Exemptions From Certain Prohibited Transaction Restrictions, 49788-49791 [2011-20342]
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Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices
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Background
The Douglas County Rural Water
Project Appraisal Report addresses the
County’s extremely low recharge into
and high withdrawal amounts from the
Denver Basin aquifers and proposes to
resolve this issue by replacing current
groundwater supplies with an
alternative source of water. The
proposed alternative includes water
treatment, raw and finished water
transmission, finished water storage,
and aquifer storage and recovery for
delivery of surface water from existing
diversions and water impoundments on
the South Platte River to this large rural
region of central Colorado.
The Dry-Redwater Rural Water
System project would serve a
population of about 15,000 people in
the project area, including the towns of
Circle, Richey, Jordan, and Fairview; the
unincorporated town of Lambert; the
water districts of Highland Park, Forrest
Park, Spring Grove, and Whispering
Tree; and rural users in the service area.
It examines opportunities to provide
communities, unincorporated areas, and
rural areas in east-central Montana with
a present and future source of high
quality water from North Rock Creek in
the Big Dry Arm of Fort Peck Reservoir.
The Musselshell-Judith Rural Water
System Appraisal Investigation was
conducted by the Central Montana
Regional Water Authority to assess the
viability of developing a rural water
system to serve about 4,500 people in 15
incorporated and unincorporated towns
in central Montana. The proposed
alternative would supply water to the
system from a field of groundwater
wells in the Utica, Montana area. Water
pumped from the Madison Aquifer, a
deep underground aquifer, would be
distributed from the well field by a
branch type system of pipelines, booster
pump stations, and storage tanks.
The Lower Niobrara project area is
located in Knox County in northeast
Nebraska. There is a growing need for
an improved water source because of
rising nitrate levels in some areas. The
proposed study area comprises
approximately the central one-third of
Knox County, which includes the West
Knox Rural Water System (RWS), the
Santee Sioux Reservation, and the
towns of Creighton, Niobrara, and
Center. The preferred alternative for
Lower Niobrara consists of expanding
the West Knox RWS Well Field to
supply Creighton, Niobrara, Center, and
the Santee Sioux Reservation.
The Southern Black Hills Water
System (SBHWS) project is designed to
provide a regional water supply and
water delivery system for rural users,
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special use needs, and community
needs for southern Pennington County,
all of Custer County, and all of Fall
River County, in southwestern South
Dakota. The SBHWS appraisal
investigation evaluated a number of
alternatives ranging from purchasing
water from an existing entity,
developing new infrastructure, and
some non-structural alternatives which
include water use polices (e.g., prohibit
rural residential growth) and water
conservation (e.g., leak detection
surveys).
Dated: July 11, 2011.
Roseann Gonzales,
Director, Policy and Administration.
[FR Doc. 2011–20392 Filed 8–10–11; 8:45 am]
BILLING CODE 4310–MN–P
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
Exemptions From Certain Prohibited
Transaction Restrictions
Employee Benefits Security
Administration, Labor.
ACTION: Grant of Individual Exemptions.
AGENCY:
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). This notice includes
the following: D–11468 and D–11469,
The Krispy Kreme Doughnut
Corporation Retirement Savings Plan
(the Savings Plan) and the Krispy Kreme
Profit-Sharing Stock Ownership Plan
the KSOP (together, the Plans), 2011–10;
D–11634, The United Brotherhood of
Carpenters Pension Fund (the Plan),
2011–11; and L–11651 and L–11652,
Verizon Communications, Inc. (Verizon
and Cellco Partnership, doing business
as Verizon Wireless (Verizon Wireless;
collectively the Applicants), 2011–12 et
al.
SUPPLEMENTARY INFORMATION: 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
SUMMARY:
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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.
The Krispy Kreme Doughnut
Corporation Retirement Savings Plan
(the Savings Plan) and the Krispy Kreme
Profit-Sharing Stock Ownership Plan
the KSOP; together, the Plans)
[Prohibited Transaction Exemption
2011–10; Located in Winston-Salem,
North Carolina [Exemption Application
Nos. D–11468 and D–11469,
respectively]
Exemption
The restrictions of section
406(a)(1)(A),(D),(E), section 406(a)(2),
section 406(b)(2) and section 407(a) of
the Act and the sanctions resulting from
the application of section 4975 of the
Code, by reason of section 4975(c)(1)(A)
and (D) of the Code, shall not apply,
effective January 16, 2007, to (1) the
release by the Plans of their claims
against Krispy Kreme Doughnut
Corporation (KKDC), the sponsor of the
Plans, Michael Phalen and Price
waterhouseCoopers LLP (PwC), parties
in interest with respect to the Plan, in
exchange for cash, shares of common
stock (the Common Stock) and warrants
(the Warrants) issued by Krispy Kreme
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Doughnuts, Inc. (KKDI), the parent of
KKDC and also a party in interest, in
settlement of certain litigation (the
Securities Litigation) between the Plans
and KKDC, Mr. Phalen and PwC; and (2)
the holding of the Warrants by the
Plans.
