EBSA Notices

Exemption From Certain Prohibited Transaction Restrictions   [5/23/2013]
Federal Register, Volume 78 Issue 100 (Thursday, May 23, 2013)
[Federal Register Volume 78, Number 100 (Thursday, May 23, 2013)]
[Pages 30936-30937]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12236]



Employee Benefits Security Administration

Exemption From Certain Prohibited Transaction Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemption.


SUMMARY: This document contains an exemption 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: 2013-07, The Mo-Kan Teamsters 
Apprenticeship and Training Fund (the Fund) L-11720.

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

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (76 FR 66637, 66644, October 27, 2011) \1\ and based 
upon the entire record, the Department makes the following findings:

    \1\ The Department has considered exemption applications 
received prior to December 27, 2011 under the exemption procedures 
set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 
10, 1990).

    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

The Mo-Kan Teamsters Apprenticeship and Training Fund (the Fund) 
Located in Kansas City, Missouri

[Prohibited Transaction Exemption 2013-07; Exemption Application No. L-


    The restrictions of sections 406(a)(1)(A) and (D) of the Act shall 
not apply to the purchase (the Purchase) by the Fund of certain real 
property located in Kansas City, Missouri (the Property) from Jim 
Kidwell Construction, a party in interest with respect to the Fund; 
provided that the following conditions are satisfied:
    (a) The terms and conditions of the Purchase are at least as 
favorable to the Fund as those obtainable in an arm's length 
transaction with an unrelated party;
    (b) The Purchase is a one-time transaction for cash;
    (c) The Fund pays the lesser of $1,500,000 or the fair market value 
of the Property, as of the date of the Purchase, as determined by a 
qualified, independent appraiser (the Appraiser);
    (d) The Fund's fiduciaries (the Trustees) review and approve the 
methodology used by the Appraiser, ensure that such methodology is 
properly applied in determining the fair market value of the Property, 
and determine whether it is prudent to go forward with the transaction; 
    (e) The Fund pays only reasonable closing costs with respect to the 
Purchase that a similarly situated buyer would customarily pay in a 
similar transaction.

Written Comments

    The Department invited all interested persons to submit written 
comments with respect to the notice of proposed exemption on or before 
February 10, 2013. During this comment period, the Department received 
one written comment. To ensure that all participants had been given the 
opportunity to comment, the Department decided to extend the comment 
period until March 21, 2013. During the second comment period, the 
Department received three written comments from Fund participants.
    Of the four comments received by the Department, one commenter 
disapproved of the proposed transaction because he thought it might 
affect his benefits. The three comments that were substantive were, in 
part, concerned with the value of the Property. The participants' 
comments, as well as the responses to these comments by the Appraiser 
and the Trustees, are described below.
Comments Regarding Property Overvaluation and Purchase Not Negotiated 
in Good Faith
    In three comment letters, the participants noted that the 
Property's value was overstated. One commenter attached an online 
document (the Document) that placed the fair market value of the 
Property at $300,000.00, as of January 17, 2013. The commenter further 
stated that the Purchase was not negotiated in good faith.
The Appraiser's Response
    The Appraiser reviewed the comments relating to the value of the 
Property and the Document. The Appraiser states that he disagrees with 
the participants' assertion that the Property is overvalued. The 
Appraiser also explains that the Document only depicts the value of a 
single parcel of land rather than the twelve parcels comprising the 
    In addition, the Appraiser notes that the Document was obtained 
from the Jackson County, Missouri Web site, containing the tax 
assessment information. According to the Appraiser, this information 
has no relevance for the purposes of assessing market value and is not 
a source of information that the Appraiser relied on or should rely on.
Comment Regarding Union Voting and Fund Assets Invested in the Property
    Another participant inquired about the lack of information offered 
to the union membership and why the transaction was not subject to a 
union vote. The participant also questioned

[[Page 30937]]

the knowledge and experience of the Fund with managing a mine that is 
located on the Property. Further, the participant questioned whether it 
is prudent to spend 83% of the Fund's cash on the Purchase.
Trustees' Response
    In response to the participant's comments, the Trustees note that 
the decision to purchase the Property was a financial decision made by 
the Trustees for the benefit of the participants and beneficiaries of 
the Fund. The Trustees state further that all of the Trustees are 
familiar with the matters regarding the Purchase. According to the 
Trustees, the decision to purchase the Property by the Fund is not a 
union matter or a decision that the union or its members were required 
or permitted to make.
    With respect to the knowledge and experience of the Fund to manage 
the mine, the Trustees state that there is no requirement that the Fund 
manage the mine or conduct mining activities on the Property. The 
Trustees point out that the Property will be used for the purpose of 
truck driving, heavy equipment training, and equipment storage 
underneath the surface where the mine is located. The Trustees explain 
that they expect to oversee and employ proper personnel to handle 
issues of maintenance when necessary.
    In response to the participant's comment regarding the high 
percentage of the Fund's assets involved in this Purchase, the Trustees 
represent that the decision to purchase the Property was made with due 
diligence as established and required by the regulations under the Act. 
The Trustees represent further that based on this due diligence, they 
have determined that purchasing the Property is in the Fund's best 
interest. The Trustees note that the Fund will be able to make any 
changes or additions to meet future training requirements of the 
Training Fund and its apprenticeship program without the consent or 
outside interference from other parties. In addition, the Fund will 
acquire an equity interest in the Property which will, in return, have 
a future value as a plan asset, and the Purchase is a transaction that 
is customary for similarly situated employee benefit plans.
    After giving full consideration to the entire record, including the 
written comments, the Department has decided to grant the exemption, as 
described above. The complete application is made available for 
inspection in the Public Disclosure 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 December 
28, 2012 at 77 FR 76776.

FOR FURTHER INFORMATION CONTACT: Mr. Asrar Ahmed of the Department, 
telephone (202) 693-8557. (This is not a toll-free number.)

General Information

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

Lyssa E. Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2013-12236 Filed 5-22-13; 8:45 am]