Grant of Individual Exemptions; General Electric Pension Trust (the Trust)

AGENCY:

Pension and Welfare Benefits Administration, Labor.

ACTION:

Grant of individual exemptions.

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 (the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency before the Department of proposals to grant such exemptions. The notices set forth a summary of facts and representations contained in each application for exemption and referred interested persons to the respective 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 public comments and no requests for a hearing, unless otherwise stated, were received by the Department.

The notices of proposed exemption 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 (55 FR 32836, 32847, August 10, 1990) and based upon the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their participants and beneficiaries; and

(c) They are protective of the rights of the participants and beneficiaries of the plans.

General Electric Pension Trust (the Trust), Located in Fairfield, Connecticut

Exemption

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, as of October 1, 1998, to the lease (the Lease) by the Trust of office space in a certain commercial office building (the Property) to Transport International Pool, Inc. (TIP), a party in interest with respect to employee benefit plans of General Electric Company (GE) and/or an affiliate whose assets are held in the Trust, provided that the following conditions are satisfied:

(1) The Trust was and is represented for all purposes under the Lease by a qualified, independent fiduciary;

(2) The terms and conditions of the Lease are at least as favorable to the Trust as those the Trust could have obtained in a comparable arm's length transaction with an unrelated party;

(3) The rent paid to the Trust under the Lease is no less than the fair market rental value of the office space occupied by TIP, as established by a qualified, independent appraiser;

(4) The independent fiduciary for the Trust reviewed the terms and conditions of the Lease on behalf of the Trust and determined that the Lease was in the best interests of the Trust;

(5) The independent fiduciary monitors and enforces compliance with all of the terms and conditions of the Lease, and of the exemption, throughout the duration of the Lease; and

(6) The independent fiduciary expressly approves any renewal of the Lease, and the rental rate under such renewal is based upon an updated independent appraisal of the office space being leased to TIP (but in no event shall the rental rate be less than that for the preceding period).

EFFECTIVE DATE:

The exemption is effective as of October 1, 1998.

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 published on August 26, 1999 at 64 FR 46728.

Written Comments

The Department received two written comments with respect to the notice of proposed exemption.

1. The first comment was submitted by a participant in the GE Pension Plan. This commenter expressed opposition to the proposed exemption on the basis of its retroactive effective date. He stated that the trustees of the Trust had a fiduciary responsibility to obtain an exemption prior to the execution of the Lease, given the conflicts of interest involved.

The applicant responded that the Department has a long-standing policy of granting retroactive exemptions “if the safeguards necessary for the grant of a prospective exemption were in place at the time of the consummated transaction.” (See ERISA Technical Release 85-1.) The applicant also responded that the trustees were mindful of their fiduciary responsibility with respect to the Lease. The trustees identified the potential prohibited transaction and appropriately sought legal counsel prior to the execution of the Lease. They were advised to file an exemption application with the Department and to structure the Lease in a manner such that all the necessary safeguards for the grant of an exemption would be in place, including review and approval of the Lease by a qualified, independent fiduciary. Thus, the applicant asserts that all potential conflicts of interest were adequately addressed.

2. The second comment was submitted by the applicant. The applicant wishes to correct certain representations made in the Summary of Facts and Representations (the Summary).

a. First, the applicant notes that, as of the effective date of the exemption, the assets of the Knolls Atomic Laboratories Pension Plan were no longer held in the Trust. (See the first paragraph in Item 1 of the Summary at 64 FR 46728).

b. Second, the applicant notes that the agreed upon tenant improvements in the Lease were substantially completed in November, 1998—not October, 1998, as stated in the first paragraph in Item 6 of the Summary (64 FR 46729). In addition, the third sentence in the third paragraph of Item 6 of the Summary (64 FR 46729) should be revised to read as follows (change in bold): “In addition, TIP is responsible for any additional taxes levied or assessed that are attributable to TIP's improvements to or personal property within the leased space, its activities within the leased space, or any transactions involving the leased space.”

The Department concurs with the applicant's assertion that the standards for a retroactive exemption have been satisfied. The Department also acknowledges the applicant's corrections to the Summary. Thus, after a careful consideration of the entire record, the Department has determined to grant the exemption as proposed.

FOR FURTHER INFORMATION CONTACT:

Ms. Karin Weng of the Department, telephone (202) 219-8881. (This is not a toll-free number.)

Cullen Incorporated Profit Sharing Plan and Trust (the Profit Sharing Plan), Cullen Incorporated Employees Defined Contribution Pension Plan and Trust (the Money Purchase Plan) (Collectively the Plans), Located in Fredericksburg, Virginia

Exemption

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(a) and (b) of the Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall not apply to the past sale (the Sale) by the Plan of property located in Fredericksburg, Virginia (the Property) to Robert C. O'Neill (Mr. O'Neill), the trustee of the Plans, President and sole shareholder of the Plan Sponsor, and a party in interest with respect to the Plans, provided that the following conditions are satisfied:

(a) The Sale was a one time transaction for a lump sum cash payment;

(b) The purchase price was the fair market value of the Property as of the date of the Sale;

(c) The Property has been appraised by a qualified, independent real estate appraiser; and

(d) The Plans paid no commissions or other expenses relating to the Sale.

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 published on February 1, 2000 at 65 FR 4851.

EFFECTIVE DATE OF EXEMPTION:

The effective date of this exemption is November 6, 1998.

FOR FURTHER INFORMATION CONTACT:

J. Martin Jara of the Department, telephone (202) 219-8881. (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 exemptions 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) These exemptions are 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 these exemptions is subject to the express condition that the material facts and representations contained in each application accurately describes all material terms of the transaction which is the subject of the exemption.