This exemption is subject to the
following conditions:
(a) The receipt and holding of cash,
the Common Stock and the Warrants
occurred in connection with a genuine
controversy in which the Plans were
parties.
(b) An independent fiduciary was
retained on behalf of the Plans to
determine whether or not the Plans
should have joined in the Securities
Litigation and accept cash, the Common
Stock and the Warrants pursuant to a
settlement agreement (the Settlement
Agreement). Such independent
fiduciary—
(1) Had no relationship to, or interest
in, any of the parties involved in the
Securities Litigation that might affect
the exercise of such person’s judgment
as a fiduciary;
(2) Acknowledged, in writing, that it
was a fiduciary for the Plans with
respect to the settlement of the
Securities Litigation; and
(3) Determined that an all cash
settlement was either not feasible or was
less beneficial to the participants and
beneficiaries of the Plans than accepting
all or part of the settlement in non-cash
assets.
(4) Thoroughly reviewed and
determined whether it would be in the
best interests of the Plans and their
participants and beneficiaries to engage
in the covered transactions.
(5) Determined whether the decision
by the Plans’ fiduciaries to cause the
Plans not to opt out of the Securities
Litigation was more beneficial to the
Plans than having the Plans file a
separate lawsuit against KKDC.
(c) The terms of the Settlement
Agreement, including the scope of the
release of claims, the amount of cash
and the value of any non-cash assets
received by the Plans, and the amount
of any attorney’s fee award or any other
sums to be paid from the recovery were
reasonable in light of the Plans’
likelihood of receiving full recovery, the
risks and costs of litigation, and the
value of claims foregone.
(d) The terms and conditions of the
transactions were no less favorable to
the Plans than comparable arm’s length
terms and conditions that would have
been agreed to by unrelated parties
under similar circumstances.
(e) The transactions were not part of
an agreement, arrangement, or
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understanding designed to benefit a
party in interest.
(f) All terms of the Settlement
Agreement were specifically described
in a written document approved by the
United States District Court for the
Middle District of North Carolina.
(g) Non-cash assets, which included
the Common Stock and Warrants
received by the Plans from KKDC under
the Settlement Agreement, were
specifically described in the Settlement
Agreement and valued as determined in
accordance with a court-approved
objective methodology;
(h) The Plans did not pay any fees or
commissions in connection with the
receipt or holding of the Common Stock
and the Warrants.
(i) KKDC maintains, or causes to be
maintained, for a period of six years
such records as are necessary to enable
the persons described in paragraph (j)(1)
below to determine whether the
conditions of this exemption have been
met, except that—
(1) If the records necessary to enable
the persons described in paragraph (j)(1)
to determine whether the conditions of
this exemption have been met are lost,
or destroyed, due to circumstances
beyond the control of KKDC, then no
prohibited transaction will be
considered to have occurred solely on
the basis of the unavailability of those
records; and
(2) No party in interest with respect
to the Plans other than KKDC 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 such
records are not maintained or are not
available for examination as required by
paragraph (i).
(j)(1) Except as provided in this
paragraph (j) and notwithstanding any
provision of section 504(a)(2) and (b) of
the Act, the records referred to in
paragraph (i) above are unconditionally
available at their customary locations
for examination during normal business
hours by:
(A) Any duly authorized employee,
agent or representative of the
Department or the Internal Revenue
Service, or the Securities and Exchange
Commission (SEC);
(B) Any fiduciary of the Plans or any
duly authorized representative of such
participant or beneficiary;
(C) Any participant or beneficiary of
the Plans or duly authorized
representative of such participant or
beneficiary;
(D) Any employer whose employees
are covered by the Plans; or
(E) Any employee organization whose
members are covered by such Plans.
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49789
(2) None of the persons described in
paragraph (j)(1)(B) through (E) shall be
authorized to examine trade secrets of
KKDC or commercial or financial
information which is privileged or
confidential.
(3) Should KKDC refuse to disclose
information on the basis that such
information is exempt from disclosure,
KKDC shall, by the close of the thirtieth
(30th) day following the request,
provide written notice advising that
person of the reason for the refusal and
that the Department may request such
information.
DATES: Effective Date: This exemption is
effective as of January 16, 2007.
Written Comments
In the Notice of Proposed Exemption
(76 FR 14083, March 15, 2011)(the
Notice), the Department invited all
interested persons to submit written
comments and requests for a hearing on
the proposed exemption within forty
(40) days of the date of the publication
of such Notice in the Federal Register.
