The Agencies note that certain commentators, in their submissions concerning the proposed exemption, suggested that the Agencies should revise their regulations concerning the definition of fiduciary under ERISA and the Code.10 Specifically, it has been suggested that the Agencies should take the position that a person who is an investment adviser to a plan is not, merely for that reason, a plan fiduciary if prior authorization for each transaction effected for the plan must be obtained from some other person. It is argued that, if such a definition of fiduciary were adopted, a brokerdealer which was a plan's investment adviser would be able to effect securities transactions for the plan without relying upon the class exemption being granted herein provided that each such transaction was approved in advance by another person who was a plan fiduciary, since in such cases the adviser would not be a fiduciary.11 The Agencies believe that such a definition of fiduciary would be inconsistent with section 3(21) (A) (ii) of ERISA and section 4975(e) (3) (B) of the Code, relating to persons who are fiduciaries by reason of providing investment advice to plans. Nonetheless, the Agencies point out that a broker-dealer which provides investment advice to a plan and is therefore a fiduciary may, under certain circumstances, be able to effect brokerage transactions for the plan without relying upon the class exemption, provided that he/she obtains prior authorization from another plan fiduciary before effecting any such transaction. This is because, as the Agencies have previously explained,12 the regulations under section 408(b)(2) of ERISA and section 4975(d) (2) of the Code13 provide, in effect, that a fiduciary does not engage in a transaction prohibited by section 406(b) (1) of ERISA and section 4975 (c) (1) (E) of the Code if the fiduciary does not use any of the authority, control or responsibility which makes such person a fiduciary to cause a plan to pay additional fees for a service furnished by such fiduciary. A broker-dealer-fiduciary would not be using any of the authority, control or responsibility which makes such person a fiduciary to cause the plan to retain him/her to effect a brokerage transaction for the plan, even if such fiduciary offered his/her services to effect the transaction for the plan, if he/she effected such a transaction only after receiving approval for the transaction from a secondary fiduciary who had no interest in the matter which might affect his/her best judgment as a fiduciary, and who was in possession of sufficient information to enable a reasonable plan fiduciary to reach an independent judgment as to whether the broker-dealer should effect the transaction. The approving fiduciary, in order to make an independent judgment concerning which broker-dealer should be selected to effect a transaction, would have to possess information as to the size and complexity of the transaction, as well as any other factors which might affect such a selection, including the amount of the brokerage commission to be charged on the transaction and information related to the reasonableness of that commission in relation to the value of the brokerage services and any research services being provided, and in relation to what other brokers would 12 See notice of proposed exemption, 43 FR 19481, note 4. 13 29 CFR 2550.408b-2 and 26 CFR 54.4975-6. be expected to charge for similar services, 14 It should be emphasized that where a broker-dealer acts as an investment adviser in recommending securities transactions and second fiduciary decides whether each such transaction should be entered into, both the broker-dealer and and the approving fiduciary are under an obligation to comply with the general fiduciary responsibility requirements of section. 404 of ERISA regarding the appropriateness of each such transaction.15 General Information The attention of interested persons is directed to the following: (1) The fact that a transaction is the subject of an exemption granted under section 408(a) of ERISA and section 4975 (c) (2) of the Code does not relieve a fiduciary of a plan to which the exemption is applicable from certain other provisions of ERISA, including any prohibited transaction provisions to which the exemption does not apply and the general fiduciary responsibility provisions of section 404 of ERISA which, among other things, require a fiduciary to discharge his duties with respect to the plan solely in the inter 13 The broker-dealer would be a fiduciary, and thus subject to the requirements of section 404, by reason of providing investment advice within the meaning of section 3(21)(A)(ii) of ERISA and section 4975 (E) (3) (B) of the Code. However, since he would not have the power to manage, acquire, or dispose of plan assets without the approval of the second