Grant of Amendment to Prohibited Transaction Exemption (PTE) 93-8 Involving the Fortunoff Pension Plans (the Plans) Located in Westbury, NY
WAIS Document Retrieval
[Federal Register: May 18, 1998 (Volume 63, Number 95)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-22; Exemption Application Nos. D-
10461, D-10462 and D-10463]
Grant of Amendment to Prohibited Transaction Exemption (PTE) 93-8
Involving the Fortunoff Pension Plans (the Plans) Located in Westbury,
AGENCY: Pension and Welfare Benefits Administration, U.S. Department of
ACTION: Grant of Amendment to PTE 93-8.
SUMMARY: This document contains a final exemption which amends PTE 93-8
(58 FR 7258, February 5, 1993), a purchase, leaseback and license
exemption involving Plans sponsored by Fortunoff Fine Jewelry and
Silverware, Inc. (FFJ) and M. Fortunoff of Westbury Corporation (M.
Fortunoff) and parties in interest. These transactions are described in
a notice of pendency that was published in the Federal Register on May
8, 1992 at 57 FR 19951.
EFFECTIVE DATE: This exemption is effective as of May 18, 1998.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption
Determinations, Pension and Welfare Benefits Administration, U.S.
Department of Labor, Washington, D.C. 20210, telephone (202) 219-8881.
(This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: On December 19, 1997, the Department of
Labor (the Department) published a notice of proposed exemption (the
Notice) in the Federal Register (62 FR 66685) that would amend PTE 93-
8. PTE 93-8 provides an exemption from certain prohibited transaction
restrictions of section 406 of the Employee Retirement Income Security
Act of 1974 (the Act) and from the sanctions resulting from the
application of section 4975 of the Internal Revenue Code of 1986 (the
Code), as amended, by reason of section 4975(c)(1) of the Code. The
Notice was requested in an application filed on behalf of M. Fortunoff
and FFJ (collectively, the Applicants) pursuant to 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,
August 10, 1990) (the Procedures). Effective December 31, 1978, section
102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17,
1978) transferred the authority of the Secretary of the Treasury to
issue exemptions of the type requested to the Secretary of Labor.
Accordingly, this exemption is being issued solely by the Department.
The Notice gave interested persons the opportunity to comment and
to request a public hearing on the matters described therein. Although
the Notice and supplemental statement were to be posted and distributed
to interested persons during the month of December 1997, the Applicants
stated that this action was not taken but inadvertently overlooked.
Therefore, the Applicants represented that they posted copies of the
Notice and supplemental statement on employee bulletin boards in
company stores and executive offices and also mailed this documentation
to all other participants in the Plans who were not current employees,
on or about March 9, 1998. The Department received no comments or
hearing requests from interested persons following the dissemination of
the Notice and supplemental statement and, therefore, has determined to
grant the amendment to PTE 93-8.
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 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 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 require, among other things, a fiduciary to
discharge his or her 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 requirements of section 401(a) of the Code that the plan
operate for the exclusive benefit of the employees of the employer
maintaining the plan and their beneficiaries;
(2) The exemption will not extend to transactions prohibited under
section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;
(3) Before an exemption can be granted under section 408(a) of the
Act and section 4975(c)(2) of the Code, the Department must find that
the exemption is administratively feasible, in the interest of the plan
and of its participants and beneficiaries and protective of the rights
of participants and beneficiaries of the plan;
(4) This exemption will be supplemental to, and not in derogation
of, any other provisions of the Act and the Code, including statutory
or administrative exemptions. 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
(5) This exemption is subject to the express condition that the
Summary of Facts and Representations set forth in the proposed
exemption relating to PTE 93-8, as amended by this grant notice,
accurately describe, where relevant, the material terms of the
transactions consummated pursuant to that 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 cited
above, the Department hereby amends PTE 93-8. Accordingly, the
restrictions of sections 406(a), 406(b)(1) and (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) through (E) of the Code, shall
not apply to the leasing by the Fortunoff Pension Plan--Employer Group
A Plan, the Fortunoff Pension Plan--Employer Group B Plan and the
Fortunoff Fine Jewelry and Silverware, Inc. Profit Sharing Plan
(collectively, the Plans) to Fortunoff Fine Jewelry and Silverware,
Inc. (FFJ), under the provisions of an amended lease (the Amended
Lease) described in Prohibited Transaction Exemption (PTE) 93-8 (58 FR
7258, February 5, 1993), of certain real property (the Substitute
Property), acquired by the Plans through
a third party exchange (the Exchange Property), as well as all
remaining real estate which constitutes the leased premises (the
Property), provided the following conditions are met:
(a) The terms of the Amended Lease remain at least as favorable to
the Plans as those obtainable in an arm's length transaction with an
(b) The independent fiduciary--
(i) Determines that the acquisition and subsequent leasing of the
Substitute Property by the Plans under the Amended Lease are in the
best interest of the Plans and their participants and beneficiaries;
(ii) Monitors and enforces compliance with the terms and conditions
of the Amended Lease, the Escrow Agreement and the new exemption, at
all times; and
(iii) Appoints one or more independent fiduciaries to resolve any
conflicts of interest which may develop among the Plans with respect to
the Amended Lease, the Escrow Agreement, the Property, or the Plans'
respective interests therein.
(c) The fair market value of the proportionate interests held by
each Plan in the Property as a whole following the exchange transaction
does not exceed 25 percent of each Plan's assets.
(d) The Property, the Exchange Property and the Substitute Property
are all appraised by qualified, independent appraisers prior to the
consummation of the exchange transaction.
(e) The base rent for the Property is adjusted annually by the
independent fiduciary based upon an independent appraisal of such
(f) FFJ incurs all real estate taxes and other costs which are
incident to the Amended Lease.
(g) The Escrow Agreement is maintained by M. Fortunoff of Westbury
Corporation (M. Fortunoff), in favor of the Plans, as security for
FFJ's rental obligations under the Amended Lease.
The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application for exemption are true and complete and accurately describe
all material terms of the transactions. In the case of continuing
transactions, if any of the material facts or representations described
in the application change, the exemption will cease to apply as of the
date of such change. In the event of any such change, an application
for a new exemption must be made to the Department.
For a more complete statement of the facts and representations
supporting the Department's decision to grant PTE 93-8, refer to the
proposed exemption, grant notice and technical correction notice which
are cited above.
Signed at Washington, D.C., this 13th day of May, 1998.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 98-13144 Filed 5-15-98; 8:45 am]
BILLING CODE 4510-29-P