All comments and requests for a hearing
from interested persons were due by
April 24, 2011. However, KKDC
required additional time to mail the
Notice to interested persons. Therefore,
the Department extended the comment
period until May 15, 2011.
During the comment period, the
Department received one written
comment and no requests for a hearing.
KKDC submitted the comment on March
31, 2011 that it supplemented by emails dated April 19, 2011 and April 21,
2011.
In its comment, KKDC stated that the
proposed exemption should be
extended to include PwC and Mr.
Phalen, the former Chief Financial
Office of KKDI and a member of the
Plans’ Investment Committee. Both were
parties to the Securities Litigation and
parties in interest with respect to the
Plans. In regard to PwC and Mr. Phalen,
the KKDC asserts the following:
It is possible that each Plan’s (A) failure to
opt of the [Securities Litigation], and any
corresponding release of claims thereby
effected, and (B) subsequent filing of a Proof
of Claim and Release in favor of parties in
interest KKDC, Phalen and PwC, in exchange
for the Plan’s right to receive its pro rata
portion of the settlement proceeds in the
Securities Litigation could have resulted in a
violation of [the] prohibited transaction
restrictions of ERISA and the Code.
Notwithstanding the fact that the release of
KKDC, Phalen, and PwC could each be
viewed as a prohibited transaction, the
proposed relief published in the Federal
Register on March 15, 2011 provides an
exemption only with respect to the release of
KKDC, and leaves open the possibility that
the releases of Phalen and PwC are
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prohibited transactions with respect to the
Plans.
KKDC further explains that the Plans’
decision to enter into the Settlement
Agreement to grant the releases of
claims against the party in interest
defendants was primarily based on the
advice of Independent Fiduciary
Services (IFS), the independent
fiduciary for the Plans. Based on IFS’
conclusions and the Department’s
determination that it was appropriate to
grant an exemption for the Plans’ release
of claims against KKDC, KKDC explains
that it is important that similar
exemptive relief be provided with
respect to the Plans’ release of claims
against PwC and Mr. Phalen.
If the exemption is not extended to
these parties, KKDC believes the Plans’
participation in the settlement of the
Securities Litigation would have to be
reversed and the Plans would be
required to return their share of the
settlement proceeds received.
Additionally, KKDC notes that the Plans
would lose a significant economic
benefit if compelled to pursue separate
litigation on this matter.
In response to this comment, the
operative language of this exemption
has been amended accordingly. The
Department notes that the sentence in
the Notice identifying PwC and Mr.
Phalen as party in interest defendants
was inadvertently omitted from the
Notice. In this regard, the last sentence
of the first paragraph of Representation
6 of the Notice, located in the third
column of page 14085, should have
read: ‘‘The class action defendants (the
Class Defendants) included KKDC, PwC,
and Mr. Phalen, who served as the Chief
Financial Officer of KKDI and a member
of each Plan’s committee.’’
Additionally, a new sentence should
have been added to the end of the first
paragraph of Representation 6 of the
Notice located in the third column of
page 14085, stating: ‘‘With the exception
of KKDI, Mr. Phalen and PwC, none of
the other Class Defendants was a party
in interest with respect to the Plans.’’
The Department, therefore, wishes to
clarify that the requested relief includes
all the party in interest Class Defendants
with respect to the Securities Litigation.
Furthermore, although the Department
has determined that the exemption
sufficiently covers the potential
prohibited transaction engaged by
KKDC in its capacity as a fiduciary, it
does not provide exemptive relief for
any prohibited transactions that resulted
from the events leading to the filing of
the Securities Litigation.
Accordingly, after giving full
consideration to the entire record,
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including the KKDC written comment
and supplemental statements, the
Department has determined to grant the
exemption as clarified herein. For a
more complete statement of the facts
and representations supporting the
Department’s decision to grant this
exemption, refer to the Notice published
on March 15, 2011 at 76 FR 14083.
FOR FURTHER INFORMATION CONTACT: Mr.
Anh-Viet Ly of the Department at (202)
693–8648. (This is not a toll-free
number.)
The United Brotherhood of Carpenters
Pension Fund (the Plan), Located in Las
Vegas, Nevada, [Prohibited Transaction
Exemption 2011–11; Exemption
Application No. D–11634].
