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EBSA Notices

Exemptions From Certain Prohibited Transaction Restrictions   [11/16/2012]
[PDF]
Federal Register, Volume 77 Issue 222 (Friday, November 16, 2012)
[Federal Register Volume 77, Number 222 (Friday, November 16, 2012)]
[Notices]
[Pages 68831-68834]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27848]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Exemptions From Certain Prohibited Transaction Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). 
This notice includes the following: D-11710, El Paso Corporation 
Retirement Savings Plan

[[Page 68832]]

(the Plan), 2012-19; and L-11688, Sharp HealthCare (Sharp), 2012-20.

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

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR part 
2570, subpart B (76 FR 66637, 66644, October 27, 2011) \1\ and based 
upon the entire record, the Department makes the following findings:
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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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    (a) The exemptions are administratively feasible;
    (b) The exemptions are in the interests of the plans and their 
participants and beneficiaries; and
    (c) The exemptions are protective of the rights of the participants 
and beneficiaries of the plans.

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

[Prohibited Transaction Exemption 2012-19; Exemption Application No. D-
11710]

Exemption

Section I: Transactions
    The restrictions of sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2), 
406(b)(1), 406(b)(2), and 407(a)(1)(A) of the Act and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) and 4975(c)(1)(E) of the Code,\2\ shall not 
apply, in connection with a merger transaction (the Merger) between El 
Paso Corporation (El Paso) and Kinder Morgan, Inc. (KMI):
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    \2\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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    (a) To the acquisition by the individually directed accounts of the 
participants of the Plan (the Invested Participants) of certain 
publicly traded warrants (the Warrants) issued by KMI, which became a 
party in interest with respect to the Plan after the merger (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 exemption, were 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 material facts and representations described, herein, and as set 
forth in the application file and upon compliance with the conditions, 
as set forth in this exemption.
    (a) The Warrants were 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 resulted from an independent 
act of El Paso and KMI, as corporate entities in connection with the 
Merger, and occurred 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 
occurred in connection with the Merger, and such Warrants were 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 were 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 did not pay any fees or commissions 
in connection with the acquisition and holding of the Warrants, nor did 
the Invested Participants pay any fees on the exercise of the Warrants; 
and
    (g) Prior to entering into the Merger, El Paso obtained 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, and the Federal Trade Commission.
    Effective Date: This exemption is effective, May 25, 2012, the 
closing date of the Merger.

Written Comments

    In the Notice, the Department invited all interested persons to 
submit written comments and requests for a hearing within sixty (60) 
days of the date of the publication of the Notice in the Federal 
Register on June 1, 2012. All comments and requests for hearing were 
due by July 31, 2012. During the comment period, the Department 
received no requests for hearing. However, the Department did receive a 
comment in a letter, dated July 5, 2012, from James E. Street (Mr. 
Street), Vice President, Human Resources and IT of KMI. As of the date 
of the Merger, KMI became an interested person with respect to the 
Plan.
    In his letter, Mr. Street informed the Department that the Merger 
was effective on May 25, 2012. Accordingly, Mr. Street represents that 
the subject transactions were entered into on the effective date of the 
Merger for business expediency reasons before a final exemption could 
be obtained from the Department. As the subject transactions have 
already been consummated, Mr. Street, on behalf of KMI, requests that 
the Department grant a retroactive exemption, effective as of May 25, 
2012, the date when the Merger closed.

[[Page 68833]]

    The Department concurs, and accordingly, the final exemption has 
been amended to change the tense of the verbs to reflect that the 
subject transactions have been entered into, and to insert the 
following paragraph:
    Effective Date: This exemption is effective, May 25, 2012, the 
closing date of the Merger.
    In response to an inquiry by the Department, Mr. Street, on behalf 
of KMI, in a letter dated September 25, 2012, confirmed that, to the 
best of his knowledge and belief, the material facts presented and the 
representations made by El Paso in the original prohibited transaction 
exemption application (the Application) submitted to the Department on 
November 23, 2011, and in the supplemental submissions relating to the 
Application remain true and correct and that the conditions set forth 
in Section II of the Notice, as published in the Federal Register on 
June 1, 2012, were satisfied, as of May 25, 2012, the closing date of 
the Merger of El Paso and KMI, and thereafter.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice of Proposed Exemption which was published on June 1, 2012, 
at 77 FR 32692.

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

Sharp HealthCare (Sharp), Located in San Diego, California

[Prohibited Transaction Exemption 2012-20; Exemption Application No. L-
11688]

