
provided for new or additional transactions, as described in Section
II, the Applicants may submit another application for exemption. In
this regard, the Department expects that prior to filing another
exemption application seeking relief for new or additional
transactions, as described in Section II, the Applicants should be
prepared to demonstrate compliance with the conditions of this
exemption.
Written Comments
In the Notice of Proposed Exemption (the Notice), the Department
invited all interested persons to submit written comments and requests
for a hearing on the proposed exemption within fifty (50) days of the
date of the publication of the Notice in the Federal Register on
January 20, 2011. All comments and requests for hearing were due by
March 12, 2012. Although during the comment period, the Department
received numerous telephone calls, emails, and letters from
commentators, none of the commentators raised any substantive issues
with respect to the transactions which are the subject of this
exemption. During the comment period, the Department also received two
requests from commentators for a hearing, but the commentators did not
provide a substantive reason why a hearing should be held. As no
material issues relating to the subject transactions were raised by the
commentators during the comment period which would require the
convening of a hearing, the Department has determined not to delay
consideration of the final exemption by holding a hearing on
application D-11677.
Accordingly, after full consideration and review of the entire
record, including the comments filed by the commentators, the
Department has determined to grant the exemption, as set forth, above.
The written comments submitted to the Department by the commentators
have been included as part of the public record of the exemption
application. Copies of the written comments have also been provided to
Weyerhaeuser. The complete application file (D-11677), including all
supplemental submissions received by the Department, is available for
public inspection in the Public Documents Room of the Employee Benefits
Security Administration, Room N-1513, U.S. Department of Labor, 200
Constitution Avenue NW., Washington, DC 20210.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption refer to
the Notice published on January 20, 2012, at 77 FR 3052.
FOR FURTHER INFORMATION CONTACT: Ms. Angelena C. Le Blanc of the
Department, telephone (202) 693-8540. (This is not a toll-free number.)
Sammons Enterprises, Inc. Employee Stock Ownership ESOP (the ESOP)
Located in Dallas, Texas
[Prohibited Transaction Exemption 2012-13; Exemption Application Number
D-11679]
Exemption
The restrictions of sections 406(a)(1)(A) and (D), 406(b)(1), 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)(A), (D)
and (E) of the Code, shall not apply to the personal holding company
consent dividend election (the Consent) with respect to Sammons
Enterprises, Inc. (Sammons), by the trustee of the ESOP, provided that
the following conditions are satisfied:
(a) The trustee of the ESOP is an independent, qualified fiduciary
(the I/F), acting on behalf of the ESOP, which determines prior to
entering into the transaction that the transaction is feasible, in the
interest of, and protective of the ESOP and the participants and
beneficiaries of the ESOP;
(b) Before the ESOP enters into the subject transaction, the I/F
reviews the transaction, and determines whether or not to approve the
transaction, in accordance with the fiduciary provisions of the Act;
(c) The I/F monitors compliance with the terms and conditions of
this exemption, as described herein, and ensures that such terms and
conditions are at all times satisfied;
(d) Sammons provides to the I/F, in a timely fashion, all
information reasonably requested by the I/F to assist it in making its
decision whether or not to approve the transaction;
(e) The consent dividend will represent no more than two percent
(2%) of the ESOP's assets in any taxable year within the timeframe of
the exemption herein;
(f) Shares of Sammons stock are held in an ESOP suspense account,
and are allocated each year to each eligible ESOP participant in
accordance with the applicable provisions of the Code;
(g) All of the requirements of section 565 of the Code are met with
respect to the Consent; and
(h) All shareholders of Sammons are requested to consent to the
dividend in the manner prescribed under section 565 of the Code.
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 70503, and the notice of amendment to the proposed exemption
published on March 30, 2012 at 77 FR 19338.
Temporary Nature of Exemption: This exemption will expire at the
earlier of (i) the first day of Sammons' first fiscal year next
following the fiscal year in which falls the fifth anniversary of the
date of grant of the exemption; and (ii) the first day upon which the
ESOP fails to own at least 99% of the issued and outstanding shares of
Sammons.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 693-8546. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions to which the exemption does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things
[[Page 32686]]
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 25th day of May 2012.
Lyssa E. Hall,
Acting Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2012-13263 Filed 5-31-12; 8:45 am]
BILLING CODE 4510-29-P
|
|