fiduciary, he would not be an investment manager as that term is defined in section 3(38) of ERISA. Therefore, the fact that the brokerdealer was acting as a fiduciary in making his recommendations would not excuse the second fiduciary from also meeting the requirements of section 404 in deciding whether those recommendations should be followed. est of the plan's participants and beneficiaries and in a prudent fashion in accordance with section 404 (a) (1) (B) of ERISA. (2) The exemption set forth herein. is supplemental to, and not in derogation of, any other provisions of ERISA, including statutory 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. (3) The class exemption is applicable to a particular transaction only if the transaction satisfies the conditions specified in the class exemption. (4) In accordance with section 408 (a) of ERISA and section 4975 (c) (2) of the Code, and based upon the entire record, including the written comments submitted in response to the notice of May 5, 1978, and the hearing held on June 12, 1978, the Agencies make the following determinations: (i) The class exemption set forth herein is administratively feasible; (ii) It is in the interests of plans and of their participants and beneficiaries; and (iii) It is protective of the rights of participants and beneficiaries of plans. This document does not meet the criteria for significant regulations set forth in paragraph 8 of the proposed Treasury directive appearing in the Federal Register for Wednesday, May 24, 1978 (43 FR 22319). Exemption Accordingly, the following exemption is hereby granted under authority of section 408(a) of ERISA and section 4975 (c) (2) of the Code and in accordance with the procedures set forth in ERISA Procedure 75-1 (40 FR 18471, April 28, 1975) and Rev. Proc. 75-26, 1975-1 C.B. 722: Effective May 1, 1978, the restrictions of section 406 of the Employee Retirement Income Security Act of 1974 and the taxes imposed by section 4975(a) and (b) of the Internal Revenue Code of 1954 (the Code), by reason of section 4975 (c)(1) of the Code, shall not apply until February 1, 1979, to the effecting of any securities transaction on behalf of an employee benefit plan by a person who is a fiduciary with respect to the plan, acting in such transaction as agent for the plan, and to the performance by such person of clearance, settlement, or custodial functions incidental to effecting such transaction, if such person ordinarily and customarily effected such securities transactions and performed such functions on May 1, 1975. Signed at Washington, D.C. this 19th day of June 1978. Prohibited Transaction DEPARTMENT OF THE TREASURY Pension and Welfare Benefit Programs Exemption from the Prohibitions Respecting a Transaction Involving the Leo F. Quinn, P.A. Profit Sharing Trust AGENCIES: Department of the Treasury/Internal Revenue Service, Department of Labor. ACTION: Grant of individual exemption. SUMMARY: This exemption enables the Leo F. Quinn, P.A. Profit Sharing Trust (the Trust) to sell certain trust assets to Drs. Jacob L. Raney, Charles G. Dalbey and Leo F. Quinn, who are officers, directors, 10 percent or more shareholders and highly compensated employees of Leo F. Quinn, P.A. (the Employer). FOR FURTHER INFORMATION CONTACT: Timothy Smith of the Prohibited Transactions Staff of the Employee Plans Division, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 20224 (Attention: E: EP: PT:1) (202-566-6761). This is not a toll free number. SUPPLEMENTARY On April 25, 1978, notice was published in the Federal Register (43 FR 17561) of the pendency before the Internal Revenue Service and the Department of Labor (the Agencies) of an exemption from the taxes imposed by section 4975(a) and (b) of the Internal Revenue Code of 1954 (the Code) and from the provisions of section 406 (a) (1) (A) and (D), 406(b) (1) and 406(b) (2) of the Employee Retirement Income Security Act of 1974 (the Act) [1974-3 C.B. 1, 48], for a transaction described in an application submitted by the Employer and the trustees of the Trust. The notice set forth a summary of the 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 Agencies in Washington, D.C. The notice also invited interested persons to submit comments on the requested exemption to the Internal Revenue Service (the Service). In addition, the notice. stated that any interested person might submit a written request that a hearing be held relating to this exemption. No public comments and no requests for a hearing were received by the Service. GENERAL INFORMATION The attention of interested persons is directed to the following: (1) The fact that a transaction is the subject of an exemption granted under section 4975 (c) (2) of the Code and section 408 (a) of the Act does not relieve a fiduciary or party in interest or disqualified person with respect to a