Grant of Individual Exemptions and Prohibited Transaction Exemptions Involving: PNC Financial Services Group, Inc. (PNC Financial), PTE 2009-22; Verizon Investment Management Corporation, PTE 2009-23; United States Steel and Carnegie Pension Fund (the Applicant), PTE 2009-24; and Barclays Global Investors, N.A. and Its Affiliates and Successors (BGI) and Barclays Capital Inc. and Its Affiliates and Successors (BarCap) (Collectively the Applicants), PTE 2009-25, 45284-45304 [E9-20724]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 74, Number 168 (Tuesday, September 1, 2009)]
[Notices]
[Pages 45284-45304]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-20724]



[[Page 45283]]

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Part II





Department of Labor





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Employee Benefits Security Administration



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Grant of Individual Exemptions and Prohibited Transaction Exemptions 
Involving: PNC Financial Services Group, Inc. (PNC Financial), PTE 
2009-22; Verizon Investment Management Corporation, PTE 2009-23; United 
States Steel and Carnegie Pension Fund (the Applicant), PTE 2009-24; 
and Barclays Global Investors, N.A. and Its Affiliates and Successors 
(BGI) and Barclays Capital Inc. and Its Affiliates and Successors 
(BarCap) (Collectively the Applicants), PTE 2009-25; Notice

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / 
Notices

[[Page 45284]]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Grant of Individual Exemptions and Prohibited Transaction 
Exemptions Involving: PNC Financial Services Group, Inc. (PNC 
Financial), PTE 2009-22; Verizon Investment Management Corporation, PTE 
2009-23; United States Steel and Carnegie Pension Fund (the Applicant), 
PTE 2009-24; and Barclays Global Investors, N.A. and Its Affiliates and 
Successors (BGI) and Barclays Capital Inc. and Its Affiliates and 
Successors (BarCap) (Collectively the Applicants), PTE 2009-25

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.

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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 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
    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 (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (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.

PNC Financial Services Group, Inc. (PNC Financial), Located in 
Pittsburgh, Pennsylvania.

[Prohibited Transaction Exemption 2009-22 Application No. D-11397.]

Exemption

Section I--Exemption for Receipt of Fees

    In connection with the investment in an open-end investment company 
(a Fund or Funds), as defined, below, in Section IV(e), by certain 
employee benefit plans (Client Plan or Client Plans) for which PNC, as 
defined, below, in Section IV(a), serves as a fiduciary and is a party 
in interest with respect to such Client Plan(s), the restrictions of 
sections 406(a) and 406(b) of the Act and the sanctions resulting from 
the application of section 4975 of the Code, by reason of sections 
4975(c)(1)(A) through (F) \1\ of the Code, shall not apply, effective 
September 29, 2006, to:
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    \1\ For purposes of this exemption references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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    (a) The receipt of fees by PNC from a Fund where BlackRock, as 
defined, below, in Section IV(b), acts as the investment adviser for 
such Fund, and the receipt of fees by BlackRock for the provision of 
investment advisory services, or similar services, to such Fund;
    (b) The receipt of fees by PNC from a Fund for providing certain 
service(s) (Secondary Service(s)), as defined, below, in Section IV(i), 
to such Fund; and
    (c) The receipt of fees by PNC from BlackRock in connection with 
administrative service(s) (Mutual Fund Administration Service(s)), as 
defined, below, in Section IV(l), provided to a Fund in which a Client 
Plan invests; provided that the conditions, as set forth in Section II 
and Section III, below, were satisfied, as of the effective date of 
this exemption and thereafter.

Section II--Specific Conditions

    (a) PNC, serving as a fiduciary for a Client Plan, satisfies any 
one (but not all) of the following:
    (1) A Client Plan invested in a Fund does not pay any plan-level 
investment management fee, investment advisory fee, or similar fee 
(Plan-Level Fee(s)) to PNC with respect to any of the assets of such 
Client Plan which are invested in shares of such Fund for the entire 
period of such investment (the Offset Fee Method). This condition does 
not preclude the payment of investment advisory fees or similar fees 
(Fund-Level Fee(s)) by a Fund to BlackRock under the terms of an 
investment advisory agreement adopted in accordance with section 15 of 
the Investment Company Act of 1940 (the Investment Company Act);
    (2) A Client Plan invested in a Fund pays an investment management 
fee or similar fee based on total assets of such Client Plan from which 
a credit has been subtracted representing such Client Plan's pro rata 
share of investment advisory fees or similar fees paid by such Fund to 
BlackRock (the Subtraction Fee Method). If, during any fee period for 
which a Client Plan has prepaid its investment management or similar 
fee, such Client Plan purchases shares of such Fund, the requirement of 
this Section II(a)(2) shall be deemed met with respect to such prepaid 
fee if, by a method reasonably designed to accomplish the same, the 
amount of the prepaid fee that constitutes the fee with respect to the 
assets of such Client Plan invested in shares of such Fund: (i) Is 
anticipated and subtracted from the prepaid fee at the time of payment 
of such fee, (ii) is returned to such Client Plan no later than during 
the immediately following fee period, or (iii) is offset against the 
prepaid fee for the immediately following fee period or for the fee 
period immediately following thereafter. For purposes of this Section 
II(a)(2), a fee shall be deemed to be prepaid for any fee period, if 
the amount of such fee is calculated as of a date not later than the 
first day of such period; or
    (3) A Client Plan invested in a Fund receives a ``a credit'' \2\ 
(the Credit Fee Method) of such Client Plan's proportionate share of 
all fees charged to such Fund by BlackRock for

[[Page 45285]]