Exemption
The restrictions of sections
406(a)(1)(A), (D) and 406(b)(2) of the Act
and the sanctions resulting from the
application of section 4975(c)(1)(A) and
(D) of the Code, shall not apply to the
proposed sale (Sale) of a 10.89 acre
parcel of real property (the Parcel),
which is part of larger parcel of real
property (the Nevada Property), from
the Plan-owned Bermuda Hidden Well,
LLC to the Southwest Regional Council
of Carpenters, a party in interest with
respect to the Plan; provided that the
following conditions are satisfied:
(a) The terms and conditions of the
Sale are at least as favorable to the Plan
as those obtainable in an arm’s length
transaction with an unrelated party;
(b) The Sale is a one-time transaction
for cash;
(c) As consideration, the Plan receives
the greater of $5,383,577, or the fair
market value of the Parcel as
determined by a qualified, independent
appraiser (the Appraiser) in an appraisal
of the Nevada Property, which is
updated on the date of Sale;
(d) The Plan pays no commissions,
costs or fees with respect to the Sale,
except for customary closing costs and
50% of certain rental credits that are
paid to unrelated parties; and
(e) The Plan fiduciaries review and
approve the methodology used by the
Appraiser, ensure that such
methodology is properly applied in
determining the fair market value of the
Parcel, and also determine whether it is
prudent to go forward with the
proposed transaction.
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 May
5, 2011 at 76 FR 25714.
FOR FURTHER INFORMATION CONTACT: Mr.
Anh-Viet Ly of the Department at (202)
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693–8648. (This is not a toll-free
number.)
Verizon Communications, Inc.
(Verizon) and Cellco Partnership, doing
business as Verizon Wireless (Verizon
Wireless; collectively, the Applicants),
Located in Basking Ridge, New Jersey,
[Prohibited Transaction Exemption
2011–12; Exemption Application Nos.
L–11651 and L–11652].
Exemption
The restrictions of sections 406(a) and
(b) of the Act shall not apply to the
reinsurance of risks and the receipt of
premiums therefrom by Exchange
Indemnity Company (EIC), a whollyowned subsidiary of Verizon, in
connection with an insurance contract
sold by Prudential Life Insurance
Company (Prudential) or any successor
insurance company to Prudential which
is unrelated to Verizon, to provide
group-term life insurance to certain
employees and retirees of Verizon and
Verizon Wireless under The Plan for
Group Insurance maintained by Verizon
and the Verizon Wireless Health and
Welfare Benefits Plan maintained by
Verizon Wireless (collectively, the
Plans), provided the following
conditions are met:
(a) EIC—
(1) Is a party in interest with respect
to the Plan by reason of a stock or
partnership affiliation with Verizon that
is described in section 3(14)(E) or (G) of
the Act,
(2) Is licensed to sell insurance or
conduct reinsurance operations in at
least one State as defined in section
3(10) of the Act, (3) Has obtained a
Certificate of Authority from the
Insurance Commissioner of its
domiciliary state which has neither
been revoked nor suspended,
(4)(A) Has undergone and shall
continue to undergo an examination by
an independent certified public
accountant for its last completed taxable
year immediately prior to the taxable
year of the reinsurance transaction; or
(B) Has undergone a financial
examination (within the meaning of the
law of its domiciliary State, Vermont) by
the Insurance Commissioner of Vermont
within 5 years prior to the end of the
year preceding the year in which the
reinsurance transaction occurred, and
(5) Is licensed to conduct reinsurance
transactions by a State whose law
requires that an actuarial review of
reserves be conducted annually by an
independent firm of actuaries and
reported to the appropriate regulatory
authority;
(b) The Plans pay no more than
adequate consideration for the
insurance contracts;
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(c) In subsequent years, the formula
used to calculate premiums by
Prudential or any successor insurer will
be similar to formulae used by other
insurers providing comparable coverage
under similar programs. Furthermore,
the premium charge calculated in
accordance with the formula will be
reasonable and will be comparable to
the premium charged by the insurer and
its competitors with the same or a better
rating providing the same coverage
under comparable programs;
(d) The Plans only contract with
insurers with a rating of A or better from
A.M. Best Company. The reinsurance
arrangement between the insurer and
EIC will be indemnity insurance only,
i.e., the insurer will not be relieved of
liability to the Plans should EIC be
unable or unwilling to cover any
liability arising from the reinsurance
arrangement;
(e) No commissions, costs or other
expenses are paid with respect to the
reinsurance of such contracts; and
(f) For each taxable year of EIC, the
gross premiums and annuity
considerations received in that taxable
year by EIC for life and health insurance
or annuity contracts for all employee
benefit plans (and their employers) with
respect to which EIC is a party in
interest by reason of a relationship to
such employer described in section
3(14)(E) or (G) of the Act does not
exceed 50% of the gross premiums and
annuity considerations received for all
lines of insurance (whether direct
insurance or reinsurance) in that taxable
year by EIC. For purposes of this
condition (f):
(1) the term ‘‘gross premiums and
annuity considerations received’’ means
as to the numerator the total of
premiums and annuity considerations
received, both for the subject
reinsurance transactions as well as for
any direct sale or other reinsurance of
life insurance, health insurance or
annuity contracts to such plans (and
their employers) by EIC. This total is to
be reduced (in both the numerator and
the denominator of the fraction) by
experience refunds paid or credited in
that taxable year by EIC.