Exemption

Section I. Covered Transactions
    A. The restrictions of sections 406(a)(1)(A), 406(a)(1)(D), 
406(b)(1), and 406(b)(2) of the Act shall not apply, effective August 
1, 2006 through and until November 15, 2012, to the purchase of health 
insurance by the Sharp HealthCare Health and Dental Plan (the Plan) 
from the Sharp Health Plan (the HMO), provided that the conditions of 
Section II have been met.
    B. The restrictions of sections 406(a)(1)(A), 406(a)(1)(D), 
406(b)(1), and 406(b)(2) of the Act shall not apply, effective as of 
November 16, 2012, to the purchase of health insurance by the Plan from 
the HMO, provided that the conditions of Section II and Section III are 
met.
Section II. General Conditions
    (a) Sharp is the sole member of the HMO, and more than 50% of the 
appointment power for the HMO's Board of Directors is held by Sharp.
    (b) Sharp is licensed to sell HMO coverage in the State of 
California.
    (c) The HMO is certified by the California Department of Managed 
Health Care as being in compliance with the requirements for a licensed 
HMO within the last 18 months.
    (d) The HMO has undergone a financial examination by the California 
Department of Managed Health Care within the past 5 years and will 
continue to undergo such financial examinations at least once every 
five years.
    (e) The HMO has been, and will continue to be, examined by an 
independent certified public accountant annually.
    (f) The amount the Plan pays to Sharp for HMO coverage is 
reasonable and does not exceed the amount the Plan would have paid for 
similar services in an arm's length transaction between unrelated 
parties.
    (g) All HMO-offered health care providers meet all applicable 
licensure requirements and certifications.
    (h) The HMO offers a sufficient number of non-Sharp affiliated 
health care providers to effectively allow Plan participants the 
opportunity to receive health care services from either Sharp or non-
Sharp affiliated health care providers.
    (i) No commissions are paid by the Plan with respect to the sale of 
HMO coverage.
    (j)(i) With respect to the relief provided in section I. A., for 
each taxable year of the HMO, the gross premiums received in that 
taxable year by the HMO from the Plan did not exceed 50% of the gross 
premiums received by the HMO for all HMO coverage issued in that 
taxable year; or
    (ii) with respect to the relief provided in section I. B., for each 
taxable year of the HMO, the gross premiums received in that taxable 
year by the HMO from the Plan will not exceed 50% of the gross premiums 
received by the HMO for all HMO coverage issued in that taxable year.
    (k) Sharp maintains or causes to be maintained for a period of six 
years from the date of any covered transaction hereunder such records 
as are necessary to enable the persons described in paragraph (l)(i) 
below to determine whether the conditions of this exemption have been 
met, provided that (i) a separate prohibited transaction will not be 
considered to have occurred if, due to circumstances beyond the control 
of Sharp, the records are lost or destroyed prior to the end of the 
six-year period, and (ii) no party in interest other than Sharp shall 
be subject to a civil penalty that may be assessed under section 502(i) 
of the Act, if such records are not maintained, or are not available 
for examination as required by paragraph (l)(i) below.
    (l)(i) Except as provided below in paragraph (l)(ii), and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to above in paragraph (k) are 
unconditionally available at their customary location for examination 
during normal business hours by:
    (A) Any duly authorized employee or representative of the 
Department,
    (B) Any duly authorized representative of the California Department 
of Managed Health Care or any State or Federal governmental body 
responsible for regulatory oversight of Sharp or the HMO, and
    (C) Any fiduciary of the Plan or the Plan's authorized 
representative; and
    (ii) None of the persons described above in paragraph (l)(i)(C) 
shall be authorized to examine trade secrets of Sharp, or commercial or 
financial information which is privileged or confidential, and should 
Sharp refuse to disclose information on the basis that such information 
is exempt from disclosure, Sharp shall, by the close of the thirtieth 
(30th) day following the request, provide a written notice advising 
that person of the reasons for the refusal and that the Department may 
request such information.
Section III. Prospective Conditions
    (a) Sharp retains annually the services of an independent third-
party consultant to determine whether the amount employees and/or their 
dependents pay for coverage is reasonable and does not exceed the 
amount that would be paid for similar services in an arm's length 
transaction between unrelated parties, which amount includes the cost 
of co-payments and other out-of-pocket expenses for such coverage borne 
by participants and/or their dependents, and written copies of such 
determination are distributed to Plan participants along with summaries 
of health care costs for similar, competing health care providers.
    (b) The Board of Directors of Sharp appoints a committee (the Plan 
Committee) consisting of the Senior Vice President and General Counsel, 
the Senior Vice President and Chief Financial Officer, and the Vice 
President, Compensation and Benefits, and such other representatives as 
the Board of Directors may deem appropriate. The Plan Committee will 
annually ascertain and certify in writing

[[Page 68834]]

that the above requirements of this exemption continue to be met.
Section IV. Effective Dates
    Section I.A. of this exemption is effective as of August 1, 2006, 
through and until November 15, 2012, and Section I.B. of this exemption 
is effective as of November 16, 2012.
    The Department invited all interested persons to submit written 
comments with respect to the proposed exemption on or before September 
30, 2012. During the comment period, the Department received one email 
inquiry which generally concerned the individual's difficulty in 
understanding the notice of proposed exemption. However, the Department 
received no comments or requests for a hearing from interested persons.
    Therefore, after giving full consideration to the entire record, 
the Department has decided to grant the exemption. For further 
information regarding the individual exemption, interested persons are 
encouraged to obtain copies of the exemption application file 
(Application No. L-11688) that the Department maintains with respect to 
the individual exemption. The complete application file, as well as 
supplemental submissions received by the Department, is made available 
for public inspection in the Public Documents room of the Employee 
Benefits Security Administration, Room N-1513, U.S. Department of 
Labor, 200 Constitution Ave. NW., Washington, DC 20210.
    For a complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the proposed exemption published in the Federal Register on August 28, 
2012 at 77 FR 52061.

FOR FURTHER INFORMATION CONTACT: Mr. Warren Blinder, Office of 
Exemption Determinations, Employee Benefits Security Administration, 
U.S. Department of Labor, telephone (202) 693-8553. (This is not a 
toll-free number.)

General Information

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

    Signed at Washington, DC, this 9th day of November 2012.
Lyssa E. Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2012-27848 Filed 11-15-12; 8:45 am]
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