investment advisory services or similar services for a particular 
month: (1) Effective for the period, September 29, 2006, through 
December 31, 2008, on the earlier of either: (a) The same day as PNC 
receives a fee from BlackRock for Mutual Fund Administration Services 
provided for that month to such Fund by PNC, or (b) the fifth business 
day before the end of the month following the month in which fees for 
investment advisory services, or similar services, accrued, or (2) 
effective for the period beginning, January 1, 2009, and continuing 
thereafter, on a date which is no later than one business day after 
BlackRock receives fees from the Fund for investment advisory services, 
or similar services, provided for that month to such Fund by BlackRock. 
The crediting of all such fees to such Client Plan by PNC is audited by 
an independent accounting firm (the Auditor) on at least an annual 
basis to verify the proper crediting of such fees to such Client Plan.
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    \2\ PNC Financial represents that it would be accurate to 
describe ``the credit'' as a ``credited dollar amount'' to cover 
situations in which the credited amount is used to acquire 
additional shares of a Fund, rather than being held by a Client Plan 
in the form of cash. It is represented that the standard practice is 
to reinvest the ``credited dollar amount'' in additional shares of 
the same Fund with respect to which the fees were credited.
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    (b) The price paid or received by a Client Plan for shares in a 
Fund is the net asset value per share, as defined, below, in Section 
IV(f), at the time of the transaction, and is the same price which 
would have been paid or received for such shares by any other investor 
in such Fund at that time;
    (c) PNC, including any officer or director of PNC, does not 
purchase shares of a Fund from any Client Plan or sell shares of a Fund 
to any Client Plan;
    (d) A Client Plan does not pay sales commissions in connection with 
any purchase or sale of shares of a Fund, and a Client Plan does not 
pay redemption fees in connection with any sale of shares to a Fund, 
unless
    (1) Such redemption fee is paid only to a Fund, and
    (2) The existence of such redemption fee is disclosed in the 
prospectus for such Fund in effect both at the time of any purchase of 
such shares and at the time of such sale;
    (e) The combined total of all fees received by PNC for services 
provided by PNC:
    (1) To Client Plans, and
    (2) To Funds in which Client Plans invest is not in excess of 
reasonable compensation within the meaning of section 408(b)(2) of the 
Act;
    (f) PNC does not receive any fees payable pursuant to Rule 12b-1 
under the Investment Company Act in connection with the subject 
transactions;
    (g) A Client Plan is not an employee benefit plan sponsored or 
maintained by PNC;
    (h) A second fiduciary (Second Fiduciary), as defined, below, in 
Section IV(h), who is acting on behalf of a Client Plan receives, in 
advance of any initial investment by a Client Plan in a Fund, full and 
detailed written disclosure of information concerning such Fund, 
including but not limited to:
    (1) A current prospectus for each Fund in which such Client Plan is 
considering investing;
    (2) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for:
    (i) Any investment advisory or similar services to be paid by such 
Fund to BlackRock,
    (ii) Any Secondary Services to be paid by such Fund to PNC,
    (iii) Any Mutual Fund Administration Services to be paid by 
BlackRock to PNC, and
    (iv) All other fees to be charged to or paid by a Client Plan and 
by such Fund;
    (3) The reasons why PNC, acting as fiduciary for such Client Plan, 
may consider investment in such Fund to be appropriate for such Client 
Plan;
    (4) A statement describing whether there are any limitations 
applicable to PNC with respect to which assets of a Client Plan that 
may be invested in such Fund, and if so, the nature of such 
limitations; and
    (5) Upon the request of the Second Fiduciary, acting on behalf of a 
Client Plan, a copy of the proposed exemption and a copy of the final 
exemption, once such documents are published in the Federal Register.
    (i) On the basis of the information described, above, in Section 
II(h), a Second Fiduciary, acting on behalf of a Client Plan, 
authorizes in writing: (1) The investment of the assets of such Client 
Plan in shares of each particular Fund; and (2) the fees received by 
PNC and by BlackRock in connection with services provided by PNC and by 
BlackRock to such Fund. Such authorization by a Second Fiduciary must 
be consistent with the responsibilities, obligations, and duties 
imposed on fiduciaries by Part 4 of Title I of the Act.
    (j)(1) All authorizations, described, above, in Section II(i), made 
by a Second Fiduciary, regarding: (i) Investments by a Client Plan in a 
Fund, (ii) fees paid for investment advisory services or similar 
services provided by BlackRock to such Fund, (iii) fees paid for 
Secondary Services provided by PNC to such Fund, and (iv) fees paid by 
BlackRock to PNC for Mutual Fund Administration Services provided by 
PNC to such Fund, shall be terminable at will by the Second Fiduciary, 
acting on behalf of such Client Plan, without penalty to such Client 
Plan, upon receipt by PNC of a written notice of termination. A form 
(the Termination Form), as defined, below, in Section IV(j), expressly 
providing an election to terminate the authorizations, described, 
above, in Section II(i), with instructions on the use of such 
Termination Form must be provided to such Second Fiduciary at least 
annually. However, if a Termination Form has been provided to such 
Second Fiduciary, pursuant to Section II(k) and (l), below, then a 
Termination Form need not be provided again, pursuant to this Section 
II(j), unless at least six (6) months but no more than twelve (12) 
months have elapsed, since a Termination Form was provided, pursuant to 
Section II(k) and (l), below.
    (2) The instructions for the Termination Form must include the 
following statements:
    (i) The authorization, described, above, in Section II(i), is 
terminable at will by the Second Fiduciary, acting on behalf of a 
Client Plan, without penalty to such Client Plan, upon receipt by PNC 
of written notice from such Second Fiduciary.
    (ii) Failure by such Second Fiduciary to return the Termination 
Form on behalf of such Client Plan will be deemed to be an approval by 
the Second Fiduciary and will result in the continuation of the 
authorization, as described, above, in Section II(i), of PNC to engage 
in the transactions which are the subject of this exemption.
    (k) For a Client Plan invested in a Fund which uses one of the fee 
methods described, above, in Section II(a)(1), (a)(2), or (a)(3), in 
the event of a proposed change from one of the fee methods to another 
or in the event of a proposed increase in the rate of any fee paid by a 
Fund to BlackRock for any investment advisory service, or similar 
service that BlackRock provides to such Fund over an existing rate for 
such services or method of determining the fee for such services, which 
had been authorized, in accordance with Section II(i), above, by the 
Second Fiduciary for such Client Plan, at least thirty (30) days in 
advance of the implementation of such change from one of the fee 
methods to another or such increase in a fee, PNC will provide a 
written notice (which may take the form of a proxy statement, letter, 
or similar communication that is separate from the prospectus of such 
Fund and which explains the nature and amount of such change from one 
of the fee methods to another or increase in fee) to the Second 
Fiduciary of each Client Plan affected by such change from one of the 
fee