plan to which the exemption is applicable from certain other provisions of the Code and the Act. These provisions include any prohibited transaction provisions to which the exemption does not apply and the general fiducary 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 interests of the participants and beneficiaries of the plan and in a prudent fashion in accordance with subsection (a)(1)(B) of section 404 of the Act, nor does the fact the transaction is the subject of an exemption affect the requirement of section 401(a) of the Code that a plan must operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries. (2) This exemption does not extend to transactions prohibited under section 4975 (c) (1) (F) of the Code and section 406(b) (3) of the Act. (3) This exemption is supplemental to, and not in derogation of, any other provisions of the Code and the Act, including statutory or administrative exemptions and transitional rules. Furthermore, the fact that a transaction is subject to an administrative or statutory exemption or transitional rule is not dispositive of whether the transaction is in fact a prohibited transaction. (4) This document does not meet the criteria for significant regulations set forth in paragraph 8 of the proposed Treasury directive appearing in the Federal Register for Wednesday, May 24, 1978 (43 FR 22319). EXEMPTION In accordance with section 4975 (c) (2) of the Code and section 408 (a) of the Act and the procedures set forth in Rev. Proc. 75-26, 1975-1 C.B. 722, and ERISA Proc. 75-1 (40 FR 18471, April 28, 1975), and based upon the entire record, the Agencies make the following determinations: (a) The exemption is administratively feasible; (b) It is in the interests of the Plan ficiaries; and and of the participants and bene (c) It is protective of the rights of participants and beneficiaries of the Plan. Accordingly, the following exemption is hereby granted under the authority of section 4975 (c) (2) of the Code and section 408(a) of the Act and in accordance with the procedures set forth in Rev. Proc. 75-26 and ERISA Proc. 75-1. The taxes imposed by section 4975 (a) and (b) of the Code by reason of section 4975 (c) (1) (A), (D) and (E) of the Code and the restrictions of section 406 (a) (1) (A) and (D), 406(b) (1) and 406(b) (2) of the Act shall not apply to a transaction involving the sale of approximately 1.18 acres of land located in Boca Raton, Palm Beach County, Florida by the Trust to Drs. Raney, Dalbey and Quinn for $90,000 cash, provided that this amount is not less than the fair market value of the property. The availability of this exemption is subject to the express conditions that the material facts and representations contained in the application are true and complete and that the application accurately describes all material terms of the transaction consummated pursuant to the exemption. Signed at Washington, D.C. this 24th day of July, 1978. Prohibited Transaction Exemption 78-12 DEPARTMENT OF THE TREASURY Internal Revenue Service DEPARTMENT OF LABOR Pension and Welfare Benefit Programs AMERICAN MEDICAL Exemption from the Prohibitions Respecting a Transaction AGENCIES: Department of the Treasury/Internal Revenue Service, Department of Labor ACTION: Grant of individual exemption SUMMARY: This exemption enables the American Medical Association (A.M.A.) to purchase certain parcels of real property from the American Medical Association Members' Retirement Plan (M.R.P.). FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Prohibited Transactions Staff of the Employee Plans Division, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 20224 (attention: E: EP: PT:2), (202) 566-3045. (This is not a toll free number.) INFORMA SUPPLEMENTARY TION: On June 13, 1978, notice was published in the Federal Register (43 FR 25513) of the pendency before the Internal Revenue Service and the Department of Labor (the Agencies) of an exemption from the taxes imposed by section 4975 (a) and (b) of the Internal Revenue Code of 1954 (the Code) by reason of section 4975 (c) (1) (A), (D), or (E) of the Code, and from provisions of sections 406(a) (1)(A) and (D) and 406(b)(1) and (2) of the Employee Retirement Income Security Act of 1974 (the Act) [Pub. L. 93-406, 1974-3 C.B. 1], for a transaction described in an application submitted by the A.M.A., the M.R.P., and the Harris Trust and Savings Bank (Harris Bank) of Chicago, Illinois. The notice set forth a summary of the 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 Agencies, in Washington, D.C. The notice also invited interested persons to submit comments on the requested exemption to the Internal Revenue Service (the Service). In addition, the notice stated that any interested person might submit a written request that a hearing be held relating to this exemption. By letter dated July 13, 