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EBSA Notices

Proposed 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 32686-32698]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13264]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Proposed Exemptions From Certain Prohibited Transaction 
Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code). This notice includes the 
following proposed exemptions: D-11649, Meridian Medical Associates, 
S.C, Employees' Retirement Plan and Trust (the Plan); D-11710, El Paso 
Corporation Retirement Savings Plan (the Plan); and D-11714, Ed Laur 
Defined Benefit Plan (the Plan).

DATES: All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice.

ADDRESSES: Comments and requests for a hearing should state: (1) The 
name, address, and telephone number of the person making the comment or 
request, and (2) the nature of the person's interest in the exemption 
and the manner in which the person would be adversely affected by the 
exemption. A request for a hearing must also state the issues to be 
addressed and include a general description of the evidence to be 
presented at the hearing. All written comments and requests for a 
hearing (at least three copies) should be sent to the Employee Benefits 
Security Administration (EBSA), Office of Exemption Determinations, 
Room N-5700, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210. Attention: Application No. ------, stated in each 
Notice of Proposed Exemption. Interested persons are also invited to 
submit comments and/or hearing requests to EBSA via email or FAX. Any 
such comments or requests should be sent either by email to: 
moffitt.betty@dol.gov, or by FAX to (202) 219-0204 by the end of the 
scheduled comment period. The applications for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue NW., 
Washington, DC 20210.
    Warning: If you submit written comments or hearing requests, do not 
include any personally-identifiable or confidential business 
information that you do not want to be publicly-disclosed. All comments 
and hearing requests are posted on the Internet exactly as they are 
received, and they can be retrieved by most Internet search engines. 
The Department will make no deletions, modifications or redactions to 
the comments or hearing requests received, as they are public records.

SUPPLEMENTARY INFORMATION:

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).
    The proposed exemptions were requested in applications filed 
pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the 
Code, and in accordance with procedures set forth in 29 CFR Part 2570, 
Subpart B (76 FR 66637, 66644, October 27, 2011).\1\ Effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 1 (1996), transferred the authority of the Secretary of the 
Treasury to issue exemptions of the type requested to the Secretary of 
Labor. Therefore, these notices of proposed exemption are issued solely 
by the Department.
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    \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).
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    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Meridian Medical Associates, S.C., Employees' Retirement Plan and Trust 
(the Plan), Located in Joliet, Illinois

[Exemption Application No. D-11649]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990).

I--Transactions

    If the exemption is granted, the restrictions of sections 
406(a)(1)(A), 406(a)(1)(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), 4975(c)(1)(D), and 4975(c)(1)(E) of 
the Code, will not apply to:
    (a) The cash purchase (the Purchase) by the Plan (formerly, the 
Will County Medical Associates, S.C. Employees' Retirement Plan & 
Trust) of a 52 percent (52%) beneficial ownership interest in a parcel 
of improved real property (the Annex) located in Joliet, Illinois, from 
the JMG Property, LLC (the LLC), a party in interest with respect to 
the Plan;
    (b) The entry by the Plan through a land trust (no. 6722), into a 
lease (the Annex Lease) with Meridian Medical Associates, S.C. (the 
Employer) (formerly, the Will County Medical

[[Page 32687]]

Associates, S.C.), as lessee, of a 52 percent (52%) beneficial 
ownership interest in the Annex; and
    (c) The personal guarantees, jointly and severally, by each of the 
shareholders of the Employer of the obligations of such Employer under 
the terms of the Annex Lease; provided that the conditions set forth, 
below, in Section II are satisfied.

II--Conditions

    (a) With respect to the Purchase by the Plan of a 52 percent (52%) 
beneficial ownership interest in the Annex from the LLC:
    (1) The Purchase is a one-time transaction for cash;
    (2) The terms and conditions of the Purchase are no less favorable 
to the Plan than those obtainable by the Plan under similar 
circumstances when negotiated at arm's length with unrelated third 
parties;
    (3) Prior to entering into the Purchase, an independent, qualified 
fiduciary (the I/F) determines that the Purchase is in the interest of, 
and protective of the Plan and of its participants and beneficiaries;
    (4) The I/F negotiates, reviews, and approves the terms of the 
Purchase prior to the consummation of such Purchase;
    (5) The acquisition price paid by the Plan for a 52 percent (52%) 
beneficial ownership interest in the Annex is not more than the fair 
market value of such interest, as determined by an independent, 
qualified appraiser, as of the date of the Purchase;
    (6) An independent, qualified appraiser determines, as of the date 
of the Purchase, the fair market value of a parcel of improved real 
property (the Original Facility), which is adjacent to the Annex, and 
in which the Plan holds a 100 percent (100%) beneficial ownership 
interest through a land trust (no. 2024);
    (7) Immediately following the Purchase, the combined fair market 
value of the Plan's 52 percent (52%) beneficial ownership interest in 
the Annex and the fair market value of the Plan's 100 percent (100%) 
beneficial ownership interest in the Original Facility when added 
together (the Combined Facility) does not exceed 20 percent (20%) of 
the fair market value of the total assets of the Plan;
    (8) In the event of any actual or potential divergence of interests 
between the Plan and the LLC, that results as a consequence of their 
shared ownership interest in the Annex, the I/F takes appropriate steps 
to resolve such conflicts of interest and in all events acts prudently 
and solely in the interest of the Plan with respect to all decisions 
pertaining to the acquisition, holding, management, and disposition of 
the Plan's interest in the Annex. To the extent that a conflict occurs, 
the I/F has, by its written agreement, the sole authority acting on 
behalf of the Plan to determine the resolution of any conflict that 
arises from the shared beneficial ownership of the Annex by the Plan 
and the LLC and that such determination shall be binding on the LLC; 
and
    (9) The Plan does not incur any fees, costs, commissions, or other 
charges as a result of engaging in the Purchase, other than the 
necessary and reasonable fees payable to the I/F and to the 
independent, qualified appraiser, respectively.
    (b) With respect to the Annex Lease:
    (1) The terms and conditions of the Annex Lease are no less 
favorable to the Plan than those obtainable by the Plan under similar 
circumstances when negotiated at arm's length with unrelated third 
parties;
    (2) Prior to entering into the Annex Lease, the I/F, acting on 
behalf of the Plan, negotiates, reviews, and approves the terms and 
conditions of the Annex Lease, and determines that the Annex Lease is 
in the interest of, and protective of the Plan and its participants and 
beneficiaries;
    (3) The I/F monitors and enforces compliance with the conditions of 
this exemption and monitors and enforces compliance with all of the 
terms of the Annex Lease throughout the initial term of such lease and 
throughout the duration of each renewal of such lease, and is also 
responsible for legally enforcing the payment of rent and the proper 
performance of all other obligations of the Employer under the terms of 
such lease;
    (4) The rent paid to the Plan by the Employer under the initial 
term of the Annex Lease, and the rent paid to the Plan by the Employer 
during each renewal of such lease, is based upon the fair market value 
of the Annex, as established by an independent, qualified appraiser at 
the time of such initial term and at the time of each renewal of such 
lease;
    (5) The rent under the Annex Lease is adjusted at the commencement 
of the second year of the term of such lease and is adjusted every 
second year thereafter by the I/F, based on an appraisal of the fair 
market value of the Annex, as established by an independent, qualified 
appraiser at the time of each such adjustment of rent. If twelve 
percent (12%) of the fair market value of the Annex, established by 
such appraisal at the time of any such adjustment, is greater than the 
then current base rent under the Annex Lease, then the base rent is 
revised by the I/F to reflect the increase in fair market value of the 
Annex, as established by such appraisal. If twelve percent (12%) of the 
fair market value of the Annex, established by such appraisal at the 
time of any such adjustment, is less than or equal to the then current 
base rent, then the base rent remains unchanged by the I/F;
    (6) The terms of the Annex Lease are triple net, such that the 
Employer, as lessee, is responsible for paying, in addition to monthly 
rent, all costs for maintenance, taxes, utilities, and insurance on the 
Annex;
    (7) Prior to entering into any renewal of the Annex Lease, the I/F, 
acting on behalf of the Plan, approves such renewal beyond the initial 
term of such lease; and
    (8) The Plan does not incur any fees, any costs, any commissions, 
and any other charges and expenses as a result of entering into the 
Annex Lease, other than the necessary and reasonable fees payable to 
the I/F and payable to the independent, qualified appraiser, 
respectively.