[[Page 45286]]

methods to another or increased fee. Such notice shall be accompanied 
by a Termination Form, with instructions on the use of such Termination 
Form, as described, above, in Section II(j).\3\
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    \3\ It is represented that PNC furnished only disclosure, not 
advanced notice, of a mid-2007 advisory fee change to the Second 
Fiduciaries of Client Plans invested in Funds using the Credit Fee 
Method. The change, which resulted in increased fees to BlackRock of 
0.5 basis points, (which it is represented was credited back to the 
Client Plans) occurred effective June 1, 2007, with the disclosure 
being provided in October 2007, after the effective date of such 
change. As the Second Fiduciaries of the Client Plans did not 
receive notification of such increase at least thirty (30) days in 
advance of the implementation of such increase, the Department, 
herein, is not providing relief for the receipt of such fee increase 
by BlackRock.
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    (l) In the event of:
    (i) A proposed addition of a Secondary Service for which an 
additional fee is charged; or
    (ii) A proposed addition of a Mutual Fund Administration Service 
provided by PNC to a Fund in which a Client Plan invests and for which 
an additional fee is charged; or
    (iii) A proposed increase in the rate of any fee paid by a Fund to 
PNC for any Secondary Service, or
    (iv) A proposed increase in the rate of any fee paid by BlackRock 
to PNC for Mutual Fund Administration Services provided to such Fund, 
or
    (v) A proposed increase in the rate of any fee paid for Secondary 
Services or for Mutual Fund Administration Services that results from 
the decrease in the number or kind of services performed by PNC for 
such fee over an existing rate for services which had been authorized, 
in accordance with Section II(i), by the Second Fiduciary for a Client 
Plan invested in such Fund, PNC, at least thirty (30) days in advance 
of the implementation of such fee increase or additional service for 
which an additional fee is charged, will provide a written notice 
(which may take the form of a proxy statement, letter, or similar 
communication that is separate from the prospectus of such Fund and 
which explains the nature and amount of the additional service for 
which an additional fee is charged or the nature and amount of the 
increase in fees) to the Second Fiduciary of each Client Plan invested 
in such Fund which is proposing to increase fees or add services for 
which an additional fee is charged. Such notice shall be accompanied by 
a Termination Form, with instructions on the use of such Termination 
Form, as described, above in Section II(j).
    (m) On an annual basis, PNC, serving as fiduciary to a Client Plan, 
provides the Second Fiduciary of such Client Plan invested in a Fund 
with:
    (1) A copy of the current prospectus for such Fund in which such 
Client Plan invests;
    (2) Upon the request of such Second Fiduciary, a copy of the 
Statement of Additional Information for such Fund which contains a 
description of all fees paid by such Fund to PNC and all fees paid by 
BlackRock to PNC for Mutual Fund Administration Services;
    (3) A copy of the annual financial disclosure report which includes 
information about Fund portfolios, within sixty (60) days of the 
preparation of such report;
    (4) Oral or written responses to inquiries of the Second Fiduciary 
of such Client Plan, as such inquiries arise; and
    (5) A copy of the audit findings prepared by the independent 
Auditor, as required by Section II(a)(3), is provided by PNC at least 
annually within sixty (60) days of the completion of the report of such 
audit findings, to the Second Fiduciary of those Client Plans using the 
Credit Fee Method, as described in Section II(a)(3).
    (n) All dealings between a Client Plan and a Fund are on a basis no 
less favorable to such Client Plan than dealings between such Fund and 
other shareholders invested in such Fund.

Section III--General Conditions

    (a) PNC maintains for a period of six (6) years the records 
necessary to enable the persons described, below, in Section III(b) to 
determine whether the conditions of this exemption have been met, 
except that:
    (1) A prohibited transaction will not be considered to have 
occurred, if solely because of circumstances beyond the control of PNC, 
the records are lost or destroyed prior to the end of the six-year 
period, and
    (2) No party in interest other than PNC shall be subject to the 
civil penalty that may be assessed under section 502(i) of the Act or 
to the taxes imposed by section 4975(a) and (b) of the Code if the 
records are not maintained or are not available for examination as 
required by Section III(b), below.
    (b)(1) Except as provided in Section III(b)(2) and notwithstanding 
any provisions of section 504(a)(2) of the Act, the records referred to 
in Section III(a) are unconditionally available at their customary 
location for examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department of Labor (the Department) or the Internal Revenue Service,
    (ii) Any fiduciary of a Client Plan who has authority to acquire or 
dispose of shares of a Fund owned by such Client Plan, or any duly 
authorized employee or representative of such fiduciary, and
    (iii) Any participant or beneficiary of a Client Plan or duly 
authorized employee or representative of such participant or 
beneficiary.
    (2) None of the persons described in Section III(b)(1)(ii) and 
(iii) shall be authorized to examine trade secrets of PNC, or 
commercial or financial information which is privileged or 
confidential.

Section IV--Definitions

    For purposes of this exemption:
    (a) The term, ``PNC,'' means PNC Financial, and any affiliate 
thereof, as defined, below in Section IV(c).
    (b) The term, ``BlackRock,'' means BlackRock, Inc., and any 
affiliate thereof, as defined, below in Section IV(c).
    (c) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (d) The term, ``control,'' means the power to exercise a 
controlling influence over the management or policies of a person other 
than an individual.
    (e) The term, ``Fund(s),'' shall mean any diversified open-end 
investment company or companies registered with the Securities and 
Exchange Commission under the Investment Company Act, as amended, for 
which BlackRock serves as an investment adviser (but not sub-adviser).
    (f) The term, ``net asset value,'' means the amount for purposes of 
pricing all purchases and sales of shares of a Fund calculated by 
dividing the value of all securities, determined by a method as set 
forth in the prospectus for such Fund and in the statement of 
additional information, and other assets belonging to the Fund or 
portfolio of the Fund, less the liabilities charged to each such 
portfolio or Fund, by the number of outstanding shares.
    (g) The term, ``relative,'' means a relative as that term is 
defined in section 3(15) of the Act (or a member of the family as that 
term is defined in section 4975(e)(6) of the Code), or a brother, a 
sister, or a spouse of a brother or a sister.
    (h) The term, ``Second Fiduciary,'' means a fiduciary of a Client 
Plan who is independent of and unrelated to PNC

[[Page 45287]]

and BlackRock. For purposes of this exemption, the Second Fiduciary 
will not be deemed to be independent of and unrelated to PNC and 
BlackRock if:
    (1) Such fiduciary, directly or indirectly controls, through one or 
more intermediaries, is controlled by, or is under common control with 
PNC or with BlackRock;
    (2) Such fiduciary, or any officer, director, partner, employee, or 
relative of the fiduciary, is an officer, director, partner, or 
employee of PNC or of BlackRock (or is a relative of such persons); or
    (3) Such fiduciary, directly or indirectly, receives any 
compensation or other consideration for his or her personal account in 
connection with any transaction described in this exemption.
    If an officer, director, partner, or employee of PNC or of 
BlackRock (or relative of such persons) is a director of such Second 
Fiduciary, and if he or she abstains from participation in:
    (i) The choice of such Client Plan's investment adviser,
    (ii) The approval of any such purchase or sale between such Client 
Plan and a Fund, and
    (iii) The approval of any change in fees or fee method, as 
described, above, in Section II (k) or (l), charged to or paid by such 
Client Plan in connection with any of the transactions described in 
Section I above, then Section IV(h)(2), above, shall not apply.
    (i) The term, ``Secondary Service(s),'' means a service or services 
which is/are provided by PNC to a Fund, including but not limited to 
custodial, accounting, or administrative services. The fees for 
providing Secondary Services to a Fund are paid to PNC by such Fund.
    (j) The term, ``Termination Form,'' means the form supplied to a 
Second Fiduciary which expressly provides an election to such Second 
Fiduciary to terminate on behalf of a Client Plan the authorization 
described, above, in Section II(i).
    (k) The term, ``business day,'' means any day that
    (i) PNC Financial is open for conducting all or substantially all 
of its banking functions, and
    (ii) the New York Stock Exchange (or any successor exchange) is 
open for trading.
    (l) The term, ``Mutual Fund Administration Services,'' means a 
service or services which is/are provided by PNC to, or on behalf of, a 
Fund, including PNC's maintaining records of investments by Client 
Plans in such Fund, processing Fund transactions for Client Plans, 
transmitting account statements and shareholder communications, 
responding to inquiries from Client Plans regarding account balances 
and dividends, and providing information to such Fund on sales and 
assisting in monitoring possible market timing. The fees for providing 
Mutual Fund Administration Services to a Fund are paid to PNC by 
BlackRock, rather than by such Fund.