1978, the Agencies were informed that on June 14, 1978, the Board of Trustees of the A.M.A. extended its offer to purchase the M.R.P.'s real estate properties. No other public comments and no requests for a hearing were received by the Service. GENERAL INFORMATION The attention of interested persons is directed to the following: (1) The fact that a transaction is the subject of an exemption granted under section 4975(c) (2) of the Code and section 408(a) of the Act does not relieve a fiduciary or party in interest or disqualified person to a plan to which the exemption is applicable from certain other provisions of the Code and Act. These provisions include 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 interests of the participants and beneficiaries of the plan and in a prudent fashion in accordance with subsection (a) (1) (B) of section 404 of the Act, nor does the fact the transaction is the subject of an exemption affect the requirement of section 401(a) of the Code that a plan must operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries. (2) This exemption does not extend to transactions prohibited under sec tion 4975 (c) (1) (F) of the Code and section 406 (b) (3) of the Act. (3) This exemption is supplemental to, and not in derogation of, any other provision of the Code and the Act, including statutory or administrative exemptions and transitional rules. Furthermore, the fact that a transaction is subject to an administrative or statutory exemption or transitional rule is not dispositive of whether the transaction is in fact a prohibited transaction. (4) This document does not meet the criteria for significant regulations set forth in paragraph 8 of the proposed Treasury directive appearing in the Federal Register for Wednesday, May 24, 1978 (43 FR 22319). EXEMPTION In accordance with section 4975(c) (2) of the Code and section 408(a) of the Act and the procedures set forth in Rev. Proc. 75-26, 1975-1 C.B. 722, and ERISA Proc. 75-1 (40 FR 18471, and ERISA Proc. 75-1 (40 FR 18471, April 28, 1975), and based upon the entire record, the Agencies make the following determinations: (a) the exemption is administratively feasible; (b) it is in the interests of the M.R.P. and of its participants and beneficiaries; and (c) it is protective of the rights of participants and beneficiaries of the M.R.P. Accordingly, the following exemption is hereby granted under the authority of section 4975 (c) (2) of the Code and section 408 (a) of the Act and in accordance with the procedures set forth in Rev. Proc. 75-26 and ERISA Proc. 75-1. The taxes imposed by section 4975 (a) and (b) of the Code by reason of section 4975 (c) (1) (A), (D) and (E) of the Code and the restrictions of sections 406 (a) (1) (A) and (D) and 406(b) (1) and (2) of the Act shall not apply to the purchase by the A.M.A. of any or all of the properties described in the application from the M.R.P. pursuant to the terms of its offer dated September 9, 1976, as ex tended, provided that the following conditions are met: (1) Within 10 days from the publication of this exemption in the Federal Register, the A.M.A. and the Harris Bank publish notice of the A.M.A.'s offer, the proposed sale, and of the administrative exemption granted by the Agencies in at least one newspaper of general circulation in the city of Chicago, Illinois, such notice to be published consecutively for a period of not less than 30 days. This notice must also provide the name and telephone number of an officer of the Harris Bank to whom inquiries may be directed; (2) The Harris Bank does not accept the A.M.A.'s offer for a period of at least 90 days from the date of the publication of the first notice required by the preceding paragraph; and (3) the M.R.P. receives not less than fair market value for each of the properties. The availability of this exemption is subject to the express conditions that the material facts and representations contained in the application are true and complete and that the application accurately describes all material terms of the transaction consummated pursuant to the exemption. Signed at Washington, D.C., this 16th day of August, 1978. Prohibited Transaction Exemption 78-13 DEPARTMENT OF THE TREASURY Internal Revenue Service DEPARTMENT OF LABOR Pension and Welfare Benefit Programs Exemption from the Prohibitions Respecting Transactions Involving the Ragnar Benson Profit Sharing Plan and Trust (Application No. D-175) AGENCIES: Department of Labor, Department of the Treasury/Internal Revenue Service. ACTION: Grant of Individual Exemption. SUMMARY: This exemption enables the Ragnar Benson Profit Sharing Plan and Trust (the Trust) to acquire, from a group of independent banks, a one million dollar participation interest in a long-term mortgage loan to Woodlane Corporation (Woodlane), a company 50 percent of whose stock