Summary of Facts and Representations

    1. The Plan is a defined contribution plan with a cash or deferred 
compensation arrangement. The Plan was established on January 20, 1972, 
and has been amended and restated on several occasions since that date, 
the latest being March 10, 2010. The Plan had, as of December 31, 2011, 
total assets valued at approximately $31,197,086. It is represented 
that the most recent update of the number of participants in the Plan 
is dated December 31, 2010, as reflected on the Plan's Form 5500. As of 
December 31, 2010, the Plan had 277 participants, including former 
employees with deferred benefits. The Plan maintains an individual 
account for each such participant. Some of the participants in the Plan 
are also shareholders of the Employer. Some of the shareholders of the 
Employer also serve as the trustees of the Plan (the Trustees). The 
Trustees are parties in interest and fiduciaries with respect to the 
Plan, pursuant to section 3(14)(A) of the Act. The Trustees are elected 
by the Board of Directors of the Employer (the Board). It is 
represented that the Trustees have the exclusive right to decide on 
investments for the Plan without a recommendation from the Board.
    2. The sponsor of the Plan is the Employer, an Illinois medical 
corporation which was incorporated on November 29, 1971. As the sponsor 
of the Plan, the Employer is a party in

[[Page 32688]]

interest with respect to the Plan, pursuant to section 3(14)(C) of the 
Act. The Employer is engaged in the general practice of medicine. The 
Employer conducts its operations in both the Original Facility and in 
the Annex. The Employer employs 45 physicians and more than 200 staff 
and administrative personnel. Some of the employees are also 
shareholders of the Employer.
    3. The LLC is a limited liability company established on June 24, 
2004, for the purpose of purchasing the Annex and leasing it to the 
Employer. In July 2011, there were twenty-two (22) members of the LLC. 
All of the members of the LLC are current or former shareholders of the 
Employer. The Trustees of the Plan are also members of the LLC. It is 
represented that the LLC is a party in interest with respect to the 
Plan, pursuant to section 3(14)(G) of the Act.
    4. In 1981, the Department granted an individual exemption, 
Prohibited Transaction Exemption 81-96 (PTE 81-96),\2\ which permitted 
the Plan to purchase the Original Facility from the Employer. The 
Original Facility consists of approximately 2.28 acres of real property 
improved by a two-story medical office building, completed in 1969, 
including a parking lot with 90 spaces. The Original Facility contains 
approximately 10,583 square feet on each floor for a total (above 
ground) of approximately 21,166 square feet. In addition, the Original 
Facility has a fully finished basement containing approximately 10,583 
square feet of additional space. Further, PTE 81-96 permitted the 
Employer to extend credit at an interest rate of 6 percent (6%) per 
annum to the Plan in connection with the purchase by the Plan of the 
Original Facility. Currently, however, it is represented that there are 
no mortgages, no liens, and no other encumbrances of title on the 
Original Facility. In addition, PTE 81-96 permitted the Plan to lease 
the Original Facility (the 1981 Lease) to the Employer under triple net 
terms for a minimum guaranteed rent of $263,000 for a period of 18 
years ending on November 1, 1999. Union National Bank and Trust Co. 
(UNB) of Joliet, Illinois, an independent party, represented at the 
time the 1981 Lease was entered that the transactions which were the 
subject of PTE 81-96 were in the interest of the Plan and that the 
terms of such transactions were arm's length. UNB also was responsible 
for monitoring the transactions which were the subject of PTE 81-96 and 
exercising the rights of the Plan with respect to such transactions.
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    \2\ 46 FR 53816, October 30, 1981.
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    5. In 2001, the Department issued another Prohibited Transaction 
Exemption 2001-25 (PTE 2001-25),\3\ to the same applicants \4\ which 
provided retroactive and prospective relief for a lease (the 1999 
Lease) to the Employer of the Original Facility by First Midwest Trust 
Company of Joliet, Illinois (FMB),\5\ as the holder of legal title 
under the terms of a land trust (no. 2024), and by the Plan, as 
beneficial owner of the Original Facility. The term of the 1999 Lease 
was for a period of five (5) years (1999-2004), with an option to renew 
and extend such lease for two (2) additional successive terms of five 
(5) years each, subject to the approval of FMB, acting as the 
independent, qualified fiduciary under PTE 2001-25.\6\ Accordingly, it 
is represented that, since 1981 FMB or a predecessor has served as the 
I/F with respect to the Plan in connection with PTE 81-96 and PTE 2001-
25.
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    \3\ 66 FR 40734, August 3, 2001.
    \4\ At the time that the Department issued PTE 81-96 and at the 
time the Department issued PTE 2001-25, the Employer was known as 
the ``Joliet Medical Group, Ltd.,'' and the Plan was known as the 
``Joliet Medical Group, Ltd. Employee Retirement Plan and Trust.''
    \5\ It is represented that in 1983 First Midwest Bancorp, Inc., 
a bank holding company, purchased UNB, and the name of UNB was 
subsequently changed to First Midwest Bank and Trust. It is 
represented that First Midwest Bank and Trust, First Midwest Trust 
Company, and First Midwest Bank whenever referred to in the 
application all represent the same entity and will be referred to 
herein as FMB.
    \6\ It is represented that FMB agreed in 2004 and again in 2009 
to the exercise of each of the five (5) year term extensions 
permitted under the 1999 Lease. Accordingly, the exemptive relief 
provided by PTE 2001-25 with respect to the leasing by the Plan of 
the Original Facility to the Employer shall cease, as of October 31, 
2014, upon the expiration of the second five (5) year term extension 
of the 1999 Lease. The Department notes that, should the 
transactions which are the subject of this proposed exemption be 
granted, such final exemption does not alter the terms and 
conditions of PTE 2001-25 with respect to the leasing by the Plan of 
the Original Facility to the Employer and will not extend the relief 
provided under PTE 2001-25 to such lease beyond October 31, 2014.
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    Under the terms of the 1999 Lease, the Employer leased the Original 
Facility for a ``floating'' monthly rental rate of one percent (1%) of 
the then appraised value ($3,200,000) of the Original Facility 
($3,200,000 times .01 equals $32,000), or twelve percent (12%) of the 
fair market value of the Original Facility on an annualized basis 
($3,200,000 times .12 equals $384,000). The terms of PTE 2001-25 
require that an independent, qualified appraiser update the rent every 
other year, but that the minimum guaranteed monthly rent (regardless of 
any possible decrease in the appraised value of the Original Facility) 
would remain $32,000 monthly. It is represented that, with respect to 
both the 1981 Lease and the 1999 Lease of the Original Facility, the 
Employer has always paid the rent on time and has otherwise complied 
with the terms and conditions of such leases and the terms and 
conditions of PTE 81-96 and PTE 2001-25.
    6. The Annex which is the subject of this proposed exemption is 
physically connected to the Original Facility by means of a single-
story entrance foyer and reception area that is a part of the Annex 
structure. Although the Annex and the Original Facility occupy adjacent 
parcels, both properties share the same street address, 2100 Glenwood 
Avenue in Joliet, Illinois.
    The Employer purchased the Annex on July 13, 2001, from Blue Cross 
and Blue Shield of Illinois, an unrelated third party, for a purchase 
price of $3,757,731.15. The Annex consists of approximately 1.93 acres 
of real property improved by a single-story medical office building 
completed in 1996, including a parking lot with 117 spaces. The medical 
office building contains approximately 13,600 square feet of space at 
the ground level and another 11,128 square feet at the basement level, 
for a total of approximately 24,728 square feet of space.
    On June 28, 2004, the Employer transferred full legal ownership of 
the Annex to a land trust (no. 6722) controlled by FMB, as trustee. In 
this regard, it is represented that in Illinois a land trust exists 
only to hold title and to facilitate easy transfer of property without 
expense and administrative process of re-recording instruments of 
transfer with the county. As discussed above, FMB also serves as the 
trustee of the land trust (no. 2024) with respect to the legal 
ownership of the Original Facility. As such, FMB currently holds 100 
percent (100%) legal title to both the Original Facility and the Annex. 
It is represented that FMB, as trustee for the land trusts (nos. 6722 
and 2024), has no discretionary authority and serves only as a directed 
trustee with respect to such land trusts. It is represented that legal 
ownership held by FMB of the Original Facility and the Annex will not 
be affected by the proposed Purchase transaction. Further, it is 
represented that the Plan's current 100 percent (100%) beneficial 
ownership interest in the Original Facility will not be affected by the 
proposed Purchase transaction.
    On June 30, 2004, acting as the legal owner of the Annex through 
the land trust (no. 6722), FMB executed a written assignment of 100 
percent (100%) of the beneficial ownership interest in the

[[Page 32689]]