DATES: Effective Date: This exemption is effective as of September 29, 
2006.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department of 
Labor (the Department) invited all interested persons to submit written 
comments and requests for a hearing on the proposed exemption within 
forty-five (45) days of the date of the publication of the Notice in 
the Federal Register on March 26, 2009. The deadline for providing 
notice to all interested persons was April 10, 2009. All comments and 
requests for a hearing from interested persons were due by May 11, 
2009. The Department received no requests for a hearing. However, three 
(3) commentators informed the Department that the mailing to them was 
not complete.
    In this regard, the first commentator did not receive a copy of the 
Notice. In response, the applicant indicated that the Notice had been 
inadvertently omitted from the initial mailing, dated April 3, 2009, to 
one group of interested persons, and that the mailing was resent to 
that group, including the Notice, before the deadline on April 10, 
2009, for providing notice to interest persons. The second commentator 
indicated that certain enclosures were not included. In response, the 
applicant indicated that this commentator was part of the group that 
had received the mailing without the Notice, and that he should have 
subsequently received the second mailing, before the deadline on April 
10, 2009, for providing notice to interest persons.
    The third commentator indicated that he had received only the 
Notice and no cover letters. The applicant was unable to explain how 
this error could have occurred, because this part of the mailing was 
assembled by a machine designed to confirm that the inserts in each 
envelope were of the correct thickness. Accordingly, the applicant 
confirmed through a sampling of other packages that were part of this 
group that there were no other apparent instances of this error. In any 
event, the applicant mailed a complete package to the third 
commentator.
    During the comment period, the Department received 24 telephone 
inquiries from commentators seeking an explanation of the contents of 
the Notice. In response, the staff of the Office of Exemption 
Determinations spoke to each commentator and provided an explanation 
``in plain English'' of the proposed exemption.
    In addition, eight (8) commentators wrote to the Department 
requesting a further explanation of the proposed exemption. In response 
to these commentators, the applicant states that the notice to 
interested persons provided by PNC contained all the information 
required by the Department's exemption procedures, and also included an 
additional cover page that was intended to help the recipients 
understand the contents of the Notice. The applicant maintains that no 
further written explanation on PNC's part was either required or 
permitted. Further, the applicant maintains that in any event, these 
comments do not raise any substantive issues on the proposed exemption 
itself.
    The Department concurs.
    During the comment period, the Department also received via e-mail, 
facsimile, and mail comments from three (3) commentators who raised 
substantive issues. Copies of these letters were posted on the Web site 
regulations.gov. At the close of the comment period, the Department 
forwarded a copy of these comments to the applicant for response. The 
comments and the applicant's response thereto are summarized in the 
numbered paragraphs below.
    1. One commentator, identified as an IRA trustee, in an e-mail, 
dated April 20, 2009, took the view that the requested exemption 
``appears to be an effort to modify the existing ERISA law to allow a 
corporate `sweetheart deal' of two interlocked corporations (PNC and 
BLACKROCK),'' and says that a change to the existing law ``would be a 
step backward.'' The commentator further characterizes the described 
arrangement as appearing ``to have an intended benefit for the two 
corporations at the likely eventual expense of perhaps thousands of 
individuals with IRAs.'' In addition, the commentator expresses concern 
that the costs of implementing the proposed exemption would be paid by 
either taxpayers or ``The IRA owner who gets clobbered with higher and 
higher fees to pay the costs.''
    In response to this comment, the applicant maintains that the 
proposed exemption is not a modification to existing law, but rather an 
exception to certain provisions under existing law pursuant to a 
procedure contemplated by the statute. The applicant represents that 
PNC's goal in requesting the relief

[[Page 45288]]

