Proposed Exemptions From Certain Prohibited Transaction Restrictions, 25432-25446 [2016-09946]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 81, Number 82 (Thursday, April 28, 2016)]
[Notices]
[Pages 25432-25446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09946]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Proposed Exemptions From Certain Prohibited Transaction 
Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of 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-11813, The Michael T. Sewell, M.D., 
P.S.C. Profit Sharing Plan (the Plan); D-11822, Plumbers' Pension Fund, 
Local 130, U.A. (the Plan or the Applicant); D-11858, Liberty Media 
401(k) Savings Plan (the Plan); and, D-11866, Baxter International Inc. 
(Baxter or the Applicant).

DATES: 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.

ADDRESSES: 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

[[Page 25433]]

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.__, 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 email 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-1515, 200 Constitution Avenue NW., 
Washington, DC 20210.
    Warning: All comments will be made available to the public. Do not 
include any personally identifiable information (such as Social 
Security number, name, address, or other contact information) or 
confidential business information that you do not want publicly 
disclosed. All comments may be posted on the Internet and can be 
retrieved by most Internet search engines.

SUPPLEMENTARY INFORMATION:

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).
    The proposed exemptions were requested in applications filed 
pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the 
Code, and in accordance with procedures set forth in 29 CFR part 2570, 
subpart B (76 FR 66637, 66644, October 27, 2011).\1\ 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 requested to the Secretary of 
Labor. Therefore, these notices of proposed exemption are issued solely 
by the Department.
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    \1\ The Department has considered exemption applications 
received prior to December 27, 2011 under the exemption procedures 
set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 
10, 1990).
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    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

The Michael T. Sewell, M.D., P.S.C. Profit Sharing Plan (the Plan) 
Located in Bardstown, Kentucky

[Application No. D-11813]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (76 FR 66637, 66644, October 27, 2011). If the 
exemption is granted, the restrictions of section 406(a)(1)(A) and (D) 
and section 406(b)(1) and (b)(2) of the Act and the sanctions resulting 
from the application of section 4975, by reason of section 
4975(c)(1)(A), (D) and (E) of the Code,\2\ shall not apply to the cash 
sale (the Sale) by the individually-directed account (the Account) in 
the Plan of Michael T. Sewell, M.D. (Dr. Sewell or the Applicant) of a 
parcel of unimproved real property (the Property), to Dr. Sewell, a 
party in interest with respect to the Plan; provided that:
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    \2\ For purposes of this proposed 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 Sale is a one-time transaction for cash;
    (b) The sales price for the Property is the greater of: $916,501; 
or the sum of the fair market value of the Property, as established by 
a qualified independent appraiser (the Appraiser), and the fair market 
value of timber on the Property, as determined by a qualified 
independent timber appraiser (the Forester), in separate, updated 
appraisal reports (the Appraisal Reports) on the date of the Sale;
    (c) The Account pays no real estate fees or commissions in 
connection with the Sale;
    (d) The terms of the Sale are no less favorable to the Account than 
the terms the Account would receive under similar circumstances in an 
arm's length transaction with an unrelated party; and
    (e) Michael T. Sewell, M.D., P.S.C. (the Employer) bears 100% of 
the costs of obtaining this exemption, if granted.