(2) all premium and annuity
considerations written by EIC for plans
which it alone maintains are to be
excluded from both the numerator and
the denominator of the fraction.
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 May
5, 2011 at 76 FR 25721.
FOR FURTHER INFORMATION CONTACT: Gary
H. Lefkowitz of the Department,
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telephone (202) 693–8546. (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 exemption does
not apply and the general fiduciary
responsibility provisions of section 404
of the Act, which among other things
require a fiduciary to discharge his
duties respecting the plan solely in the
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) This exemption is 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 this exemption
is subject to the express condition that
the material facts and representations
contained in the application accurately
describes all material terms of the
transaction which is the subject of the
exemption.
Signed at Washington, DC this 4th day of
August, 2011.
Ivan Strasfeld,
Director of Exemption Determinations,
Employee Benefits Security Administration,
U.S. Department of Labor.
[FR Doc. 2011–20342 Filed 8–10–11; 8:45 am]
BILLING CODE 4510–29–P
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
Proposed Exemptions From Certain
Prohibited Transaction Restrictions
Employee Benefits Security
Administration, Labor.
ACTION: Notice of Proposed Exemptions.
AGENCY:
This document contains
notices of pendency before the
Department of Labor (the Department) of
SUMMARY:
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49791
proposed exemptions 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). This notice includes the
following proposed exemptions: D–
11601, BB&T Asset Management, Inc.
(BB&T AM); and D–11661, Bayer
Corporation (Bayer or the Applicant) et
al.]
All interested persons are invited
to submit written comments or requests
for a hearing on the pending
exemptions, unless otherwise stated in
the Notice of Proposed Exemption,
within 45 days from the date of
publication of this Federal Register
Notice.
DATES:
Comments and requests for
a hearing should state: (1) The name,
address, and telephone number of the
person making the comment or request,
and (2) the nature of the person’s
interest in the exemption and the
manner in which the person would be
adversely affected by the exemption. A
request for a hearing must also state the
issues to be addressed and include a
general description of the evidence to be
presented at the hearing.
All written comments and requests for
a hearing (at least three copies) should
be sent to the Employee Benefits
Security Administration (EBSA), Office
of Exemption Determinations, Room N–
5700, U.S. Department of Labor, 200
Constitution Avenue, NW., Washington,
DC 20210. Attention: Application No.
llll, stated in each Notice of
Proposed Exemption. Interested persons
are also invited to submit comments
and/or hearing requests to EBSA via email or FAX. Any such comments or
requests should be sent either by e-mail
to: moffitt.betty@dol.gov, or by FAX to
(202) 219–0204 by the end of the
scheduled comment period. The
applications for exemption and the
comments received will be available for
public inspection in the Public
Documents Room of the Employee
Benefits Security Administration, U.S.
Department of Labor, Room N–1513,
200 Constitution Avenue, NW.,
Washington, DC 20210.
Warning: If you submit written
comments or hearing requests, do not
include any personally-identifiable or
confidential business information that
you do not want to be publiclydisclosed. All comments and hearing
requests are posted on the Internet
exactly as they are received, and they
can be retrieved by most Internet search
engines. The Department will make no
deletions, modifications or redactions to
ADDRESSES:
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[Federal Register Volume 76, Number 155 (Thursday, August 11, 2011)]
[Notices]
[Pages 49788-49791]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20342]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Exemptions From Certain Prohibited Transaction Restrictions
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).
This notice includes the following: D-11468 and D-11469, The Krispy
Kreme Doughnut Corporation Retirement Savings Plan (the Savings Plan)
and the Krispy Kreme Profit-Sharing Stock Ownership Plan the KSOP
(together, the Plans), 2011-10; D-11634, The United Brotherhood of
Carpenters Pension Fund (the Plan), 2011-11; and L-11651 and L-11652,
Verizon Communications, Inc. (Verizon and Cellco Partnership, doing
business as Verizon Wireless (Verizon Wireless; collectively the
Applicants), 2011-12 et al.
SUPPLEMENTARY INFORMATION: 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.
The Krispy Kreme Doughnut Corporation Retirement Savings Plan (the
Savings Plan) and the Krispy Kreme Profit-Sharing Stock Ownership Plan
the KSOP; together, the Plans) [Prohibited Transaction Exemption 2011-
10; Located in Winston-Salem, North Carolina [Exemption Application
Nos. D-11468 and D-11469, respectively]
Exemption
The restrictions of section 406(a)(1)(A),(D),(E), section
406(a)(2), section 406(b)(2) and section 407(a) of the Act and the
sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) and (D) of the Code, shall not
apply, effective January 16, 2007, to (1) the release by the Plans of
their claims against Krispy Kreme Doughnut Corporation (KKDC), the
sponsor of the Plans, Michael Phalen and PricewaterhouseCoopers LLP
(PwC), parties in interest with respect to the Plan, in exchange for
cash, shares of common stock (the Common Stock) and warrants (the
Warrants) issued by Krispy Kreme
[[Page 49789]]
Doughnuts, Inc. (KKDI), the parent of KKDC and also a party in
interest, in settlement of certain litigation (the Securities
Litigation) between the Plans and KKDC, Mr. Phalen and PwC; and (2) the
holding of the Warrants by the Plans.