is not to favor BlackRock, but rather to preserve existing investments 
in plan and IRA accounts that may no longer be permitted after the 
changes in the ownership of BlackRock, and also to ensure that 
BlackRock Funds continue to be available as investments to accounts 
managed by PNC to the extent that investment in those funds is prudent 
and meets an account's investment needs. Investments in BlackRock Funds 
under the exemption are not expected to increase IRA fees, as the 
structure for complying with the exemption is already in place.
    Furthermore, the applicant points out that to the extent the 
commentator objects to her IRA investing in BlackRock Funds, she can 
exercise her right under the proposed exemption to withhold her 
authorization of such investments or, if BlackRock Fund investments 
have previously been authorized, to terminate that authorization.
    Therefore, the applicant concludes that the commentator's comment 
does not provide any reason why the exemption should not be granted.
    The Department concurs.
    2. One commentator, in an e-mail, dated April 28, 2009, argued that 
granting the exemption would be wrong because there is an inherent 
conflict of interest, giving the following reasons:
    (a) No amount of explanation, adjustment/manipulation of fees or 
documentation of facts can cancel out that conflict.
    (b) The very fact that PNC is requesting the exemption shows it is 
in their interest.
    (c) A massive mailing and disgorgement of data does not show this 
is good for investors. The commentator further argues that it must 
clearly be convenient and remunerative for PNC to utilize an ``in-house 
organization'' to control, invest and report on client money, but there 
is no claim or promise that BlackRock is or would be the best option. 
The commentator says that because of the bank being placed in conflict 
with its clients, a PNC manager, when faced with a choice, will opt for 
BlackRock. Therefore, the commentator concludes, the proposal should be 
withdrawn.
    In response, the applicant represents that the conditions of the 
exemption are designed to address the potential conflict, namely by 
requiring fee offsets or credits, disclosures and independent 
approvals. In the opinion of the applicant, the potential conflict in 
this case is attenuated in that PNC is a minority owner in BlackRock as 
a result of the transaction with Merrill Lynch, currently holding only 
a 33% interest (down slightly from the 34% interest described in the 
application). Any decisions by PNC portfolio managers to invest in the 
BlackRock Funds for plans are subject to fiduciary obligations imposed 
by section 404(a)(1) of the Act, including the duty to act solely in 
the interest of the plan and its participants and beneficiaries and to 
act in a prudent manner, and any investment decisions for IRA accounts 
are subject to similar obligations under State law. PNC's objective is 
to have BlackRock Funds available in the event it would be prudent to 
use them, and PNC portfolio managers commonly use other fund families 
as well.
    Further, the applicant points out that if the commentator is 
concerned about these conflicts, he has the right under the proposed 
exemption to either withhold his authorization of PNC investing his 
account in BlackRock Funds or, if he has previously given his 
authorization, he can exercise his right to terminate that 
authorization at any time without penalty.
    Therefore, the applicant maintains that this comment by the 
commentator has not provided any reason why the proposed exemption 
should not be granted.
    The Department concurs.
    3. One commentator indicated her opposition to any exemption that 
would authorize additional fees to be charged by PNC Bank. The 
commentator did not give any further reason.
    In response, the applicant notes that the proposed exemption 
contains a series of protections to deal with the potential for PNC 
receiving additional fees, including fee offsets and credits. 
Furthermore, if the commentator continues to be concerned about PNC 
Bank charging additional fees, she would have the right under the 
exemption to withhold or terminate authorization of the investment of 
her account in BlackRock Funds. Therefore, the applicant maintains that 
the commentator has not provided any reason why the proposed exemption 
should not be granted.
    The Department concurs.
    In addition to the comments described above, the Department 
received, on May 8, 2009, an e-mail from the applicant, requesting 
certain changes to the operating language of the exemption. The 
applicant's comment was also posted on the Web site regulation.gov. The 
applicant's comments are summarized in the numbered paragraphs, below.
1. Fee Disclosure and Differential Language--Section II(h)(2)
    Section II(h)(2)(iv), as set forth in the Notice on page 13243, 
column 2, line 67, requires disclosure of, ``All other fees to be 
charged to or paid by a Client Plan and by such Fund.'' The applicant 
believes that disclosure of all Fund fees are within the scope of the 
exemption, but is not clear that all Client Plan fees should be subject 
to disclosure. The applicant believes that the focus on the fees 
charged to or paid by the Client Plan should only be those fees that 
are related to the investment in a Fund by a Client Plan. Accordingly, 
the applicant requests that the language of Section II(h)(2)(iv) should 
be amended to read as follows: ``All other fees to be charged to or 
paid by a Client Plan in connection with its investment in such Fund 
and by such Fund.''
    In addition, the applicant has requested an amendment to Section 
II(h)(2), as set forth in the Notice on page 13243, column 2, lines 54-
57. Section II(h)(2) requires: ``A statement describing the fees, 
including the nature and extent of any differential between the rates 
of such fees'' for: (i) Any investment advisory or similar services to 
be paid by a Fund to BlackRock, (ii) any Secondary Services to be paid 
by a Fund to PNC, (iii) any Mutual Fund Administration Services to be 
paid by BlackRock to PNC, and (iv) all other fees to be charges to or 
paid by a Client Plan and by a Fund. The applicant believes that the 
disclosure of the nature and extent of any differential between the 
rates of such fees should be limited to the fees paid for investment 
advisory or similar services. In this regard, the applicant request 
that the phrase, ``including the nature and extent of any differential 
between the rates of such fees,'' be deleted from Section II(h)(2) and 
moved to the end of Section II(h)(2)(i) following the word, 
``BlackRock.'' Accordingly, the applicant has requested that Section 
II(h)(2)(i) be amended to read as follows: ``Any investment advisory or 
similar services to be paid by such Fund to BlackRock, including the 
nature and extent of any differential between the rates of such fees.''
    The limitations suggested by the applicant do not conform to the 
requirements as set forth in Prohibited Transaction Exemption 77-4 (PTE 
77-4).\4\ In this regard, PTE 77-4 deals with the receipt of fees by a 
fiduciary of a plan in connection with the purchase or sale by a plan 
of shares of a registered, open-end investment company when

[[Page 45289]]

such fiduciary or an affiliate is also the investment adviser for such 
investment company. Section II(d) of PTE 77-4 requires that a second 
fiduciary with respect to such plan, who is independent of and 
unrelated to the fiduciary/investment adviser or any affiliate thereof, 
receive full and detailed written disclosure of the investment advisory 
and other fees charged to or paid by such plan and by such investment 
company, including the nature and extent of any differential between 
the rates of such fees. Accordingly, the Department does not concur 
with the applicant's request to alter the language of Section II(h)(2) 
and has not amended Section II(h)(2) in the final exemption. Nor does 
the Department concur with the applicant's request to alter the 
language of Section II(h)(2)(iv) and has not amended Section 
II(h)(2)(iv) in the final exemption.
---------------------------------------------------------------------------

    \4\ 42 FR 18732, April 8, 1977.
---------------------------------------------------------------------------