Annex to the LLC. It is represented that on July 1, 2004, the Employer 
entered into a triple net lease of the Annex with FMB, as legal owner, 
and the LLC, as the beneficial owner, for a term of five (5) years with 
successive one (1) year renewal options, unless either party provides a 
written notice of termination or written notice of intent not to renew. 
The base rent for the Annex for each lease year under the terms of this 
lease was $271,200, payable in equal monthly installments of $22,600. 
It is represented that pursuant to this lease of the Annex, the 
Employer, as lessee, has paid monthly rent for the use of the Annex to 
FMB, acting as the lessor. FMB, in turn, has transmitted all rental 
payments received from the Employer to the LLC, as the current 100 
percent (100%) beneficial owner of the Annex.
    7. Relief is requested for the proposed Purchase by the Plan from 
the LLC of a 52 percent (52%) beneficial ownership interest in the 
Annex. Specifically, the applicant requests relief from sections 
406(a)(1)(A), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of the Act, 
because the LLC is a party in interest with respect to the Plan. As a 
result of the proposed Purchase, the LLC, which currently holds a 100 
percent (100%) beneficial ownership interest in the Annex, will retain 
only a 48 percent (48%) beneficial ownership interest in the Annex.
    8. The proposed Purchase transaction is feasible in that it will be 
a one-time transaction for cash. Further, it is represented that the 
proposed Purchase transaction is protective of the Plan and its 
participants and beneficiaries. In this regard, as discussed more 
fully, below, Private Bank and Trust Company (PBTC) has represented 
that it will act as the I/F on behalf of the Plan with regard to the 
transactions which are the subject of this proposed exemption.
    9. It is represented that FMB, as mortgagee, currently holds a 
mortgage on the Annex in the amount of approximately $3,100,000 with 
the LLC, as the mortgagor. However, it is represented that the Purchase 
transaction will be protective of the Plan in that the Plan's 52 
percent (52%) beneficial ownership interest in the Annex will be free 
and clear of any liens, notes, or encumbrances on such Annex.
    10. It is further represented that the proposed Purchase is 
protective of the Plan and its participants and beneficiaries, in that 
the purchase price to be paid by the Plan for a 52 percent (52%) 
beneficial ownership interest in the Annex will be determined by an 
independent, qualified appraiser. Further, it is represented that the 
fair market value of a 52 percent (52%) beneficial ownership interest 
in the Annex and the fair market value of the Original Facility will be 
updated as of the date of the purchase by the Plan.
    The Plan retained Mr. Joseph E. Batis, (Mr. Batis), an accredited 
appraiser with Edward J. Batis & Associates, Inc. of Joliet, Illinois, 
to inspect the Annex and the Original Facility, and to render an 
opinion as to the fair market value of each of these properties. Mr. 
Batis is qualified in that he has actively engaged since 1983 in the 
practice of real estate analysis and valuation counseling, and has 
acquired extensive experience in the valuation of partial interests in 
property. In addition, Mr. Batis has been a member of the MAI Appraisal 
Institute since 1994, and is also certified by the State of Illinois as 
a general real estate appraiser.
    Mr. Batis represents that both he and his firm are independent of 
the Employer, and the LLC. It is represented that any fees received 
from the Employer, as well as any fees received from the LLC, have 
never equaled or exceeded one percent (1%) of the annual gross billings 
of Edward J. Batis and Associates, Inc.
    As of February 15, 2012, Mr. Batis issued separate appraisal 
reports addressing the fair market value of the Annex and the fair 
market value of the Original Facility. In conducting his valuations of 
the Annex and the Original Facility, Mr. Batis considered the three 
valuation methodologies commonly utilized in arriving at a value 
estimate: (i) The cost approach, (ii) the direct sales comparison 
approach, and (iii) the income approach. In this regard, Mr. Batis 
concluded that the direct sales comparison approach and the income 
approach were suitable for the valuation of the Annex and for the 
valuation of the Original Facility. Mr. Batis represents that the cost 
approach was excluded, because there has not been sufficient new 
construction in the local market to support such an approach. In the 
final appraisal reconciliation of the fair market value of the Annex 
and the fair market value of the Original Facility, Mr. Batis placed 
more weight on the results of the direct sales comparison approach, 
because the primary appeal of the Annex and the Original Facility is to 
an owner-occupant. After physically inspecting both properties, 
analyzing all relevant data, and reconciling the applicable valuation 
methodologies, Mr. Batis determined that the fair market value of the 
Annex was $4,600,000, as of February 15, 2012, and that the fair market 
value of the Original Facility was $3,800,000, as of the same date. Mr. 
Batis has also represented that the foregoing valuations do not require 
adjustment for the assemblage value of the Combined Facility, because 
the Annex and the Original Facility can be marketed as separate and 
independent properties based upon the fact that the entrance foyer 
connecting these two buildings can easily be removed.
    11. In addition to the Purchase transaction, the Employer also 
seeks an exemption to enter into the Annex Lease, under which FMB, as 
legal owner, and the Plan, as beneficial owner, will lease a 52 percent 
(52%) beneficial ownership interest in the Annex to the Employer.
    The proposed entry into the Annex Lease is feasible in that the 
terms of such lease will be evidenced by a written document. Pursuant 
to the terms of the Annex lease, the Plan will receive 52 percent (52%) 
of all rental payments made by the Employer under such Lease. In 
addition, the terms of the Annex Lease provide for an initial term of 
ten (10) years, with an option to renew and extend such lease for two 
(2) additional successive terms of five (5) years, each of which is 
subject to the approval of PBTC, acting as the I/F on behalf of the 
Plan, as discussed below. The annual lease payments payable by the LLC 
to the Plan under the terms of the Annex Lease will be twelve percent 
(12%) of the fair market value (currently $4,600,000) of the Annex 
($4,600,000 times .12 equals $552,000 a year), or the equivalent of 
$22.32 per square foot. The minimum guaranteed monthly base rent under 
the Annex Lease (regardless of any possible decrease in the appraised 
fair market value of the Annex) shall be $46,000 or one percent (1%) of 
the fair market value (currently $4,600,000) of such Annex ($4,600,000 
times .01 equals $46,000).
    12. It is represented that the proposed Annex Lease is in the 
interest of the Plan and the participants and beneficiaries of the Plan 
in that the rent payments under the Annex Lease will provide a fixed 
return to the account balances of participants in the Plan and will 
represent an opportunity to generate a guaranteed cash flow for the 
Plan.
    13. It is represented that the entry into the Annex Lease is 
protective of the Plan, because the terms of the Annex Lease are no 
less favorable to the Plan than those obtainable by the Plan under 
similar circumstances when negotiated at arm's length with unrelated 
third parties. In this regard, Mr. Batis, in a letter dated, March 16, 
2012, determined the fair market monthly rental value of the Annex. In 
making this determination, Mr. Batis considered

[[Page 32690]]

the commercial rents charged per square foot at six (6) comparable 
medical office buildings in the local area, and ascertained that the 
market rents for properties similar to the Annex ranged from $10.00 to 
$22.50 per square foot. Based on this information, Mr. Batis concluded 
that the fair market monthly rental value of the Annex should reflect 
$22.32 per square foot applicable to the total area of the Annex which 
includes 13,600 square feet of area on the main level and 11,128 square 
feet of finished area on the lower level.
    Under the terms of the Annex Lease, Schedule A provides for an 
annual rent equal to 12 percent (12%) of the fair market value of the 
Annex; provided that any decrease in the value of the Annex shall not 
be considered in determining the annual rent amount for the Annex. 
Accordingly, the annual lease payments payable by the Employer for the 
Annex should reflect twelve percent (12%) of the fair market value 
($4,600,000) of the Annex or the equivalent of $46,000 monthly rent and 
annual rental of $552,000. In his letter dated March 16, 2012, Mr. 
Batis concluded that based on comparable rental properties, the Annex 
rents (determined at 12 percent (12%) of fair market value of the 
Annex) are within the range of fair market rents in the local market. 
It is represented that Mr. Batis will update the fair market monthly 
rental value the Annex, as of the date of the entry into the Annex 
Lease. It is further represented that a new appraisal by an 
independent, qualified appraiser will be performed every 24 months to 
update the rent under the Annex Lease.
    14. In addition to the Purchase transaction, the applicant also 
seeks an exemption for the personal guarantees, jointly and severally, 
by each of the shareholders of the Employer of the obligations of such 
Employer under the terms of the Annex Lease between the Plan and the 
Employer. It is represented that each of these guarantors under the 
Annex Lease, as an employee of the Employer, is a party in interest 
with respect to the Plan, pursuant to section 3(14)(H) of the Act.
    It is represented that the proposed personal guarantees are in the 
interest of and protective of the Plan and the participants and 
beneficiaries of the Plan, because in the event of a default by the 
Employer, the Plan has recourse to the shareholders of the Employer for 
satisfaction of the Employer's obligations under the terms of the Annex 
Lease, including but not limited to the payment of rent for the initial 
ten (10) year term. The proposed personal guarantees are feasible in 
that these guarantors have a net worth in the aggregate in excess of 
$10,000,000, which is well in excess of the obligations of the Employer 
under the terms of the Annex Lease, including but not limited to the 
payment of rent for the initial ten (10) year term.
    15. PBTC has been retained by the Plan to serve as the I/F for 
purposes of the transactions described in this proposed exemption. PBTC 
acknowledges and accepts its responsibilities as the I/F with respect 
to the proposed exemption. It is represented that PBTC will take 
whatever actions are necessary to protect the interests of the Plan.
    In a letter dated November 8, 2011, Ms. Kelly C. White, Trust 
Officer for PBTC, represents that PBTC is independent and qualified to 
serve as the I/F for the Plan. PBTC is independent of the Employer and 
the LLC. It is represented that any fees for services rendered by PBTC 
in the past twelve (12) months to the Employer, to the LLC, and to the 
Plan, including services rendered as the I/F, will not exceed one 
percent (1%) of the revenue generated by PBTC in the past year.
    PBTC is qualified to serve as the I/F for the Plan, because it has 
been providing private trust services since the 1991. Not only does 
PBTC provide a wide range of trust services, PBTC also has expertise 
with respect to qualified retirement plans and directed individual 
retirement accounts. As of June 30, 2011, PBTC had $12.5 billion in 
assets.
    In agreeing to serve as the I/F for purposes of this proposed 
exemption, PBTC has enumerated a variety of duties that it has 
discharged or will discharge acting on behalf of the Plan. Among other 
things, the responsibilities of PBTC include: (a) Negotiating, 
reviewing, and approving the terms and conditions of the Purchase, and 
determining whether the Purchase in the interests of, and protective 
of, the Plan and its participants and beneficiaries; (b) negotiating, 
reviewing, and approving the terms and conditions of the Annex Lease, 
and determining whether such lease is in the interests of, and 
protective of, the Plan and its participants and beneficiaries; (c) 
determining that the terms and conditions of the Purchase are no less 
favorable to the Plan than those obtainable by the Plan under similar 
circumstances when negotiated at arm's length with unrelated third 
parties; (d) determining that the terms and conditions of the Annex 
Lease are no less favorable to the Plan than those obtainable by the 
Plan under similar circumstances when negotiated at arm's length with 
unrelated third parties; (e) verifying the appraised value of the Annex 
on the date of the Purchase and ascertaining that no fees are paid by 
the Plan in consummating the Purchase through the transfer of 
beneficial interests; (f) analyzing the terms of the Annex Lease to 
determine whether such lease provisions are reasonable and whether the 
rental rate is at, or better than, market value; (g) monitoring the 
collection of monthly rent and the transmittal of such rent to the 
Plan; (h) monitoring that the monthly rent is twelve percent (12%) of 
the appraised value of the Annex; (i) monitoring compliance by the 
Employer with the conditions of the exemption and with the terms and 
conditions of the Annex Lease, throughout the duration of such lease 
and each renewal of such lease, and assuming responsibility for legally 
enforcing payment of the rent and the proper performance of all other 
obligations of the Employer under the Annex Lease; (j) verifying that 
the aggregated fair market value of the Original Facility and the Annex 
does not exceed 20 percent (20%) of the total assets of the Plan at the 
time of the Purchase; (k) certifying annually that all rents for the 
year have been collected and all distributions made; and (l) providing 
quarterly statements.
    In addition to the foregoing duties, PBTC, acting as the I/F, has 
reviewed the appraisal reports for both the Annex and the Original 
Facility that were prepared by Mr. Batis. In particular, PBTC has 
reviewed the appraisal methodologies utilized by Mr. Batis, the 
independent, qualified appraiser, and has determined that Mr. Batis' 
methodology and his conclusions concerning the fair market value of the 
Annex and the Original Facility are persuasive and sound. PBTC will 
also be responsible for reviewing the appraisal reports for the Annex, 
as submitted every 24 months to determine that the correct amount of 
rent is charged to the Employer.
    In connection with its duties as the I/F acting on behalf of the 
Plan with respect to the transactions described in this proposed 
exemption, PBTC has the responsibility of resolving all other issues 
that might arise associated with the Plan's beneficial ownership of and 
leasing of the Annex in the best interests of the Plans participants 
and beneficiaries. Further, PBTC is responsible for any issues that may 
arise in connection with the co-ownership of the Annex by the Plan and 
the LLC.\7\ In