This exemption is subject to the following conditions:
(a) The receipt and holding of cash, the Common Stock and the
Warrants occurred in connection with a genuine controversy in which the
Plans were parties.
(b) An independent fiduciary was retained on behalf of the Plans to
determine whether or not the Plans should have joined in the Securities
Litigation and accept cash, the Common Stock and the Warrants pursuant
to a settlement agreement (the Settlement Agreement). Such independent
fiduciary--
(1) Had no relationship to, or interest in, any of the parties
involved in the Securities Litigation that might affect the exercise of
such person's judgment as a fiduciary;
(2) Acknowledged, in writing, that it was a fiduciary for the Plans
with respect to the settlement of the Securities Litigation; and
(3) Determined that an all cash settlement was either not feasible
or was less beneficial to the participants and beneficiaries of the
Plans than accepting all or part of the settlement in non-cash assets.
(4) Thoroughly reviewed and determined whether it would be in the
best interests of the Plans and their participants and beneficiaries to
engage in the covered transactions.
(5) Determined whether the decision by the Plans' fiduciaries to
cause the Plans not to opt out of the Securities Litigation was more
beneficial to the Plans than having the Plans file a separate lawsuit
against KKDC.
(c) The terms of the Settlement Agreement, including the scope of
the release of claims, the amount of cash and the value of any non-cash
assets received by the Plans, and the amount of any attorney's fee
award or any other sums to be paid from the recovery were reasonable in
light of the Plans' likelihood of receiving full recovery, the risks
and costs of litigation, and the value of claims foregone.
(d) The terms and conditions of the transactions were no less
favorable to the Plans than comparable arm's length terms and
conditions that would have been agreed to by unrelated parties under
similar circumstances.
(e) The transactions were not part of an agreement, arrangement, or
understanding designed to benefit a party in interest.
(f) All terms of the Settlement Agreement were specifically
described in a written document approved by the United States District
Court for the Middle District of North Carolina.
(g) Non-cash assets, which included the Common Stock and Warrants
received by the Plans from KKDC under the Settlement Agreement, were
specifically described in the Settlement Agreement and valued as
determined in accordance with a court-approved objective methodology;
(h) The Plans did not pay any fees or commissions in connection
with the receipt or holding of the Common Stock and the Warrants.
(i) KKDC maintains, or causes to be maintained, for a period of six
years such records as are necessary to enable the persons described in
paragraph (j)(1) below to determine whether the conditions of this
exemption have been met, except that--
(1) If the records necessary to enable the persons described in
paragraph (j)(1) to determine whether the conditions of this exemption
have been met are lost, or destroyed, due to circumstances beyond the
control of KKDC, then no prohibited transaction will be considered to
have occurred solely on the basis of the unavailability of those
records; and
(2) No party in interest with respect to the Plans other than KKDC
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 such records are not maintained or are not
available for examination as required by paragraph (i).
(j)(1) Except as provided in this paragraph (j) and notwithstanding
any provision of section 504(a)(2) and (b) of the Act, the records
referred to in paragraph (i) above are unconditionally available at
their customary locations for examination during normal business hours
by:
(A) Any duly authorized employee, agent or representative of the
Department or the Internal Revenue Service, or the Securities and
Exchange Commission (SEC);
(B) Any fiduciary of the Plans or any duly authorized
representative of such participant or beneficiary;
(C) Any participant or beneficiary of the Plans or duly authorized
representative of such participant or beneficiary;
(D) Any employer whose employees are covered by the Plans; or
(E) Any employee organization whose members are covered by such
Plans.
(2) None of the persons described in paragraph (j)(1)(B) through
(E) shall be authorized to examine trade secrets of KKDC or commercial
or financial information which is privileged or confidential.
(3) Should KKDC refuse to disclose information on the basis that
such information is exempt from disclosure, KKDC shall, by the close of
the thirtieth (30th) day following the request, provide written notice
advising that person of the reason for the refusal and that the
Department may request such information.
DATES: Effective Date: This exemption is effective as of January 16,
2007.
Written Comments
In the Notice of Proposed Exemption (76 FR 14083, March 15,
2011)(the Notice), the Department invited all interested persons to
submit written comments and requests for a hearing on the proposed
exemption within forty (40) days of the date of the publication of such
Notice in the Federal Register. All comments and requests for a hearing
from interested persons were due by April 24, 2011. However, KKDC
required additional time to mail the Notice to interested persons.