2. Reference to Part 4 of Title I of the Act--Section II(i)
    Section II(i), as set forth in the Notice, requires that on the 
basis of certain disclosure, a Second Fiduciary, acting on behalf of 
the Client Plan, authorizes in writing: (1) The investment of the 
assets of a Client Plan in shares of a particular Fund and (2) the 
receipt of fees by PNC and by BlackRock in connection with services 
provided by PNC and by BlackRock to such Fund. The last sentence in 
Section II(i), as set forth in the Notice on page 13243, column 3, 
lines 25-29, requires that ``Such authorization by a Second Fiduciary 
must be consistent with the responsibilities, obligations, and duties 
imposed on fiduciaries by Part 4 of Title I of the Act.'' The applicant 
maintains that ``whether the Second Fiduciary violates its fiduciary 
duties in providing the authorization is outside the control of PNC and 
should not affect whether PNC has coverage under the exemption.'' 
Further, the applicant notes that this language was not included in 
prior individual exemption providing analogous relief. Therefore, the 
applicants request that the sentence in Section II(i) referring to the 
Second Fiduciary's responsibilities under Part 4 of Title I of the Act 
should be deleted from the final exemption.
    The Department does not concur with the applicant's request and has 
not deleted the last sentence from Section II(i) in the final 
exemption. In this regard, PTE 77-4 contains language similar to that 
set forth Section II(i) of the Notice. In this regard, Section II(e) of 
PTE 77-4, states that ``On the basis of the prospectus and disclosure 
referred to in paragraph (d), the second fiduciary referred to in 
paragraph (d) approves such purchase and sales consistent with the 
responsibilities obligations, and duties imposed on fiduciaries by Part 
4 of Title I of the Act.''
3. Statement of Additional Information Disclosure--Section II(m)(2)
    Section II(m)(2), as set forth in the Notice on page 13244, column 
2, lines 49-52, requires on an annual basis that PNC, serving as 
fiduciary to a Client Plan, provide the Second Fiduciary of such Client 
Plan with certain disclosures. Such disclosures should include a copy 
of a Statement of Additional Information for a Fund, upon request by 
the Second Fiduciary. Further, such Statement of Additional Information 
should contain a description of all fees paid to PNC by a Fund and by 
BlackRock for services provided by PNC to such Fund. The applicant 
notes that while Statements of Additional Information for Funds do, in 
fact, describe the Mutual Fund Administration Services fees, such 
document does not specify the rate of such fees. The applicant argues 
that such disclosure should be sufficient because the rate of such fees 
would have been described in the initial disclosure to the Client Plan 
and cannot be changed without prior notice.
    The Department concurs with the applicant's comment.
4. Independent Audit Disclosure--Section II(m)(3)
    Section II(m)(3), as set forth in the Notice on page 13244, column 
2, lines 56-59, requires that PNC provide the Second Fiduciary of a 
Client Plan with ``a copy of the annual financial disclosure report 
which includes information about Fund portfolios, as well as the audit 
findings of the independent Auditor, within sixty (60) days of the 
preparation of such report.'' The audit findings referred to in Section 
II(m)(3) are those required under Section II(a)(3) of the exemption in 
connection with the audit of the Credit Fee Method. The applicant 
suggests that the requirement to disclose a copy of the audit finding 
be deleted from Section II(m)(3) and be made a separate requirement, in 
a new Section II(m)(5) in the final exemption. Accordingly, the 
applicant requests that the requirement in Section II(m)(5) apply only 
to those Client Plans using the Credit Fee Method, described in Section 
II(a)(3) of the final exemption.
    The Department concurs with the applicant's request and has amended 
Section II(m)(3) to delete the phrase, ``as well as the audit findings 
of the independent Auditor.'' Further, the Department has included in 
the final exemption a new Section II(m)(5) which reads, as follows:

    A copy of the audit findings prepared by the independent 
Auditor, as required by Section II(a)(3), is provided by PNC at 
least annually within sixty (60) days of the completion of the 
report of such audit findings, to the Second Fiduciary of those 
Client Plans using the Credit Fee Method, as described in Section 
II(a)(3).
5. Change in Fee Method--Section IV(h)(3)(iii)
    Section IV(h), as set forth in the Notice on page 13245, column 1, 
lines 33-68, and column 2, lines 1-4, defines the term, ``Second 
Fiduciary,'' as a fiduciary of a Client Plan who is independent of and 
unrelated to PNC and BlackRock. Section IV(h)(2) provides that a Second 
Fiduciary will not be deemed to be independent if such fiduciary, or 
any officer, director, partner, employee, or relative of the fiduciary 
is an officer, director, partner, or employee of PNC or of BlackRock 
(or is a relative of such person). However, Section IV(h)(3) provides 
an exception to the requirement, set forth in Section IV(2). In this 
regard, a director of a Second Fiduciary of a Client Plan who is also 
an officer, director, partner, or employee of PNC or of BlackRock (or a 
relative of such persons) is permitted to abstain from: (1) The 
selection of the Client Plan's investment adviser; (2) the approval of 
any purchase or sale between a Client Plan and a Fund; and (3) ``the 
approval of any change in fees, as described, above, in Section II (k) 
or (l), charged to or paid by such Client Plan in connection with any 
of the transactions described in Section I above.''
    The applicant requests that the language of Section IV(h)(3)(iii), 
as set forth in the Notice on page 13245, column 1, lines 67-68, be 
revised to insert the phrase, ``or fee method,'' after the phrase, 
``any change in fees,'' in order to be consistent with other provisions 
in the exemption where references to changes of fees also apply to 
changes in fee methods.
    The Department concurs with the applicant's suggestions, and 
accordingly, has amended the language of Section IV(h)(3)(iii) in the 
final exemption.
    After giving full consideration to the entire record, including the 
written comment from the applicant and from the commentators, the 
Department has decided to grant the exemption, as described and 
amended, above. In this regard, the comment letters from the applicant 
and from the commentators which were submitted to the

[[Page 45290]]

Department have been included as part of the public record of the 
exemption application. The complete application file, including all 
supplemental submissions received by the Department, is made available 
for public inspection in the Public Documents Room of the Employee 
Benefits Security Administration, Room N-1513, U.S. Department of 
Labor, 200 Constitution Avenue, NW., Washington, DC 20210.
    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 March 26, 2009, at 74 FR 
13242.

FOR FURTHER INFORMATION CONTACT: Angelena Le Blanc of the Department, 
telephone (202) 693-8540 (This is not a toll-free number).

Verizon Investment Management Corporation, Located in Basking Ridge, 
New Jersey.

[Prohibited Transaction Exemption 2009-23, Exemption Application No. D-
11447.]

Exemption

Section I--Transaction(s)

    The restrictions of section 406(a)(1)(A) through (D) of the Act and 
the taxes imposed by section 4975(a) and (b) of the Code, by reason of 
section 4975(c)(1)(A) through (D) of the Code,\5\ shall not apply, 
effective for the period January 1, through December 31, 2001, and for 
the period January 1, through December 31, 2003, to any transaction, as 
described in Part I of Prohibited Transaction Exemption 96-23 (PTE 96-
23),\6\ between a Verizon Plan or Verizon Plans, as defined, below, in 
section III(h) of this exemption, and a party in interest, as defined, 
below, in section III(c) of this exemption, with respect to such 
Verizon Plan; provided that: during the period January 1, through 
December 31, 2001, and during the period January 1, through December 
31, 2003, VIMCO satisfied the definition of an in-house asset manager 
(INHAM), as defined, below, in section III(a) of this exemption, and 
had discretionary authority or control with respect to the assets of 
such Verizon Plan involved in each such transaction; and the 
conditions, as set forth, below, in section I(a) through (b) and 
section II of this exemption were satisfied and, the conditions, as set 
forth, below, in section I(c) and section II of this exemption are 
satisfied;
---------------------------------------------------------------------------