[[Page 32691]]

this regard, PBTC represents that in the event of any actual or 
potential divergence of interests between the Plan and the LLC, as a 
consequence of their shared beneficial ownership interest in the Annex, 
PBTC in all events will act prudently and solely in the interest of the 
Plan with respect to all decisions pertaining to the acquisition, 
holding, management, and disposition of the Plan's beneficial ownership 
interest in the Annex. Further, to the extent that a conflict occurs, 
the I/F has, by its written agreement, the sole authority acting on 
behalf of the Plan to determine the resolution of any conflict that 
arises from the shared beneficial ownership of the Annex by the Plan 
and the LLC and that such determination shall be binding on the LLC.
---------------------------------------------------------------------------

    \7\ The Department notes that, in the event the proposed 
exemption is granted, the Purchase by the Plan of a partial 
beneficial ownership interest in the Annex from the LLC would result 
in a co-investing arrangement between the Plan and the LLC, which in 
turn could give rise to conflicts of interest between these parties. 
In this regard, section 406(b)(1) of the Act prohibits the fiduciary 
of a plan from dealing with plan assets in his or her own interests 
or for his or her own account. In addition, section 406(b)(2) of the 
Act specifically prohibits plan fiduciaries in their individual or 
in any other capacity from acting in any transaction involving the 
plan on behalf of a party (or representing a party) whose interests 
are adverse to the interests of the plan or the interests of its 
participants or beneficiaries. Accordingly, the Department notes 
that if, over time, the shared ownership of the Annex results in a 
divergence of interests between the Plan and the LLC, violations of 
section 406(b) of the Act could occur. In the event that such a 
divergence of interests develops between the parties, PBTC, acting 
as the I/F, would be required to take steps to eliminate the 
conflict of interest in order to avoid engaging in a prohibited 
transaction. See ERISA Advisory Opinion Letter 2000-10A (July 27, 
2000). The Department further notes that it is not providing relief, 
herein, for any violations of the Act that may arise in connection 
with this co-investing arrangement. In addition, the Department 
notes that the general standards of fiduciary conduct under the Act 
would apply to the purchase by the Plan of a beneficial ownership 
interest in the Annex. Section 404(a)(1) of the Act requires, among 
other things, that a fiduciary discharge his or her duties with 
respect to a plan solely in the interest of the participants and 
beneficiaries, and with the care, skill, prudence and diligence 
under the circumstances then prevailing that a prudent person acting 
in a like capacity and familiar with such matters would use in the 
conduct of an enterprise of like character and with like aims. 
Accordingly, PBTC, the I/F acting on behalf of the Plan, must act 
prudently and solely in the interest of the Plan and its 
participants and beneficiaries with respect to all decisions 
pertaining to the acquisition, holding, management, and disposition 
of the beneficial ownership interest in the Annex by the Plan.
---------------------------------------------------------------------------

    In a letter, dated November 8, 2011, PBTC made additional 
representations concerning how it proposes to respond to potential 
issues that may emerge as a consequence of the shared beneficial co-
ownership of the Annex between the Plan and the LLC in the following 
situations: (a) Issues associated with late payment or non-payment of 
rents, (b) issues associated with the possible sale of the Annex to 
third parties, (c) issues associated with the necessity of major 
repairs and the cost of repairs, (d) issues associated with any 
government action or eminent domain, and (e) other issues associated 
with joint ownership of the Annex and rental of the properties.
    Specifically, it is represented that in the event of late payment 
or non-payment of rent by the Employer, PBTC will pursue its remedies 
under the Annex Lease to ensure payment, including the option of 
bringing a lawsuit against the Employer. In this regard, given that 
rent has been timely paid in the past, PBTC does not anticipate any 
issue arising in the near future.
    If an opportunity arises to sell the Annex to an unrelated third 
party, PBTC will ensure that the Plan will receive the greater of the 
fair market value of the Plan's beneficial ownership interest in the 
Annex at the time of the sale or the original purchase price paid by 
the Plan to acquire such interest, so that the Plan will not lose 
principal. It is further represented that PBTC will undertake to obtain 
for the Plan the best price possible for the sale of the Plan's 
beneficial ownership interest in the Annex (provided that it would be 
in the interest of the Plan to sell such interest). In the event that 
repairs to the medical office building located on the Annex are 
required during the term of the Annex Lease, PBTC notes that the 
Employer, as lessee, would be responsible for the costs associated with 
such repairs, and that in the event of major repairs which are caused 
by fire or weather, the damage to the building would be covered by 
insurance. If the Employer is unable to bear the costs of repairs, or 
in the rare event some emergency threatens the integrity of the Annex, 
PBTC will take appropriate steps to protect the building. Depending on 
the circumstances, PBTC represents that it would first look to the 
principals of the Employer to pay their proportionate cost of such 
repairs.
    In the event of an eminent domain taking of the Annex by a 
governmental entity, PBTC represents that it will take whatever actions 
are appropriate to protect the Plan and its participants and 
beneficiaries, including resisting the eminent domain action, if that 
course is reasonable.
    As a condition of this exemption, immediately following the 
Purchase, the aggregate fair market value of the Plan's interest in the 
Combined Facility shall not exceed 20 percent (20%) of the fair market 
value of the total assets of the Plan. PBTC has concluded that this 
proposed limitation on the percentage of the Plan's assets that will be 
invested in the Combined Facility is protective of the Plan, because 
such a restriction will prevent an undue concentration of the Plan's 
assets in any particular investment.
    With respect to the percentage of the Plan's assets involved in the 
proposed transaction, Mr. Batis, in his appraisal report, dated 
February 15, 2012, determined that the fair market value of the Annex 
was $4,600,000. A 52 percent (52%) beneficial ownership interest in the 
Annex would equal $2,392,000 ($4,600,000 times .52 equals $2,392,000). 
Accordingly, the fair market value of the Plan's 52 percent (52%) 
beneficial ownership interest in the Annex ($2,392,000) would 
constitute approximately 7.667 percent (7.667%) of the Plan's total 
assets of $31,197,086, as of December 31, 2011.
    Further, in his appraisal report, dated February 15, 2012, Mr. 
Batis also determined that the fair market value of the Plan's 100 
percent (100%) beneficial ownership interest in the Original Facility 
was $3,800,000. So, the fair market value of the Plan's 100 percent 
(100%) beneficial ownership in the Original Facility ($3,800,000) 
comprises an additional 12.180 percent (12.180%) of the value of the 
Plan's total assets $31,197,086, as of December 31, 2011. Accordingly, 
as a result of the proposed Purchase transaction, the Plan's aggregate 
beneficial ownership interest in the Combined Facility (7.667% and 
12.180%) attributable to the Plan's interest in the Annex and the 
Original Facility, respectively) constitutes approximately 19.847 
percent (19.847%) of the Plan's total assets, as of December 31, 2011.
    After analyzing the terms and conditions of the proposed Purchase 
and the proposed Annex Lease, and based upon all of the financial and 
empirical data at its disposal, PBTC concluded, for the reasons 
discussed above, that the Purchase transaction and the Annex Lease 
transaction which are the subjects of this proposed exemption are in 
the interest of the Plan and its participants and beneficiaries, and 
protective of the rights of the participants and beneficiaries.
    16. In summary, the applicant represents that the transactions, as 
described herein, satisfy the requirements of section 408(a) of the Act 
and section 4975(c)(2) of the Code because: (a) The Annex Lease 
represents an opportunity to generate a guaranteed cash flow to the 
Plan of twelve percent (12%) per annum, thereby providing a fixed rate 
of return to the individual accounts of participants and beneficiaries 
of the Plan and providing a more predictable method for ascertaining 
the retirement income available to such persons; (b) prior to

