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PTE Amendment


Amendment to Prohibited Transaction Exemption 96-62


[Federal Register: July 3, 2002 (Volume 67, Number 128)]
[Notices]
[Page 44622-44625]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jy02-64]

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

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No: D-10936]

Adoption of Amendment to Prohibited Transaction Exemption 96-62
(PTE 96-62) To Permit Certain Authorized Transactions Between Plans and
Parties in Interest

AGENCY: Pension and Welfare Benefits Administration, Department of
Labor.

ACTION: Adoption of amendment to PTE 96-62.

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

SUMMARY: This document amends PTE 96-62 (61 FR 39988, July 31, 1996).
PTE 96-62 permits certain prospective transactions between employee
benefit plans and parties in interest where such transactions are
specifically authorized by the Department and are subject to terms,
conditions and representations which are substantially similar to two
individual exemptions granted by the Department within the 60 month
period ending on the date of filing of a written submission seeking
authorization for the transaction. The amendment affects plans,
participants and beneficiaries of such plans and certain persons
engaging in such transactions.

EFFECTIVE DATE: This amendment is effective July 3, 2002.

FOR FURTHER INFORMATION CONTACT: Allison Padams Lavigne, Office of
Exemption Determinations, Pension and Welfare Benefits Administration
at (202) 693-8540 (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On March 20, 2002, notice was published in
the Federal Register (67 FR 13019) of the pendency before the
Department of a proposed amendment to PTE 96-62. PTE 96-62 provides
relief from a restriction described in sections 406(a) and 406(b) of
the Employee Retirement Income Security Act (ERISA or the Act) or a
parallel restriction described in section 8477(c)(2) of the Federal
Employees' Retirement Systems Act (FERSA), and from the taxes imposed
by section 4975(a) and (b) of the Internal Revenue Code of 1986 (the
Code), by reason of a parallel provision described in section
4975(c)(1)(A) through (F) of the Code. The amendment adopted by this
notice was proposed by the Department on its own motion pursuant to
section 408(a) of ERISA 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).\1\
---------------------------------------------------------------------------

    \1\ Section 102 of Reorganization Plan No. 4 of 1978 (5 U.S.C.
App. 1 (1996)) generally transferred the authority of the Secretary
of the Treasury to issue administrative exemptions under section
4975(c)(2) of the Code to the Secretary of Labor.
---------------------------------------------------------------------------

    The notice gave interested persons an opportunity to comment or to
request a hearing on the proposed amendment. No public comments or
requests for a hearing were received.
    For the sake of convenience, the entire text of PTE 96-62, as
amended, has been reprinted with this notice.

Description of the Exemption

    Section I of PTE 96-62 provides relief from certain of the
restrictions described in section 406(a) of ERISA and from the taxes
imposed by section 4975(a) and (b) of the Code, by reason of a parallel
provision described in section 4975(c)(1)(A) through (D) of the Code,
for a transaction between a plan and a party in interest with respect
to such plan, provided the conditions of the exemption are met. Under
section II, additional relief is provided from certain of the
restrictions described in section 406(b) of ERISA and the parallel
restrictions described in section 8477(c)(2) of FERSA, as well as from
the taxes imposed by section 4975(a) and (b) of the Code, by reason of
a parallel provision described in section 4975(c)(1)(E) and (F).
Sections I(a) and II(a) require that the transaction be substantially
similar (as defined in section IV(a) of PTE 96-62) to transactions
described in at least two individual exemptions that were granted by
the Department, and which provided relief from the same restrictions as
requested by the party, within the 60-month period ending on the date
of filing of the written submission.\2\
---------------------------------------------------------------------------

    \2\ Section IV(a) defines the term ``substantially similar'' to
mean alike in all respects as determined by the Department, in its
sole discretion.
---------------------------------------------------------------------------

    The amendment granted by this notice expands sections I(a) and
II(a) to permit parties to either base their submission on
substantially similar transactions described in two individual
exemptions granted within the past 60 months; or on one individual
exemption granted within the past 120 months and one transaction which
received final authorization by the Department under PTE 96-62 within
the past 60 months (the Authorized Transaction). The Department
believes that the alternate method for satisfying the requirements of
sections I(a) and II(a) will continue to ensure that the transactions
that the party compares to its proposed transaction reflect the current
policies of the Department.\3\ The amendment also adds a definition for
the term ``Authorized Transaction'' in section IV(g).
---------------------------------------------------------------------------