is owned by Ragnar Benson, Inc. (Ragnar Benson), the employer of employees covered by the Trust. Certain related transactions are also exempted by this action. FOR FURTHER INFORMATION CONTACT: Frederic G. Burke, Office of Regulatory Standards and Exceptions, Pension and Welfare Benefit Programs, Room C-4526, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20216, (202) 523-8195. (This is not a toll-free number.) SUPPLEMENTARY On January 4, 1977, notice was published in the Federal Register (42 FR 956) of the pendency before the Department of Labor (the Department) and the Internal Revenue Service (the Service) (collectively referred to as "the Agencies"), of an exemption from the restrictions of section 406 of the Employee Retirement Income Security Act of 1974 (the Act) [1974-3 C.B. 1, 48] and from the taxes imposed by section 4975 (a) and (b) of the Internal Revenue Code of 1954 (the Code) by reason of section 4975 (c) (1) of the Code, for transactions described in an application submitted by Ragnar Benson and the Trustee and Plan Committee under the Trust (collectively referred to as "Applicants"). The notice, which was supplemented by a correction published in the Federal Register on January 11, 1977 (42 FR 2389), set forth a sum mary of the 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 applications and all documents and letters containing facts, representations and comments that were submitted to the Agencies after the publication of the notice, as well as the record of the public hearing referred to below, have been available for public inspection at the Agencies in Washington, D.C. The exemption was proposed in accordance with the procedures set forth in Rev. Proc. 75-26, 1975-1 C.B. 722, and ERISA Procedure 75-1 (40 FR 18471, April 28, 1975). All interested persons were invited by the notice to submit written comments on the proposed exemption and to submit a written request that a hearing be held relating to the exemption. Following the receipt of requests for a hearing from a majority of participants in the Trust, and pursuant to a notice published in the Federal Register on May 6, 1977 (42 FR 23220), a public hearing was held on May 27, 1977, at which interested persons were afforded the opportunity to present their views on the proposed exemption. COMMENTS RECEIVED None of the comments raised objections to the grant of an exemption jections to the grant of an exemption with respect to the Trust's proposed investment in a long-term mortgage loan to Woodlane for the financing of the third addition to the Bell System Center for Technical Education (the third addition). Nor were any objections raised regarding the other related transactions covered by the proposed exemption. Rather, the comments urged the Agencies to expand the proposed exemption so as to permit the Trust to invest 4 million dollars of its assets in the mortgage loanwhich assets are currently held in cash and short-term certificates of deposit instead of the sum of one million dol lars which was proposed in the notice of pendency. A loan participation of one million dollars, together with the $450,000 which remains outstanding on a previous loan by the Trust to Woodlane, would represent approximately 25 percent of Trust assets. A loan participation of $4 million, in addition to the $450,000 outstanding loan, would represent approximately 65 percent of Trust assets. In testimony at the public hearing, and by written submissions to the Agencies subsequent to the hearing, the Applicants, including members of the Plan Committee, officers of Ragnar Benson, Inc., and Raymond Benson, the Trustee under the Trust and principal officer of Ragnar Benson, Inc. as well as an officer of Woodlane, offered evidence and argument designed to demonstrate that adequate safeguards would be present to protect plan participants despite an investment of substantially more than half of the Trust's assets in the single employer-related real estate venture in question. The following summary of the facts and representations submitted to the Agencies by written comments and testimony at the public hearing amend or supplement those facts and representations which were summarized in the notice of pendency. (a) The financing of the third addition to the Bell Training Center was completed by September 1976. The National Security Bank of Chicago (National Security Bank), as mortgagee and noteholder under a March 26, 1976 mortgage indenture with Woodlane, together with 13 banks in the Chicago area who signed an agreement with National Security Bank to participate in the financing, provided $6,375,000 in a combined construction and 15 year permanent mortgage loan to Woodlane. (b) On October 1, 1976, Western Electric occupied the third addition and began paying rent in accordance with the terms of the 15 year lease with Woodlane. |