Therefore, the Department extended the comment period until May 15,
2011.
During the comment period, the Department received one written
comment and no requests for a hearing. KKDC submitted the comment on
March 31, 2011 that it supplemented by e-mails dated April 19, 2011 and
April 21, 2011.
In its comment, KKDC stated that the proposed exemption should be
extended to include PwC and Mr. Phalen, the former Chief Financial
Office of KKDI and a member of the Plans' Investment Committee. Both
were parties to the Securities Litigation and parties in interest with
respect to the Plans. In regard to PwC and Mr. Phalen, the KKDC asserts
the following:
It is possible that each Plan's (A) failure to opt of the
[Securities Litigation], and any corresponding release of claims
thereby effected, and (B) subsequent filing of a Proof of Claim and
Release in favor of parties in interest KKDC, Phalen and PwC, in
exchange for the Plan's right to receive its pro rata portion of the
settlement proceeds in the Securities Litigation could have resulted
in a violation of [the] prohibited transaction restrictions of ERISA
and the Code. Notwithstanding the fact that the release of KKDC,
Phalen, and PwC could each be viewed as a prohibited transaction,
the proposed relief published in the Federal Register on March 15,
2011 provides an exemption only with respect to the release of KKDC,
and leaves open the possibility that the releases of Phalen and PwC
are
[[Page 49790]]
prohibited transactions with respect to the Plans.
KKDC further explains that the Plans' decision to enter into the
Settlement Agreement to grant the releases of claims against the party
in interest defendants was primarily based on the advice of Independent
Fiduciary Services (IFS), the independent fiduciary for the Plans.
Based on IFS' conclusions and the Department's determination that it
was appropriate to grant an exemption for the Plans' release of claims
against KKDC, KKDC explains that it is important that similar exemptive
relief be provided with respect to the Plans' release of claims against
PwC and Mr. Phalen.
If the exemption is not extended to these parties, KKDC believes
the Plans' participation in the settlement of the Securities Litigation
would have to be reversed and the Plans would be required to return
their share of the settlement proceeds received. Additionally, KKDC
notes that the Plans would lose a significant economic benefit if
compelled to pursue separate litigation on this matter.
In response to this comment, the operative language of this
exemption has been amended accordingly. The Department notes that the
sentence in the Notice identifying PwC and Mr. Phalen as party in
interest defendants was inadvertently omitted from the Notice. In this
regard, the last sentence of the first paragraph of Representation 6 of
the Notice, located in the third column of page 14085, should have
read: ``The class action defendants (the Class Defendants) included
KKDC, PwC, and Mr. Phalen, who served as the Chief Financial Officer of
KKDI and a member of each Plan's committee.'' Additionally, a new
sentence should have been added to the end of the first paragraph of
Representation 6 of the Notice located in the third column of page
14085, stating: ``With the exception of KKDI, Mr. Phalen and PwC, none
of the other Class Defendants was a party in interest with respect to
the Plans.'' The Department, therefore, wishes to clarify that the
requested relief includes all the party in interest Class Defendants
with respect to the Securities Litigation. Furthermore, although the
Department has determined that the exemption sufficiently covers the
potential prohibited transaction engaged by KKDC in its capacity as a
fiduciary, it does not provide exemptive relief for any prohibited
transactions that resulted from the events leading to the filing of the
Securities Litigation.
Accordingly, after giving full consideration to the entire record,
including the KKDC written comment and supplemental statements, the
Department has determined to grant the exemption as clarified herein.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the Notice published on March 15, 2011 at 76 FR 14083.
FOR FURTHER INFORMATION CONTACT: Mr. Anh-Viet Ly of the Department at
(202) 693-8648. (This is not a toll-free number.)
The United Brotherhood of Carpenters Pension Fund (the Plan),
Located in Las Vegas, Nevada, [Prohibited Transaction Exemption 2011-
11; Exemption Application No. D-11634].
Exemption
The restrictions of sections 406(a)(1)(A), (D) and 406(b)(2) of the
Act and the sanctions resulting from the application of section
4975(c)(1)(A) and (D) of the Code, shall not apply to the proposed sale
(Sale) of a 10.89 acre parcel of real property (the Parcel), which is
part of larger parcel of real property (the Nevada Property), from the
Plan-owned Bermuda Hidden Well, LLC to the Southwest Regional Council
of Carpenters, a party in interest with respect to the Plan; provided
that the following conditions are satisfied:
(a) The terms and conditions of the Sale are at least as favorable
to the Plan as those obtainable in an arm's length transaction with an
unrelated party;
(b) The Sale is a one-time transaction for cash;
(c) As consideration, the Plan receives the greater of $5,383,577,
or the fair market value of the Parcel as determined by a qualified,
independent appraiser (the Appraiser) in an appraisal of the Nevada
Property, which is updated on the date of Sale;
(d) The Plan pays no commissions, costs or fees with respect to the
Sale, except for customary closing costs and 50% of certain rental
credits that are paid to unrelated parties; and
(e) The Plan fiduciaries review and approve the methodology used by
the Appraiser, ensure that such methodology is properly applied in
determining the fair market value of the Parcel, and also determine
whether it is prudent to go forward with the proposed transaction.