[[Page 32692]]

entering into the subject transactions, PBTC, acting as I/F on behalf 
of the Plan, will negotiate, review, and approve the terms of the 
Purchase of the Annex by the Plan, as well as the terms of the Annex 
Lease; (c) PBTC will take appropriate steps to resolve such conflicts 
of interest and in all events acts prudently and solely in the interest 
of the Plan with respect to all decisions pertaining to the 
acquisition, holding, management, and disposition of the Plan's 
interest in the Annex; (d) to the extent that a conflict occurs, PBTC 
has, by its written agreement, the sole authority acting on behalf of 
the Plan to determine the resolution of any conflict that arises from 
the shared beneficial ownership of the Annex by the Plan and the LLC 
and that such determination shall be binding on the LLC; (e) the 
Purchase will be a one-time transaction for cash; (f) the terms and 
conditions of the Purchase and the Annex Lease will be no less 
favorable to the Plan than those obtainable by the Plan under similar 
circumstances when negotiated at arm's length with unrelated third 
parties; (g) prior to entering into the subject transactions, PBTC will 
determine that the Purchase and the Annex Lease are in the interest of, 
and protective of the Plan and of its participants and beneficiaries; 
(h) the acquisition price paid by the Plan for the 52 percent (52%) 
beneficial ownership interest in the Annex will not be more than the 
fair market value of such interest, as determined by an independent, 
qualified appraiser on the date of the Purchase; (i) as of the date of 
the Purchase, an independent, qualified appraiser will determine the 
fair market value of the Original Facility; (j) immediately following 
the Purchase, the fair market value of the Combined Facility will not 
exceed 20 percent (20%) of the Plan's total assets at the time of the 
Purchase; (k) the Plan will not incur any fees, any costs, any 
commissions, and will not incur any other charges and expenses as a 
result of engaging in the Purchase and as a result of engaging in the 
Annex Lease, other than the necessary and reasonable fees payable to 
the I/F and to the independent, qualified appraiser, respectively; (l) 
PBTC will monitor and enforce compliance with the conditions of this 
proposed exemption and will monitor and enforce compliance with the 
terms of the Annex Lease, throughout the initial term of such lease and 
any renewal of such lease, and is responsible for legally enforcing the 
payment of rent and the proper performance of all other obligations of 
the Employer under the terms of such lease; (m) the rent paid to the 
Plan by the Employer under the initial term of the Annex Lease, and the 
rent paid to the Plan by the Employer during each renewal of such 
lease, will be based upon twelve percent (12%) of the fair market value 
of the Annex, as established by an independent, qualified appraiser at 
the time of such initial term and at the time of each renewal; (n) the 
rent under the Annex Lease will be adjusted at the commencement of the 
second year of the term of such lease and adjusted every second year 
thereafter, based on twelve percent (12%) of the fair market value of 
the Annex, as established by an independent, qualified appraiser at the 
time of each such adjustment of rent; (o) if twelve percent (12%) of 
the fair market value of the Annex, established by such appraisal at 
the time of any such adjustment, is greater than the then current base 
rent under the Annex Lease, then the base rent will be revised to 
reflect the increase in fair market value of the Annex, as established 
by such appraisal; (p) if twelve percent (12%) of the fair market value 
of the Annex, established by such appraisal at the time of any such 
adjustment, is less than or equal to the then current base rent, then 
the base rent will remain unchanged; (q) the terms of the Annex Lease 
will be triple net; (r) prior to entering into any renewal of the Annex 
Lease, PBTC, acting as the I/F on behalf of the Plan, will be 
responsible for approving any renewal of the Annex Lease beyond the 
initial term of such lease; (s) PBTC will review the appraisals as 
submitted periodically to determine the correct rental amount is paid 
to the Plan; and (t) the guarantors have a net worth in the aggregate 
in excess of $10,000,000, which is well in excess of the obligations of 
the Employer under the terms of the Annex Lease, including but not 
limited to the payment of rent for the initial ten (10) year term.

Notice to Interested Persons

    Those persons who may be interested in the publication in the 
Federal Register of the Notice of Proposed Exemption (the Notice) 
include participants of the Plan and former participants of the Plan 
with account balances.
    It is represented that notification will be provided to each of 
these interested persons by first class mail, within fifteen (15) 
calendar days of the date of the publication of the Notice in the 
Federal Register. Such mailing will contain a copy of the Notice, as it 
appears in the Federal Register on the date of publication, plus a copy 
of the Supplemental Statement, as required, pursuant to 29 CFR 
2570.43(b)(2), which will advise such interested persons of their right 
to comment and to request a hearing.
    The Department must receive all written comments and requests for a 
hearing no later than forty-five (45) days from the date of the 
publication of the Notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the Department 
at (202) 693-8551. (This is not a toll-free number).

El Paso Corporation Retirement Savings Plan (the Plan) Located in 
Houston, Texas

[Application No. D-11710]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990).

Section I: Transactions

    If the proposed exemption is granted the restrictions of sections 
406(a)(1)(A), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 
407(a)(1)(A) of the Act and the sanctions resulting from the 
application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) and 4975(c)(1)(E) of the Code,\8\ shall not apply, in 
connection with a merger transaction (the Merger) between El Paso 
Corporation (El Paso) and Kinder Morgan, Inc. (KMI):
---------------------------------------------------------------------------

    \8\ For purposes of this proposed exemption, references to 
specific provisions of Title I of the Act, unless otherwise 
specified, refer also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    (a) To the acquisition by the individually directed accounts of the 
participants of the Plan (the Invested Participants) of certain 
publicly traded warrant(s) (the Warrant(s)) issued by KMI, which will 
become a party in interest with respect to the Plan after the Merger; 
and
    (b) to the holding of the Warrants by the accounts in the Plan of 
the Invested Participants; provided that the conditions, as set forth 
in Section II of this proposed exemption, are satisfied at the time of 
the acquisition of the Warrants by the accounts in the Plan of such 
Invested Participants and throughout the duration of the holding of the 
Warrants in the accounts of such Invested Participants.

Section II: Conditions

    The relief provided in this exemption is conditioned upon adherence 
to the

[[Page 32693]]

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 proposed exemption.
    (a) The Warrants will be acquired by the individually-directed 
accounts of the Invested Participants, all or a portion of whose 
accounts in the Plan hold the common stock of El Paso (the EP Stock);
    (b) The exchange by the shareholders, including the Invested 
Participants, of the EP Stock for Warrants will result from an 
independent act of El Paso and KMI, as corporate entities in connection 
with the Merger, and will occur automatically without any action or 
control on the part of such shareholders, including the Invested 
Participants;
    (c) The acquisition of the Warrants by the Invested Participants 
will occur in connection with the Merger, and such Warrants will be 
made available on the same terms to all shareholders of the EP Stock, 
including the Invested Participants;
    (d) The decisions with regard to the holding and disposition of the 
Warrants will be made by each of the Invested Participants in 
accordance with the provisions under the Plan for individually-directed 
accounts;
    (e) The Warrants allocated to the accounts of the Invested 
Participants in the Plan may be exercised or sold at any time by such 
Invested Participants giving investment directions in accordance with 
the provisions of the Plan;
    (f) The Invested Participants will not pay any fees or commissions 
in connection with the acquisition and holding of the Warrants, nor 
will the Invested Participants pay any fees on the exercise of the 
Warrants; and
    (g) Prior to entering into the Merger, El Paso will obtain all 
necessary approvals from any relevant state agencies and federal 
agencies, including, but not limited to the U.S. Department of Justice 
Antitrust Division, the Federal Energy Regulatory Commission, the 
Securities and Exchange Commission (SEC), and the Federal Trade 
Commission.

Summary of Facts and Representations

    1. The Plan and the trust maintained as a part thereof are intended 
to qualify under sections 401(a) and 501(a) of the Code. The Plan is a 
defined contribution plan. The Plan is designated as a profit sharing 
plan under section 401(a)(27) of the Code; however, contributions are 
not dependent on whether any participating employer has current or 
accumulated profits. The Plan includes participant elective deferrals 
under section 401(k) of the Code and matching contribution under 
section 401(m) of the Code. The fair market value of the total assets 
of the Plan, as of October 31, 2011, was $973,420,169.
    As of October 31, 2011 there were 9,646 participants and 
beneficiaries in the Plan. The Plan provides that a participant may 
direct the investment of the assets in his account. The Plan is 
intended to be a plan as described in section 404(c) of the Act.
    2. The El Paso Corporation Retirement Saving Plan Committee and its 
members (the Committee) have discretion with respect to selecting the 
investment alternatives under the terms of the Plan. Further, the 
Committee has the responsibility and authority with respect to the 
management, acquisition, disposition, or investment of the assets of 
the Plan to the extent that such responsibility and authority is not 
delegated to participants, investment managers, or the trustee of the 
Plan. The Committee is the named fiduciary for the Plan and has general 
responsibility for the administration of the Plan and for reviewing the 
trustee. As such, the Committee is a party in interest with respect to 
the Plan, pursuant to section 3(14)(A) of the Act.
    JPMorgan Chase Bank, National Association is the trustee of the 
Plan, and as such is a party in interest with respect to the Plan, 
pursuant to section 3(14)(A) of the Act. JPMorgan Retirement Plan 
Services LLC is the recordkeeper for the Plan, and as such is a party 
in interest as a service provider with respect to the Plan, pursuant to 
section 3(14)(B) of the Act.
    3. El Paso, a Delaware corporation, owns a North American 
interstate natural gas pipeline system, exploration and production 
companies, and an emerging midstream business. El Paso is the sponsor 
of the Plan in which its employees and the employees of its 
subsidiaries participate. As an employer any of whose employees are 
covered by the Plan, El Paso is a party in interest to the Plan, 
pursuant to section 3(14)(C) of the Act. The authorized capital stock 
of El Paso consists of 1,500,000,000 shares of EP Stock and 50,000,000 
shares of preferred stock, par value $.01 per share.
    4. El Paso, in its capacity as the sponsor of the Plan, has amended 
the terms of the Plan to provide the EP Stock as an investment option 
under the Plan. The Plan provides that a participant may elect to 
invest assets held in his or her account in this investment option. All 
assets invested in this investment option are allocated to such 
individual participant's account. The EP Stock is available under the 
EP Stock investment option, subject to certain limits on the percentage 
of new contributions and the percentage of the existing account 
balances which may be invested in the EP Stock. It is represented that 
the Plan held in the aggregate approximately 9,905,558 shares of EP 
Stock, as of December 31, 2010, which had a fair market value of 
$136,102,369, based on a price per share of $13.74, as of December 31, 
2010. It is represented that the Plan held in the aggregate 
approximately 9,239,616 shares of EP Stock, as of October 31, 2011, 
which had a fair market value of $230,990,400, based on a price per 
share of $25.00, as of October 31, 2011. The fair market value of the 
EP Stock held in the accounts of Invested Participants in the Plan in 
the aggregate constitutes approximately 15 percent (15%), as of 
December 31, 2010, and approximately 23.74 percent (23.74%), as of 
October 31, 2011, of the fair market value of the total assets of the 
Plan. It is represented that the percentage of each participant's 
account invested in the EP Stock varies according to participant 
investment elections and changes in the value of the EP Stock relative 
to other investment options.
    5. It is represented that the EP Stock is a ``qualifying employer 
security,'' as defined under section 407(d)(5) of the Act and 4975(e) 
of the Code. The Stock is listed for quotation on the New York Stock 
Exchange under the symbol ``EP.''
    6. The application for exemption was filed on behalf of El Paso and 
its employees, officers, directors and 10 percent (10%) or more 
shareholders, the Committee, and the Plan (collectively, the 
Applicants). The Applicants have requested an exemption with respect to 
the transactions which are the subject of this proposed exemption. In 
this regard, relief has been requested: (a) For the acquisition of the 
Warrants by accounts of the Invested Participants in the Plan in 
connection with the Merger; and (b) for the holding of the Warrants by 
the accounts of the Invested Participants in the Plan.
    It is represented that the subject transactions have not yet been 
consummated. It is represented that KMI and El Paso are merging for 
business reasons. It is represented that the combined enterprise will 
represent the largest natural gas pipeline network in the United 
States, the largest independent transporter of petroleum products in 
the United States, the largest transporter of carbon dioxide in the 
United States, and the largest independent terminal owner/operator in 
the United States.
    The Merger has been approved by the Board of Directors of El Paso 
and KMI.