    \5\ The Department, herein, is not providing any retroactive or 
prospective relief for a transaction between a plan (a Verizon Plan 
or Verizon Plans), as defined, below, in section III(h) of this 
exemption, and a party in interest with respect to such Verizon 
Plan, if such transaction was entered into or is entered into in 
years other than 2001 and 2003, nor is the Department, herein, 
providing any retroactive or prospective relief for any continuing 
transaction, or for any subsequent renewal or modification of a 
transaction that required or requires the consent of Verizon 
Investment Management Corporation (VIMCO), if entry into such 
continuing transaction, or entry into such renewal or modification 
occurred or occurs in years other than 2001 and 2003. In order to 
obtain relief for the entry into a transaction, or the entry into a 
continuing transaction or a subsequent renewal or modification of a 
transaction, as the case may be, VIMCO must have satisfied or must 
satisfy at the time of each such transaction, the terms and 
conditions as set forth in PTE 96-23 or, if applicable, the terms 
and conditions of PTE 96-23 as hereafter amended.
    \6\ 61 FR 15975, April 10, 1996.
---------------------------------------------------------------------------

    (a) All the requirements of PTE 96-23 were satisfied for the period 
January 1, through December 31, 2001, and the period January 1, through 
December 31, 2003, except with respect to the annual audit requirement, 
as set forth in section I(h) of PTE 96-23;
    (b) An exemption audit, as defined, in Part IV(f) of PTE 96-23, for 
the period January 1, through December 31, 2001, must have been 
completed by no later than December 31, 2003, and an exemption audit 
for the period January 1, through December 31, 2003, must have been 
completed by no later than December 31, 2005; and
    (c) If VIMCO, satisfies the definition of an INHAM, as defined, 
below, in section III(a) of this exemption, at any time during the 
period beginning on the date of the publication in the Federal Register 
of the final exemption for application D-11447 and ending on the 
effective date of a final amendment to PTE 96-23, then an independent 
auditor, who has appropriate technical training or experience and 
proficiency with the fiduciary responsibility provisions of the Act and 
who so represents in writing, must conduct an exemption audit, as 
defined, below, in section III(f) of this exemption, on an annual 
basis. Following completion of such exemption audit, the auditor shall 
issue a written report to the Verizon Plan or Verizon Plans that engage 
in transactions, described in Part I of PTE 96-23, presenting such 
auditor's specific findings regarding the level of compliance: (1) with 
the policies and procedures adopted by VIMCO in accordance with Part 
I(g) of PTE 96-23; and (2) with the objective requirements of PTE 96-
23. The written report shall also contain the auditor's overall opinion 
regarding whether VIMCO's program complied: (1) With the policies and 
procedures adopted by VIMCO; and (2) with the objective requirements of 
PTE 96-23. The exemption audit and the written report must be completed 
within six (6) months following the end of the year to which the audit 
relates.

Section II--General Conditions

    (a) VIMCO must maintain or cause to be maintained, for a period of 
six (6) years, such records as are necessary to enable the persons 
described, below, in section II(b) of this exemption, to determine 
whether the conditions of this exemption have been met, except that:
    (1) A prohibited transaction shall not be considered to have 
occurred solely because, due to circumstances beyond the control of 
VIMCO, such records are lost or destroyed prior to the end of the six-
year period, and
    (2) No party in interest with respect to a Verizon Plan which 
engages in a transaction, described in section I of this exemption, 
other than VIMCO, shall be subject to a civil penalty under section 
502(i) of the Act or to the taxes imposed by section 4975(a) and (b) of 
the Code, if such records are not maintained, or are not available for 
examination, as required, below, by section II(b) of this exemption.
    (b)(1) Except as provided, below, in section II(b)(2) of this 
exemption, and notwithstanding any provisions of section 504(a)(2) of 
the Act, the records referred to, above, in section II(a) of this 
exemption, are unconditionally available at their customary location 
for examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department of Labor (the Department) or the Internal Revenue Service,
    (ii) Any fiduciary of a Verizon Plan that engages in a transaction, 
described in Part I of PTE 96-23, or any duly authorized employee or 
representative of such fiduciary, and
    (iii) Any participant or beneficiary of a Verizon Plan or duly 
authorized employee or representative of such participant or 
beneficiary.
    (2) None of the persons described, above, in section II(b)(1)(ii) 
and (iii) of this exemption, shall be authorized to examine trade 
secrets of VIMCO, or commercial or financial information which is 
privileged or confidential.

Section III--Definitions

    For the purposes of this exemption:
    (a) The term, ``in-house asset manager'' or ``INHAM,'' means VIMCO, 
provided that VIMCO is:
    (1) Either (A) a direct or indirect wholly-owned subsidiary of 
Verizon Communications, Inc. (Verizon), or a direct or indirect wholly-
owned subsidiary of a parent organization of Verizon, or (B) a 
membership non-profit

[[Page 45291]]