    \3\ The Department maintains, on its website (www.dol.gov/pwba)
a list of Authorized Transactions. This list includes the following
information: The final authorization numbers, the name of the
applicants, a description of the transactions, and the grant numbers
and Federal Register citations of the exemptions on which the
submissions were based. Parties wishing to base their submissions on
an Authorized Transaction will be able to refer to the submissions
previously filed by parties under PTE 96-62 and to the two granted
individual exemptions identified as substantially similar for
additional information regarding the subject transactions.
---------------------------------------------------------------------------

    The Department notes that all other conditions contained in PTE 96-
62 must continue to be satisfied with respect to those parties seeking
to base their submissions on an Authorized Transaction rather than on
two substantially similar individual exemptions. Accordingly, these
parties should submit, among other things, a comparison of the proposed
transaction with the Authorized Transaction and the transaction which
was the subject of the individual exemption, including an explanation
as to why any differences should not be considered material.

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 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 ERISA and the Code to which the
exemption does not expressly apply and the general fiduciary provisions
of section 404 of ERISA. Section 404 requires, in part, that a
fiduciary discharge his or her duties respecting the plan solely in the
interest of participants and beneficiaries of the plan and in a prudent
fashion in

[[Page 44623]]

accordance with section 404(a)(1)(B) of ERISA. This exemption, if
granted, does not 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) The Department finds that the exemption is administratively
feasible, in the interests of the plan(s) and of participants and
beneficiaries, and protective of the rights of the participants and
beneficiaries of the plan(s);
    (3) This amendment is supplemental to and not in derogation of any
other provisions of ERISA 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 amendment is applicable to a transaction only if the
transaction satisfies the conditions specified in the class exemption.