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 May 5, 2011 at 76 FR
25714.
FOR FURTHER INFORMATION CONTACT: Mr. Anh-Viet Ly of the Department at
(202) 693-8648. (This is not a toll-free number.)
Verizon Communications, Inc. (Verizon) and Cellco Partnership,
doing business as Verizon Wireless (Verizon Wireless; collectively, the
Applicants), Located in Basking Ridge, New Jersey, [Prohibited
Transaction Exemption 2011-12; Exemption Application Nos. L-11651 and
L-11652].
Exemption
The restrictions of sections 406(a) and (b) of the Act shall not
apply to the reinsurance of risks and the receipt of premiums therefrom
by Exchange Indemnity Company (EIC), a wholly-owned subsidiary of
Verizon, in connection with an insurance contract sold by Prudential
Life Insurance Company (Prudential) or any successor insurance company
to Prudential which is unrelated to Verizon, to provide group-term life
insurance to certain employees and retirees of Verizon and Verizon
Wireless under The Plan for Group Insurance maintained by Verizon and
the Verizon Wireless Health and Welfare Benefits Plan maintained by
Verizon Wireless (collectively, the Plans), provided the following
conditions are met:
(a) EIC--
(1) Is a party in interest with respect to the Plan by reason of a
stock or partnership affiliation with Verizon that is described in
section 3(14)(E) or (G) of the Act,
(2) Is licensed to sell insurance or conduct reinsurance operations
in at least one State as defined in section 3(10) of the Act, (3) Has
obtained a Certificate of Authority from the Insurance Commissioner of
its domiciliary state which has neither been revoked nor suspended,
(4)(A) Has undergone and shall continue to undergo an examination
by an independent certified public accountant for its last completed
taxable year immediately prior to the taxable year of the reinsurance
transaction; or
(B) Has undergone a financial examination (within the meaning of
the law of its domiciliary State, Vermont) by the Insurance
Commissioner of Vermont within 5 years prior to the end of the year
preceding the year in which the reinsurance transaction occurred, and
(5) Is licensed to conduct reinsurance transactions by a State
whose law requires that an actuarial review of reserves be conducted
annually by an independent firm of actuaries and reported to the
appropriate regulatory authority;
(b) The Plans pay no more than adequate consideration for the
insurance contracts;
[[Page 49791]]
(c) In subsequent years, the formula used to calculate premiums by
Prudential or any successor insurer will be similar to formulae used by
other insurers providing comparable coverage under similar programs.
Furthermore, the premium charge calculated in accordance with the
formula will be reasonable and will be comparable to the premium
charged by the insurer and its competitors with the same or a better
rating providing the same coverage under comparable programs;
(d) The Plans only contract with insurers with a rating of A or
better from A.M. Best Company. The reinsurance arrangement between the
insurer and EIC will be indemnity insurance only, i.e., the insurer
will not be relieved of liability to the Plans should EIC be unable or
unwilling to cover any liability arising from the reinsurance
arrangement;
(e) No commissions, costs or other expenses are paid with respect
to the reinsurance of such contracts; and
(f) For each taxable year of EIC, the gross premiums and annuity
considerations received in that taxable year by EIC for life and health
insurance or annuity contracts for all employee benefit plans (and
their employers) with respect to which EIC is a party in interest by
reason of a relationship to such employer described in section 3(14)(E)
or (G) of the Act does not exceed 50% of the gross premiums and annuity
considerations received for all lines of insurance (whether direct
insurance or reinsurance) in that taxable year by EIC. For purposes of
this condition (f):
(1) the term ``gross premiums and annuity considerations received''
means as to the numerator the total of premiums and annuity
considerations received, both for the subject reinsurance transactions
as well as for any direct sale or other reinsurance of life insurance,
health insurance or annuity contracts to such plans (and their
employers) by EIC. This total is to be reduced (in both the numerator
and the denominator of the fraction) by experience refunds paid or
credited in that taxable year by EIC.
(2) all premium and annuity considerations written by EIC for plans
which it alone maintains are to be excluded from both the numerator and
the denominator of the fraction.
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 May 5, 2011 at 76 FR
25721.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 693-8546. (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 exemption does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the 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) This exemption is 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 this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC this 4th day of August, 2011.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2011-20342 Filed 8-10-11; 8:45 am]
BILLING CODE 4510-29-P