corporation a majority of whose members are officers or directors of 
Verizon or a parent organization; and
    (2) An investment adviser registered under the Investment Advisers 
Act of 1940 that, as of the last day of its most recent fiscal year, 
has under its management and control total assets attributable to 
Verizon Plans maintained by affiliates of VIMCO, as defined, below, in 
section III(b) of this exemption, in excess of $50 million; and 
provided that if VIMCO had no prior fiscal year as a separate legal 
entity as a result of its constituting a division or group within 
Verizon's organizational structure, then this requirement is deemed to 
have been met as of the date during VIMCO's initial fiscal year as a 
separate legal entity that responsibility for the management of such 
assets in excess of $50 million was transferred to it from Verizon.
    In addition, Verizon Plans maintained by affiliates of VIMCO and/or 
by VIMCO, have aggregate assets of at least $250 million, calculated as 
of the last day of each such Verizon Plan's reporting year.
    (b) For purposes of sections III(a) and III(h) of this exemption, 
an ``affiliate'' of VIMCO means a member of either:
    (1) a controlled group of corporations, as defined in section 
414(b) of the Code, of which VIMCO is a member, or
    (2) A group of trades or businesses under common control, as 
defined in section 414(c) of the Code, of which VIMCO is a member; 
provided that ``50 percent'' shall be substituted for ``80 percent'' 
wherever ``80 percent'' appears in section 414(b) or 414(c) of the Code 
or the rules thereunder.
    (c) The term, ``party in interest,'' means a person described in 
section 3(14) of the Act and includes a ``disqualified person,'' as 
defined in section 4975(e)(2) of the Code.
    (d) The term, ``control,'' means the power to exercise a 
controlling influence over the management or policies of a person other 
than an individual.
    (e) For purposes of this exemption, the time as of which any 
transaction occurred is the date upon which the transaction was entered 
into. In addition, the time as of which any renewal or modification of 
any transaction occurred is the date upon which the renewal or the 
modification of the transaction was entered into. For any transaction 
that required the consent of VIMCO that was entered into, renewed, or 
modified, as the case may be, during the period from January 1, through 
December 31, 2001, or during the period from January 1, through 
December 31, 2003, the requirements of this exemption must have been 
satisfied at the time such transaction was entered into, or was 
renewed, or was modified, as the case may be. In addition, in the case 
of a transaction that is continuing, the transaction is deemed to occur 
until it is terminated.
    Nothing in this paragraph shall be construed as exempting a 
transaction entered into by a Verizon Plan which becomes a transaction 
described in section 406 of the Act or section 4975 of the Code, while 
the transaction is continuing, unless the conditions of PTE 96-23 were 
met at the time the transaction was entered into, or at the time the 
transaction would have become prohibited but for PTE 96-23. In 
determining compliance with the conditions of PTE 96-23 at the time 
that the transaction was entered into for purposes of the preceding 
sentence, Part I(e) of PTE 96-23, will be deemed satisfied if the 
transaction was entered into between a Verizon Plan and a person who 
was not then a party in interest.
    (f) Exemption Audit. An ``exemption audit'' of a Verizon Plan must 
consist of the following:
    (1) A review by an independent auditor of the written policies and 
procedures adopted by VIMCO, pursuant to Part I(g) of PTE 96-23, for 
consistency with each of the objective requirements of PTE 96-23, as 
described below, in section III(g) of this exemption.
    (2) A test of a sample of VIMCO's transactions during the audit 
period that is sufficient in size and nature to afford the auditor a 
reasonable basis: (A) to make specific findings regarding whether VIMCO 
is in compliance with (i) the written policies and procedures adopted 
by VIMCO, pursuant to Part I(g) of PTE 96-23 and (ii) the objective 
requirements of PTE 96-23, as described below, in section III(g) of 
this exemption and (B) to render an overall opinion regarding the level 
of compliance of VIMCO's program with section III(f)(2)(A)(i) and (ii) 
of this exemption.
    (3) A determination as to whether VIMCO satisfied the definition of 
an INHAM, as defined, above, in section III(a), of this exemption; and
    (4) Issuance of a written report describing the steps performed by 
the auditor during the course of its review and the auditor's findings.
    (g) For purposes of section III(f), above, of this exemption, the 
written policies and procedures must describe the following objective 
requirements of the exemption and the steps adopted by VIMCO to assure 
compliance with each of these requirements:
    (1) The definition of an INHAM in section III(a) of this exemption.
    (2) The requirements of Part I and Part I(a) of PTE 96-23 regarding 
the discretionary authority or control of VIMCO with respect to the 
assets of a Verizon Plan involved in the transaction, in negotiating 
the terms of the transaction, and with regard to the decision on behalf 
of such Verizon Plan to enter into the transaction.
    (3) That any procedure for approval or veto of the transaction 
meets the requirements of Part I(a) of PTE 96-23.
    (4) For a transaction described in Part I of PTE 96-23:
    (A) That the transaction is not entered into with any person who is 
excluded from relief under Part I(e)(1), Part I(e)(2) of PTE 96-23, to 
the extent such person has discretionary authority or control over the 
plan assets involved in the transaction, or Part I(f) of PTE 96-23, and
    (B) That the transaction is not described in any of the class 
exemptions listed in Part I(b) of PTE 96-23.
    (h) The term, ``Verizon Plan(s),'' means a plan or plans maintained 
by VIMCO or an affiliate of VIMCO.
    Effective Date: This exemption is effective for the period from 
January 1, through December 31, 2001, and for the period from January 
1, through December 31, 2003.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department 
invited all interested persons to submit written comments and requests 
for a hearing on the proposed exemption within forty-five (45) days of 
the date of the publication of the Notice in the Federal Register on 
February 25, 2009. All comments and requests for a hearing were due by 
April 13, 2009.
    During the comment period, the Department received no requests for 
a hearing. However, the Department received, on April 9, 2009, a 
facsimile from the applicant, informing the Department of a correction 
to the language of the exemption, as proposed in the Notice. In this 
regard, the references to ``Verizon Investment Management Company,'' as 
set forth in the heading of the Notice on page 8571, in the heading of 
the Proposed Exemption on page 8572, and in the language in footnote 
no. 2 on page 8572, should be revised to read ``Verizon Investment 
Management Corporation.''
    The Department acknowledges the correction, as requested by the 
applicant, and in the final exemption has amended the references to 
Verizon Investment Management Corporation.

[[Page 45292]]

    In addition to the correction described above, the applicant 
requested: (1) An amendment to the exemption audit conditions of 
section I(c); (2) a change of the effective date of section I(c); and 
(3) a change in the definition of an INHAM, in section III(a), as set 
forth in the Notice. The applicant's comments are sumarized in the 
paragraphs, below.

Timing of Exemption Audit

    Section I(c) of the Notice, as set forth on page 8572, column 3, in 
lines 56-59, requires that the exemption audit and the written audit 
report must be completed within six (6) months following the end of the 
year to which such audit relates.
    In its comment, VIMCO states that it understands the 
appropriateness of imposing a timing condition on future audits. 
However, VIMCO maintains that six (6) months after the end of the plan 
year is a relatively short period considering the volume of corporate 
and employee benefit activities that VIMCO engages in at that time of 
year. Accordingly, VIMCO requests that this deadline should be one (1) 
year following the end of the year to which such audit relates, rather 
than six (6) months. In this regard, VIMCO maintains that a one-year 
deadline would be consistent with the requirement that an exemption 
audit be performed annually and would avoid the unintended loss of the 
exemption due to inadvertent delays in the exemption audit process.
    The Department does not concur with the applicant's request and has 
not amended the six (6) month audit requirement, set forth in section 
I(c) of this exemption. In this regard, it is the Department's view 
that the six (6) month audit requirement is reasonable. The Department 
believes that extending the audit requirement beyond the six (6) month 
requirement would result in audit reports which would not be timely.

Exemption Audit Conditions

    Section I(c), as set forth on page 8572, column 3, in lines 50-55, 
also requires that that the written report of the exemption audit must 
contain:

    The auditor's overall opinion regarding whether VIMCO's program 
complied: (1) With the policies and procedures adopted by VIMCO; and 
(2) with the objective requirements of PTE 96-23.

    The applicant believes that the requirement imposed in section I(c) 
of the Notice goes beyond the frameowrk envisioned by PTE 96-23. In 
this regard, VIMCO notes that in the preamble to PTE 96-23, the auditor 
was not required to reach any opinion regarding compliance. The auditor 
was simply to make the findings based on its review. In the opinion of 
the applicant, the requirement set forth in section I(c) of the Notice, 
would cause additional review and expense. In addition, the applicant 
points out that this requirement may trigger issues for accounting 
firms and law firms under their respective professional standards. The 
applicant suggests that, if the Department intends to impose this 
requirement generally on INHAMs in the course of amending PTE 96-23, 
then the Department should do so in that proceeding, at which time this 
requirement can be subject to a broader range of comments that would 
better define the issues.
    The Departme