Exemption

    Accordingly, PTE 96-62 is amended under the authority of section
408(a) of ERISA, section 4975(c)(2) of the Code and section 8477(c)(3)
of FERSA, and in accordance with the procedures set forth in 29 CFR
2570, subpart B (55 FR 32836, August 10, 1990).
    Section I--General Exemption. Effective July 31, 1996, a
restriction described in section 406(a) of ERISA, and the taxes imposed
by section 4975(a) and (b) of the Code, by reason of a parallel
provision described in section 4975(c)(1)(A) through (D) of the Code,
shall not apply to a transaction between a plan and a party in interest
with respect to such plan, provided the following conditions are met:
    (a) The transaction is substantially similar (as defined in section
IV(a)) to transactions described in: (a) At least two individual
exemptions that were granted by the Department, and provided relief
from the same restriction, within the 60-month period ending on the
date of filing of the written submission referred to in section III(a);
or (b) effective July 3, 2002, one individual exemption that was
granted by the Department, and provided relief from the same
restriction, within the 120-month period ending on the date of filing
of the written submission referred to in section III(a), and at least
one Authorized Transaction (as defined in section IV(g));
    (b) There is little, if any, risk of abuse or loss to the plan
participants and beneficiaries as a result of the transaction; and
    (c) Prior to its execution, the transaction has met the
requirements described in section III.
    Section II--Specific Exemption. Effective July 31, 1996, a
restriction described in section 406(b) of ERISA, or a parallel
restriction described in section 8477(c)(2) of FERSA, and the taxes
imposed by sections 4975(a) and (b) of the Code, by reason of a
parallel provision described in section 4975(c)(1)(E) and (F) of the
Code, shall not apply to a transaction between a plan and a party in
interest with respect to such plan, provided the following conditions
are met:
    (a) The transaction is substantially similar (as defined in section
IV(a)) to transactions described in: (a) At least two individual
exemptions that were granted by the Department, and provided relief
from the same restriction, or if FERSA relief is requested, the ERISA
relief provided parallels the restrictions of section 8477(c)(1) of
FERSA, within the 60-month period ending on the date of filing of the
written submission referred to in section III(a); or (b) effective July
3, 2002, one individual exemption that was granted by the Department,
and provided relief from the same restriction, within the 120-month
period ending on the date of filing of the written submission referred
to in section III(a), and at least one Authorized Transaction (as
defined in section IV(g));
    (b) There is little, if any, risk of abuse or loss to the plan
participants and beneficiaries as a result of the transaction;
    (c) Prior to its execution, the transaction has met the
requirements described in section III;
    (d) Where either of the previously granted exemptions identified in
the written submission described in section III, required the
involvement of an independent fiduciary, an independent fiduciary has
reviewed the proposed transaction and determined that the transaction
would be in the interests and protective of the plan and its
participants and beneficiaries;
    (e) The independent fiduciary described in section II(d) represents
the interests of the plan in the execution of the transaction; and
    (f) If the transaction is continuing in nature, the independent
fiduciary described in section II(d)--
    (1) Represents the interests of the plan for the duration of the
transaction and monitors the transaction on behalf of the plan;
    (2) Enforces compliance with all conditions and obligations imposed
on any party dealing with the plan with respect to the transaction; and
    (3) Ensures that the transaction remains in the interests of the
plan.
    Section III--Authorization Requirements. The requirements for this
section are met if:
    (a) A written submission is filed with the Department with respect
to the transaction which contains the following information:
    (1) A separate written declaration by the party who is to engage in
the transaction that the written submission is made with the intention
of demonstrating compliance with the conditions of this class
exemption,
    (2) All information required to be submitted with an individual
exemption application in accordance with the procedures set forth in 29
CFR 2570 subpart B,
    (3) A specific statement demonstrating that the proposed
transaction poses little, if any, risk of abuse or loss to the plan
participants and beneficiaries,
    (4) A comparison of the proposed transaction to at least two
substantially similar transactions which were the subject of individual
exemptions granted by the Department, or the subject of an individual
exemption granted by the Department within the 120-month period and an
Authorized Transaction, and an explanation as to why any differences
should not be considered material for purposes of this exemption, and
    (5) A complete and accurate draft of the notice (as defined in
section IV(b)) prepared for distribution to interested persons and a
description of the proposed method of distribution for such notice.
    (b) With respect to a transaction described in section II of this
exemption, the written submission referred to in section (a) above
contains the following additional information:
    (1) The identity of the independent fiduciary,
    (2) A description of such fiduciary's independence from the parties
in interest involved in the subject transaction,
    (3) A statement by the independent fiduciary containing an
explanation as to why the subject transaction is in the interest and
protective of the participants and beneficiaries of the plan(s)
involved,
    (4) An agreement by the independent fiduciary to represent the
interests of the plan(s) involved in the transaction, and
    (5) A description of the procedures for replacement of the
independent fiduciary, if necessary, during the term of the
transaction.

[[Page 44624]]