[[Page 32694]]

In this regard, an Agreement and Plan of Merger, dated as of October 
16, 2011, was entered into among KMI, Sherpa Merger Sub, Inc., Sherpa 
Acquisition LLC, Sirius Holdings Merger Corporation, Sirius Merger 
Corporation, and El Paso.
    KMI has filed a Registration Statement with the SEC on Form S-4 in 
connection with the proposed transactions contemplated by the Merger, 
including a definitive Information Statement/Prospectus of KMI and a 
definitive Proxy Statement of El Paso. The Registration Statement was 
declared effective by the SEC on January 30, 2012. Post-effective 
amendments to the Registration Statement were filed on February 27, 
2012, and on March 1, 2012. KMI and El Paso mailed the definitive 
Information Statement/Prospectus of KMI and the definitive Proxy 
Statement of El Paso to their respective shareholders on or about 
January 31, 2012. Shareholders of both KMI and El Paso have now 
approved the transaction. In this regard, KMI's stockholder meeting was 
held on March 2, 2012, and El Paso's stockholder meeting was held on 
March 9, 2012. On March 9, 2011, the shareholders of El Paso 
overwhelmingly approved the Merger. Approximately 79 percent (79%) of 
all the shares of EP Stock were voted and more than 95 percent (95%) of 
those shares were voted in favor of the Merger. The Merger is expected 
to close in the second quarter of 2012, subject to the parties to the 
Merger obtaining the customary regulatory approvals.
    7. It is represented that the Warrants to be acquired by the Plan 
in connection with the Merger will satisfy the definition of ``employer 
securities,'' pursuant to section 407(d)(1) of the Act, because such 
Warrants will be securities issued by KMI, which, as a result of the 
Merger, will become the parent company of El Paso. However, as the 
Warrants are not shares of stock or marketable obligations, or 
interests in a publicly-traded partnership, such Warrants do not meet 
the definition of ``qualifying employer securities,'' as set forth in 
section 407(d)(5) of the Act. In this regard, the subject transactions 
will constitute an acquisition and holding on behalf of the Plan of 
Warrants which are ``employer securities,'' but which are not 
``qualifying employer securities,'' in violation of section 407(a) of 
the Act. Accordingly, the Applicants have requested relief from 
sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the 
Act.
    The Applicants also seek exemptive relief from section 406(b)(1) 
and 406(b)(2) of the Act with regard to conflicts of interest which 
could arise under the facts and circumstances, as set forth, herein and 
in the application file.
    8. It is represented that the decision to enter into the Merger 
will be made by El Paso and KMI in their corporate capacities. Under 
the terms of the Merger, El Paso will become a wholly-owned subsidiary 
of KMI. According to representations in KMI's Form 10-Q, the total 
purchase price to be paid by KMI for the acquisition of El Paso is 
expected to be approximately $38 billion.
    9. KMI will issue to each shareholder of EP Stock, including the 
Invested Participants, for each share of EP Stock held by each such 
shareholder either: (a) $25.91 in cash without interest; or (b) 0.9635 
of a share of the Class P common stock of KMI (the Class P 
Stock)(which, fractional share had a rounded value of $31.20, based on 
the closing price of the Class P Stock at $32.38, as of January 27, 
2012); or (c) $14.65 in cash without interest, plus 0.4187 of a share 
of the Class P Stock (which, fractional share had a rounded value of 
$13.56, based on the closing price of the Class P Stock at $32.38, as 
of January 27, 2012). The closing price of the EP Stock, as of January 
27, 2012 was $26.54.
    Whichever option each of the shareholders of the EP Stock, 
including the Invested Participants, elect, is subject to certain 
conditions applicable to all such shareholders. If any of the 
shareholders of the EP Stock, including any of the Invested 
Participants, make no election, such shareholders will be deemed to 
have elected to receive option (c), as described above, the Class P 
Stock and cash. All elections will be subject to proration.
    Regardless of which election is made by the shareholders of the EP 
Stock, including the Invested Participants, and even if no election is 
made by such shareholders, 0.640 of a Warrant will be issued with 
respect to each share of EP Stock held by such shareholders, including 
the Invested Participants, on the closing date of the Merger. It is 
represented that each such fraction of a Warrant has an assumed value 
of $0.96. Warrants will be allocated to the accounts of the Invested 
Participants whose accounts held EP Stock on the closing date of the 
Merger.
    10. It is represented that the Class P Stock is publicly traded on 
the New York Stock Exchange. The authorized capital stock of KMI 
consists of 2,819,462,927 shares of which 10,000,000 shares are 
preferred stock (par value $0.01 per share) and 2,809,462,927 shares 
are common stock (par value $0.01 per share). At the close of business 
on October 13, 2011, 110,898,898 shares of Class P Stock were issued 
and outstanding, and no shares of Class P Stock were held by KMI in its 
treasury.
    It is represented that any Class P Stock acquired as a result of 
the Merger by the Invested Participants will become a ``qualifying 
employer security,'' as defined under section 407(d)(5) of the Act and 
section 4975(e) of the Code, because the Class P Stock, will after the 
Merger, be a security issued by KMI, the parent company of El Paso.\9\
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    \9\ The Department, herein, is not providing any relief with 
respect to the acquisition and holding by the Invested Participants 
of the Class P Stock.
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    11. It is represented that the shareholders, including the Invested 
Participants, will receive the Warrants and other consideration 
automatically upon the closing date of the Merger. In this regard, it 
is represented that the Invested Participants and the Committee have no 
control over the receipt of the Warrants. However, prior to the closing 
date of the Merger, each of the Invested Participants has the right to 
transfer the assets in his or her account in the Plan which is invested 
in the EP Stock to any other investment option offered under the Plan 
and thereby, avoid receiving the Warrants.
    12. It is represented that the Warrants will be issued pursuant to 
a certain warrant agreement (the Warrant Agreement) between KMI and a 
warrant agent (the Warrant Agent). It is represented that the Warrant 
Agent is Computershare Trust Company, N.A. and is an unrelated party to 
El Paso and KMI. The Warrant Agreement provides that the Warrants will 
be registered under the Securities Act of 1933, as amended, and the 
rules and regulations promulgated thereunder, and will be registered 
under the Securities Exchange Act of 1934, and the rules and 
regulations promulgated thereunder.
    It is represented that the Warrants will be issued to the Invested 
Participants on the same basis that such Warrants will be issued to all 
other shareholders of the EP Stock. Pursuant to the terms of the 
Warrant Agreement, each of the shareholders of the EP Stock, including 
each of the Invested Participants, for each Warrant held will be able 
to purchase one share of Class P Stock (par value $0.01 per share) at 
the exercise price of $40 per share (the Exercise Price) during the 
period beginning on the date of the Warrant Agreement and ending on the 
five-year anniversary of the date of the Warrant Agreement (the Five 
Year Term).
    13. The Warrants may be exercised in whole or in part by 
presentation of a

[[Page 32695]]

Warrant along with a Notice of Exercise to the Warrant Agent.\10\ No 
fractional shares of Class P Stock will be issued upon the exercise of 
any Warrant, but KMI will pay the cash value of such fractional shares 
equal to the market price of the Class P Stock on the trading day on 
which such Warrants are exercised. Payment of the Exercise Price can be 
made at the option of the holder of the Warrants either: (a) In cash; 
(b) by delivering a certified or official bank check payable to the 
Warrant Agent; or (c) by delivering a written direction to the Warrant 
Agent that the holder desires to exercise Warrants, pursuant to a 
``cashless exercise.''
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    \10\ With regard to the exercise of the Warrants, it is 
represented that the Invested Participants will rely on the relief 
provided by the statutory exemption, pursuant to section 408(e) of 
the Act. The Department is offering no view, as to whether the 
requirements of the statutory exemption provided in section 408(e) 
of the Act will be satisfied. Further, the Department, herein, is 
not providing any relief with respect to the exercise of the 
Warrants.
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    14. In addition to the right to exercise the Warrants, the Warrants 
may be sold, assigned, transferred, pledged, encumbered, or in any 
other manner transferred or disposed of, in whole or in part in 
accordance with the terms of the Warrant Agreement and all applicable 
laws. In this regard, Invested Participants will have the right to sell 
the Warrants allocated to their accounts in the Plan at any time and 
from time to time during the Five Year Term, in the same manner as 
other holders of the Warrants.\11\ It is represented that the Warrants 
will be listed on the New York Stock Exchange, the NASDAQ Stock 
Exchange, or another stock exchange reasonably agreed to by KMI and El 
Paso. Proceeds from the sale of the Warrants by Invested Participants 
may be directed into any other investment option under the Plan.
    15. It is represented that the Committee will not take any action 
to cause the Invested Participants to exercise or sell the Warrants. If 
an Invested Participant takes no action either to exercise or sell the 
Warrants, then such Warrants will expire at the end of the Five Year 
Term.
---------------------------------------------------------------------------

    \11\ Pursuant to section 1.21 of the Warrant Agreement, KMI has 
the right, except as limited by law, or other agreements to purchase 
or otherwise acquire Warrants at such times, in such manner, and for 
such consideration as it and the applicable holder may deem 
appropriate. The Department, herein, is not providing any exemptive 
relief with respect to the purchase nor with respect to the 
acquisition by KMI of any Warrants from the Invested Participants in 
the Plan, as holders of such Warrants.
---------------------------------------------------------------------------

    16. It is represented that one of the available investment options 
under the Plan will be a newly established limited brokerage window. 
The limited brokerage window will be a self-directed brokerage account 
that will allow Invested Participants to sell or exercise Warrants and 
direct any cash proceeds into another investment option under the Plan. 
The Warrants and the Class P Stock will be the only securities traded 
through the limited brokerage window.
    Brokerage services to the limited brokerage window are offered by 
Chase Investment Services Corp. (CISC). It is represented that CISC is 
a member of Financial Industry Regulatory Authority. The clearing and 
custody services are provided by J.P. Morgan Clearing Corp. (JPMCC). 
Both CISC and JPMCC are members of the Securities Investor Protection 
Corporation. Both CISC and JPMCC are separately registered broker 
dealers. Both CISC and JPMCC are affiliates of JPMorgan Chase and 
Company. CISC and JPMCC, are parties in interest, as service providers 
to the Plan, pursuant to section 3(14)(B) of the Act. It is represented 
that CISC, and JPMCC are unrelated to KMI and to El Paso.
    The brokerage arrangement is a prohibited transaction under section 
406(a) of the Act, because it involves the furnishing of services 
between a party in interest (i.e., CISC), and the Plan and the use of 
Plan assets to pay for those services. The Applicants represent that 
the brokerage arrangement does not give rise to a prohibited 
transaction under section 406(b) of the Act, because the Plan 
fiduciaries have contracted for the brokerage service to be provided to 
the Plan and do not exercise discretion with respect to the brokerage 
service or the fee.\12\ Further, the Applicants represent that CISC has 
no discretion with respect to the sale or exercise of the Warrants, and 
thus, will not be a fiduciary with respect to the Plan, in that 
Warrants held in the limited brokerage account will be exercised or 
sold only at the direction of the Invested Participants.
---------------------------------------------------------------------------

    \12\ The Applicants have not requested exemptive relief with 
respect to the provision of brokerage services by CISC to the Plan. 
In this regard, the Applicants rely on the relief provided by 
section 408(b)(2) of the Act for services rendered to a plan, if the 
services are necessary, the contract or arrangement for such 
services is reasonable, and only reasonable compensation is paid for 
such services. The Department is offering no relief, herein, for the 
provision of brokerage services by CISC to the Plan and is providing 
no view, as to whether the requirements of the statutory exemption 
provided in section 408(b)(2) of the Act will be satisfied with 
respect to the provision of brokerage services by CISC to the Plan.
---------------------------------------------------------------------------

    When an Invested Participant elects to sell or exercise a Warrant 
through the limited brokerage window, it is represented that CISC will 
be acting as an agent and will not engage in any principal 
transactions. In this regard, CISC will send the order to JP Morgan 
Securities, LLC (JPMS). JPMS is a party in interest, as a service 
provider to the Plan, pursuant to section 3(14)(B) of the Act. It is 
represented that JPMS is unrelated to KMI and to El Paso.
    The Warrants deposited in the accounts of Invested Participants in 
the Plan will be allocated to the limited brokerage window. The 
Invested Participants will not pay any fees or commissions in 
connection with the acquisition or holding of the Warrants. The 
Warrants will be held by the Plan from the closing date of the Merger 
until each of the Invested Participants disposes of the Warrants 
allocated to his or her account by exercising the Warrants or by 
directing the sale of the Warrants through the limited brokerage 
window.
    Upon the sale of Warrants through the limited brokerage window, all 
the cash proceeds will be swept automatically into a money market 
account on a daily basis; and subsequently, invested in another Plan 
investment option, as directed by an Invested Participant. The sweep 
account is maintained by CISC; however, CISC will have no discretion 
with respect to the amount or timing of any amount swept.\13\
---------------------------------------------------------------------------

    \13\ The Applicants have not requested exemptive relief with 
respect to the sweep account. In this regard, the Applicants 
maintain that the sweep services are provided to the Plan by CISC 
pursuant to a service agreement which satisfies section 408(b)(2) of 
the Act. The Applicants represent that neither Plan fiduciaries nor 
CISC exercise discretion with respect to such sweep services. The 
Department is offering no view, as to whether the requirements of 
the statutory exemption provided in section 408(b)(2) of the Act 
will be satisfied. Further, the Department, herein, is not providing 
any relief with respect to the provision of sweep services by CISC 
to the Plan.
---------------------------------------------------------------------------

    Upon the sale of a Warrant, a fee will be deducted from the 
proceeds of the transaction, in the same manner that a fee would be 
deducted in connection with the sale of EP Stock prior to the Merger. 
If an Invested Participant uses the self-service options available 
under the Plan for changing the Plan investment allocation, the fee for 
the sale of a Warrant will be $9.99 for up to 1,000 Warrants and $0.02 
per Warrant thereafter. If an Invested Participant requests a CISC 
representative to assist with the transaction, the fee will be $55.00 
for the sale of up to 1,000 Warrants and $0.02 per Warrant 
thereafter.\14\
---------------------------------------------------------------------------

    \14\ The Applicants have not requested exemptive relief with 
respect to the receipt of a fee by CISC for the provision of 
brokerage services to the Plan. In this regard, the Applicants rely 
on the relief provided by section 408(b)(2) of the Act for payment 
by a plan to a party in interest for services rendered to such plan, 
if the services are necessary, the contract or arrangement for such 
services is reasonable, and only reasonable compensation is paid for 
such services. The Department is offering no relief, herein, for the 
receipt of a fee by CISC for the provision of brokerage services to 
the Plan, nor is the Department providing any relief for the receipt 
of compensation for the provision of clearing or custody services by 
JPMCC or for the receipt of compensation for the execution of the 
order by JPMS. Further, the Department, herein, is offering no view, 
as to whether the requirements of the statutory exemption provided 
in section 408(b)(2) of the Act will be satisfied with respect to 
the receipt of fees by CISC, JPMCC, and JPMS.

---------------------------------------------------------------------------

[[Page 32696]]

    Upon exercise of a Warrant, the shares of the Class P Stock for 
which such Warrant was exercised will be credited to the Invested 
Participant's account and held in the limited brokerage window until 
such Invested Participant makes an investment change election. No fees 
will be charged in connection with the exercise of a Warrant.
    It is represented that prior to the closing on the Merger, El Paso 
intends to amend the Plan to prohibit any participants in the Plan from 
acquiring additional Warrants through the Plan after the Merger closes. 
It is represented that the decision to amend the Plan to include 
limitations on the investments is a settlor function that does not 
involve Plan fiduciaries. It is represented that the decision by El 
Paso to limit the acquisition of additional Warrants by the Plan was in 
part to encourage participants to diversify the investments in such 
participants' individually-directed accounts in the Plan.
    17. The Applicants represent that the proposed exemption is 
administratively feasible. In this regard, the acquisition and holding 
of the Warrants by the accounts of the Invested Participants in the 
Plan will be a one-time transaction that involves an automatic 
distribution of such Warrants to all such Invested Participants. It is 
represented that it is relatively common in stock transactions, such as 
the anticipated transaction reflected in the Merger, to include stock 
warrants as part of the consideration for the stock of the target 
corporation.
    18. The Applicants represent that the transactions which are the 
subject of this proposed exemption are in the interest of the Plan, 
because the subject transactions represent a valuable opportunity to 
the accounts of the Invested Participants in the Plan to realize the 
potential value of the Merger. If the exemption is not granted, the 
Invested Participants would be deprived of investment returns that 
could be realized, if the Warrants were to be exercised or sold during 
the Five Year Term.
    19. The Applicants also represent that the proposed exemption is in 
the interest of the accounts in the Plan of the Invested Participants. 
In this regard, the Invested Participants may select the most 
advantageous time to exercise and/or to liquidate the Warrants.
    20. The Applicants further represent that the proposed exemption 
provides sufficient safeguards for the protection of the Plan and its 
participants and beneficiaries. In this regard, the acquisition and 
holding of the Warrants will occur automatically, as a result of the 
Merger. In addition, as the Warrants will be publicly-traded 
securities, the fair market value of the Warrants, if the Invested 
Participants choose to sell such Warrants, will be determined by the 
market.
    21. In summary, the Applicants represent that the subject 
transactions will satisfy the statutory criteria for an exemption under 
section 408(a) of the Act because:
    (a) The Warrants will be acquired by the individually-directed 
accounts of the Invested Participants, all or a portion of whose 
accounts in the Plan hold the EP Stock;
    (b) The exchange by the shareholders, including the Invested 
Participants, of the EP Stock for the Warrants will result from an 
independent act of El Paso and KMI, as corporate entities in connection 
with the Merger, and will occur automatically without any action or 
control on the part of such shareholders, including the Invested 
Participants;
    (c) The acquisition of the Warrants by the Invested Participants 
will occur in connection with the Merger, and such Warrants will be 
made available on the same terms to all shareholders of the EP Stock, 
including the Invested Participants;
    (d) The decisions with regard to the holding and disposition of the 
Warrants will be made by each of the Invested Participants in 
accordance with the provisions under the Plan for individually-directed 
accounts;
    (e) The Warrants allocated to the accounts of the Invested 
Participants in the Plan may be exercised or sold at any time by such 
Invested Participants giving investment directions in accordance with 
the provisions of the Plan;
    (f) The Invested Participants will not pay any fees or commissions 
in connection with the acquisition and holding of the Warrants, nor 
will the Invested Participants pay any fees on the exercise of the 
Warrants; and
    (g) Prior to entering into the Merger, El Paso will obtain all 
necessary approvals from any relevant state agencies and federal 
agencies, including, but not limited to the U.S. Department of Justice 
Antitrust Division, the Federal Energy Regulatory Commission, the SEC, 
and the Federal Trade Commission.