    (c) The transaction meets the requirements for tentative
authorization (as defined in section IV(c)) from the Department.
    (d) Following tentative authorization, the party who is to engage
in the transaction provides written notice (as defined in section
IV(b)) to interested persons in a manner that is reasonably calculated
to result in the receipt of such notice by interested persons, informs
interested persons of the date of the expiration of the comment period,
and resolves all substantive adverse comments (as defined in section
IV(f)) to the satisfaction of the Department.
    (e) The transaction meets the requirements for final authorization
(as defined in section IV(d)).
    Section IV--Definitions. (a) The term ``substantially similar''
means alike in all material respects as determined by the Department,
in its sole discretion.
    (b) The term ``notice'' means written notification to interested
persons which includes--
    (1) An objective description of the transaction, including all
material terms and conditions,
    (2) The approximate date on which the transaction will occur,
    (3) A statement that the proposed transaction has met the
requirements for tentative authorization under this exemption,
    (4) A statement apprising interested persons of their right to
comment to the Department on the proposed transaction at the following
address: Office of Exemption Determinations, U.S. Department of Labor,
200 Constitution Ave, NW, Room N-5649, Washington, DC 20210,
    (5) The expiration date of the comment period, and
    (6) The Federal Register citations for the prior exemption(s) and/
or the final authorization number of the Authorized Transaction
(including the related Federal Register citations for the prior
exemptions cited therein) identified by the party as substantially
similar to the contemplated transaction.
    (c) For purposes of this exemption, ``tentative authorization''
occurs upon the earlier of:
    (1) The expiration of the 45-day period following an acknowledgment
by the Department of receipt of the written submission with respect to
the transaction under this exemption unless the Department has notified
the party who is to engage in the transaction during that period that
the transaction is not eligible for authorization under the terms of
this exemption, or
    (2) The issuance of a written determination by the Department
during the 45-day period that the proposed transaction meets the
requirements for tentative authorization.
    (d) For purposes of this exemption, ``final authorization'' occurs
upon the expiration of:
    (1) The five (5) day period immediately following the comment
period (as defined in section IV(e)), unless the Department notifies
the party that the transaction is not eligible for authorization under
the terms of this exemption, and
    (2) If necessary in order to resolve any substantive adverse
comments received by the Department from interested persons within the
comment period, a period of time extending beyond the five-day period
immediately following the comment period as mutually agreed between the
Department and the party.
    (e) The term ``comment period'' means the 25-day period following
the completion of distribution of the notice to interested persons by
the party who is to engage in the transaction. For this purpose,
distribution of notice by first class mail will be deemed complete
three business days following the date of mailing to interested
persons.
    (f) The term ``substantive adverse comments'' means those comments
submitted by interested persons to the Department within the prescribed
comment period which raise significant factual, legal or policy issues
regarding the transaction as determined by the Department.
    (g) The term ``Authorized Transaction'' means a transaction that
has received final authorization pursuant to PTE 96-62 within a 60-
month period ending on the date of the filing of the written submission
referred to in section III(a).
    Section V--Optional Checklist. Completion and submission of the
following optional checklist to accompany the written submission
described in section III(a) will assist the Department in the
consideration of the transaction under the class exemption.
    The written submission filed with the Department contains the
following information:
    [  ] A separate written declaration of the intent to comply with
the conditions of the class exemption.
    [  ] All information required to be submitted with an individual
exemption application under 29 CFR 2570 subpart B.
    [  ] A statement demonstrating that the transaction poses little,
if any, risk of abuse or loss to the plan participants and
beneficiaries.
    [  ] A comparison of the proposed transaction to at least two
substantially similar transactions which were the subject of individual
exemptions granted within the 60-month period ending on the date of the
filing, or the subject of one individual exemption that was granted by
the Department within the 120-month period ending on the date of
filing, and at least one Authorized Transaction and an explanation why
any differences should not be considered material.
    [  ] A complete and accurate draft of the notice to interested
persons (as described in section IV(b)).
    [  ] A description of the proposed method of distribution for such
notice.
    If either of the previously granted exemptions or the Authorized
Transactions identified in the written submission required the
involvement of an independent fiduciary, the written submission must
contain the following additional information:
    [  ] The identity of the independent fiduciary responsible for
reviewing the proposed transaction, and representing the interests of
the plan in the execution of the transaction. (If the transaction is
continuing in nature, the independent fiduciary represents the
interests of the plans for the duration of the transaction and takes
all necessary action on behalf of the plan.)
    [  ] A description of such fiduciary's independence from the
parties involved in the transaction.
    [  ] A statement from the independent fiduciary explaining why the
transaction is in the interests and protective of the plan participants
and beneficiaries.
    [  ] An agreement by the independent fiduciary to represent the
interests of the plan.
    [  ] A description of the procedures for the replacement of the
independent fiduciary, if necessary, during the term of the
transaction.
    The notice to interested persons filed with the Department includes
the following information:
    [  ] An objective description of the transaction, including all
material terms and conditions.
    [  ] The approximate date on which the transaction will occur.
    [  ] A statement that the transaction has met the requirements for
tentative authorization under the exemption.
    [  ] A statement apprising interested persons of their right to
comment on the proposed transaction at the address contained in the
exemption.
    [  ] The expiration date of the comment period.
    [  ] The Federal Register citations for the prior exemption(s) and/
or the final authorization number of the Authorized Transaction
(including the related Federal Register citations for the prior
exemptions cited therein) identified by

[[Page 44625]]

the party as substantially similar to the contemplated transaction.

Signed at Washington, DC this 28th day of June, 2002.
Ivan L. Strasfeld,
Director, Office of Exemption Determinations, Pension and Welfare
Benefits Administration, Department of Labor.
[FR Doc. 02-16737 Filed 7-2-02; 8:45 am]
BILLING CODE 4510-29-P

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