Notice to Interested Persons

    Only those participants and beneficiaries whose accounts are 
invested in EP Stock on the closing date of the Merger will be affected 
by the subject transactions. Because participants may change their 
investment directions daily, it is represented that it is not possible 
to determine the exact number of affected participants and 
beneficiaries in advance of the closing date of the Merger.
    Accordingly, the Applicants represent that, if the Merger closes 
before the Notice to Interested Persons is prepared and mailed, El Paso 
will provide notification of the publication in the Federal Register of 
the Notice of Proposed Exemption (the Notice) to all participants, 
beneficiaries, and alternate payees with account balances in the Plan, 
whose account (or portion thereof) was invested in the EP Stock on the 
closing date of the Merger. The Applicants further represent that if 
the Merger closes after the Notice to Interested Persons is prepared 
and mailed, El Paso will provide notification of the publication in the 
Federal Register of the Notice to all participants, beneficiaries, and 
alternate payees who have an account in the Plan at the time the Notice 
to Interested Persons is prepared.
    It is represented that all such interested persons will be notified 
of the publication of the Notice by first class mail, to each such 
interested person's most recent address maintained in the Plan 
administrator's records for each such interested person, within thirty 
(30) days of publication of the Notice in the Federal Register. Such 
mailing will contain a copy of the Notice, as it appears in the Federal 
Register on the date of publication, plus a copy of the Supplemental 
Statement, as required, pursuant to 29 CFR 2570.43(b)(2), which will 
advise all interested persons of their right to comment and to request 
a hearing.
    A11 written comments and/or requests for a hearing must be received 
by the Department from interested persons within 60 days of the 
publication of this proposed exemption in the Federal Register.

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

[[Page 32697]]

Ed Laur Defined Benefit Plan (the Plan) Located in Amarillo, TX

[Application No. D-11714]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 4975(c)(2) of the Code in accordance with the 
procedures set forth in 29 CFR Part 2570, Subpart B (76 FR 66637, 
66644, October 27, 2011). If the exemption is granted, the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) through (E) of the Code,\15\ shall not apply 
to the proposed cash sale by the Plan to Ed Laur (Mr. Laur) of shares 
of stock (the Stock) of EnergyNet.com (EnergyNet); provided that:
---------------------------------------------------------------------------

    \15\ Pursuant to 29 CFR 2510.3-3(b) of the Department's 
regulations, there is no jurisdiction with respect to the Plan under 
Title I of the Act. However, there is jurisdiction under Title II of 
the Act, pursuant to section 4975 of the Code.
---------------------------------------------------------------------------

    (a) The sale of the Stock by the Plan to Mr. Laur is a one-time 
transaction in which the Plan receives cash;
    (b) As the result of the sale, the Plan receives the fair market 
value of the Stock, as determined by the CFO of EnergyNet, as of the 
most recent valuation of such Stock;
    (c) The Plan pays no commissions or fees in regard to the 
transaction; and
    (d) The terms of the sale are no less favorable to the Plan than 
those the Plan would have received in similar circumstances when 
negotiated at arm's length with unrelated third parties.

Summary of Facts and Representations

    1. The Plan is a defined benefit plan established in 2001. The Plan 
is sponsored by Ed Laur (Mr. Laur), a sole proprietor. As of December 
31, 2010, the Plan had $335,442.64 in assets. It is represented that 
the estimated value of the Plan's assets, as of December 31, 2011, is 
$350,000. Mr. Laur and his wife, Mrs. Laur are the only participants in 
the Plan. It is represented that the benefit accruals under the Plan 
were frozen in 2006 and currently remain frozen.
    2. Mr. Laur is the trustee and primary fiduciary with respect to 
the Plan. Mr. Laur works as a consultant in the grain industry.
    3. EnergyNet is a local Amarillo, Texas corporation. EnergyNet is 
not traded on any exchange, but is traded locally in the Amarillo, 
Texas area. It is represented that there is no relationship between Mr. 
Laur and the ownership of EnergyNet. It is represented that EnergyNet 
in 2011 converted from a C-corporation to an S-corporation status.
    4. In 2002, 2005, 2007, and 2010, the Plan purchased the Stock of 
EnergyNet for investment purposes from EnergyNet. It is represented 
that the Plan purchased a total of 161,012 shares of the Stock at an 
aggregate cost of $39,082.40. It is represented that the estimated 
amount of income received by the Plan from EnergyNet through December 
31, 2011 is $5,000. It is further represented that the Plan did not 
incur any expenses as a result of the holding of the Stock through 
December 31, 2011. It is represented that, as of December 31, 2011, the 
Stock held by the Plan had an aggregate value of $40,253. It is 
represented that the value of the Stock represents slightly less than 
12% of the total fair market value of the assets of the Plan.
    5. As a result of the conversion in 2011 of EnergyNet from a ``C-
Corporation'' to an ``S-Corporation,'' it is represented that the Plan 
became a ``tax payer'' with respect to the income pass-through from 
EnergyNet to the Plan. As a result of the conversion, it is represented 
that the Plan will have received, pursuant to section 512(e) of the 
Code,\16\ unrelated business taxable income (UBTI) on the Plan's share 
of the 2011 dividends from EnergyNet in the amount of $11,000. The tax 
on such amount at a rate of 25.7 percent (25.7%) is represented to be 
$2,827 ($11,000 x .257 = $2,827). In addition, it is represented that 
the Plan will incur the cost of preparing and filing Form 990-T.
---------------------------------------------------------------------------

    \16\ Under special rules applicable to ``S-Corporations,'' 
section 512(e) of the Code states that if an organization described 
in section 1361(c)(6) holds stock in an ``S-Corporation,'' such 
interest shall be treated as an interest in an unrelated trade or 
business, and all items of income, loss, or deduction and any gain 
or loss on disposition of the stock in the ``S-Corporation'' shall 
be taken into account in computing the unrelated business taxable 
income of such organization.
    Section 1361(c)(6) of the Code states that an organization which 
is described in section 401(a) or 501(c)(3), and which is exempt 
from taxation under section 501(a), such as the Plan, may be a 
shareholder in an ``S-Corporation.''
---------------------------------------------------------------------------

    6. Mr. Laur proposes to purchase the Stock from the Plan at a 
purchase price which is the current fair market value of the Stock.
    7. Mr. Laur represents that the proposed transaction is feasible in 
that it will be a one-time transaction in which the Plan will receive 
cash. In addition, Mr. Laur will bear any and all costs associated with 
the subject transaction and the filing of the application for 
exemption.
    8. Mr. Laur represents that the proposed transaction is in the 
interest of the Plan, in that the Plan will receive in cash the fair 
market value of the Stock. Further, it is represented that as the 
conversion of EnergyNet from a ``C-Corporation'' to an ``S-
Corporation'' was unforeseen when the Stock was purchased, it is 
represented that the Plan never intended to become subject to UBTI. 
Accordingly, it is represented that it would be in the interest of the 
Plan to avoid incurring UBTI on the 2011 dividends from EnergyNet and 
also to avoid the cost of preparing and filing Form 990-T. Further, the 
proposed exemption is in the interest of the Plan in that the Plan will 
pay no commissions or fees with regard to the subject transaction.
    9. It is represented that the proposed transaction has sufficient 
safeguards in place for the protection of the Plan and its participants 
and beneficiaries. In this regard, the fair market value of the Stock 
will be determined, as of the most recent valuation date, by Jim Black 
(Mr. Black), the CFO of EnergyNet. It is represented that Mr. Black at 
the end of each calendar year provides a written stock value to Mr. 
Laur in Mr. Laur's capacity as the trustee of the Plan. It is 
represented that based on a letter from Mr. Black, the aggregate value 
of the 161,012 shares of the Stock held by the Plan is $40,253, as of 
December 31, 2011.
    10. In summary, Mr. Laur represents that the proposed transaction 
satisfies the criteria of section 4975(c)(2) of the Code because:
    (a) The sale of the Stock by the Plan to Mr. Laur will be a one-
time transaction in which the Plan will receive cash;
    (b) As the result of the sale, the Plan will receive the fair 
market value of the Stock, as determined by the CFO of EnergyNet, as of 
the most recent valuation of such Stock;
    (c) The Plan will pay no commissions or fees in regard to the 
transaction; and
    (d) The terms of the sale will be no less favorable to the Plan 
than those the Plan would have received in similar circumstances when 
negotiated at arm's length with unrelated third parties.

Notice to Interested Persons

    As Mr. Laur and Mrs. Laur, his wife, are the only participants in 
the Plan, it has been determined that there is no need to distribute 
the Notice of Proposed Exemption (the Notice) to interested persons. 
Therefore, comments and requests for a hearing must be received by the 
Department within thirty (30) days of the date of publication of this 
Notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT:  Angelena C. Le Blanc of the 
Department,

[[Page 32698]]

telephone (202) 693-8551. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the interest of 
the participants and beneficiaries of the plan and in a prudent fashion 
in accordance with section 404(a)(1)(b) of the Act; nor does it affect 
the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 25th day of May, 2012.
Lyssa E. Hall,
Acting Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2012-13264 Filed 5-31-12; 8:45 am]
BILLING CODE 4510-29-P