Summary of Facts and Representations \3\
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    \3\ The Summary of Facts and Representations is based on the 
Applicant's representations and does not reflect the views of the 
Department, unless indicated otherwise.
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    1. The Employer is an orthopedic medical practice that was formed 
by Dr. Sewell under Kentucky law on December 23, 1990. The Employer is 
located at 875 Pennsylvania Avenue in Bardstown, Kentucky.
    2. The Plan is a defined contribution plan that allows participants 
to self-direct the investments of their individual accounts. Dr. Sewell 
is a 65 year old participant in the Plan and he is also the Plan 
trustee. As of June 17, 2015, Dr. Sewell's Account in the Plan had 
total assets of approximately $916,501. Nearly all of the Account's 
assets is comprised of Property described herein.
    3. In addressing the Account's lack of diversification, the 
Applicant represents that in November 2012, Dr. Sewell completed a 
partial distribution of his Account by rolling over $704,599.09 to an 
individual retirement account (the IRA). At that time, the Account 
still contained an illiquid investment in a real estate investment 
trust (REIT), in addition to the subject Property. Subsequently, the 
REIT was liquidated, and proceeds of $17,011.20 were rolled over into 
the IRA.
    Prior to the rollover, the Applicant represents that Dr. Sewell's 
Account was diversified. Over time, due to the substantial increase in 
the value of the Property and the timber situated thereon, Dr. Sewell's 
Account became heavily concentrated in the Property.
    4. On February 27, 1996, the Account purchased the Property, 
consisting of 277.15 acres of rural farmland, from Mr. Edgar M. Deats 
and Mrs. Frances E. Deats, who are unrelated parties, for a total cash 
purchase price of $279,997.80, that includes $4,997.80 in closing 
expenses. The Property, is located on Deatsville Road in Coxs Creek, 
Kentucky, and is legally described as ``DB 327 PG 678 PC 2 SLOT 265 
Nelson Co.'' The Property was purchased by Dr. Sewell's Account for 
capital appreciation and it adjoins a farm that is owned by Dr. Sewell. 
Approximately 19% of the Property is grassland and 81% timberland.
    5. Since the time of acquisition by the Account, the Property has 
not been used by or leased to anyone. Aside from the Property's total 
acquisition price of $279,997.80, the Account has paid property taxes 
totaling $9,093.66 (or approximately $454 per year); appraisal fees of 
$5,950; $802.11 for liability

[[Page 25434]]

insurance; and $4,207.50 for legal and related fees. Thus, the 
aggregate cost of acquiring and holding the Property by the Account was 
$300,051.07 ($279,997.80 + $20,053.27), as of November 10, 2015.
    6. The Applicant is requesting an individual exemption from the 
Department to allow Dr. Sewell to purchase the Property from his 
Account. In this regard, the Applicant states that: (a) It would be 
difficult for Dr. Sewell to make distributions from his Account upon 
reaching age 70\1/2\ if the Account continues to hold the Property; (b) 
if Dr. Sewell decides to terminate the Plan, the tax laws would not 
permit the rollover of the Property into an individual retirement 
account; and (c) the value of the grassland portion of the Property, 
some of which could be used to grow corn, soybeans, and wheat, has 
stagnated.
    The proposed Sale will be a one-time transaction for cash, for the 
greater of: $916,501; or the sum of the fair market value of the 
Property, as established by the Appraiser, and the fair market value of 
the merchantable timber located on the Property, as determined by the 
Forester, in separate, updated Appraisal Reports on the date of the 
Sale. In addition, the terms of the proposed Sale will be at least as 
favorable to the Account as those obtainable in an arm's length 
transaction with an unrelated party. Further, the Account will pay no 
real estate commission, costs, or other expenses in connection with the 
proposed Sale, and the Employer will pay 100% of the costs of obtaining 
this exemption, if granted. Finally, the Sale will not be part of an 
agreement, arrangement or understanding designed to benefit Dr. Sewell 
or the Employer.
    7. Section 406(a)(1)(A) and (D) of the Act states that a fiduciary 
with respect to a plan shall not cause a plan to engage in a 
transaction if he knows or should know that such transaction 
constitutes a direct or indirect sale or exchange of any property 
between the Plan and a party in interest, or a transfer to, or use by 
or for the benefit of, a party in interest, of any assets of the Plan 
is also a prohibited transaction. The term party in interest is defined 
by section 3(14) of the Act to include any fiduciary. Dr. Sewell is a 
party in interest under section 3(14)(A) of the Act as a fiduciary with 
respect to the Plan because he is the Plan trustee. Therefore, the Sale 
of the Property by the Account to Dr. Sewell would violate section 
406(a)(1)(A) and (D) of the Act.
    In addition, section 406(b)(1) of the Act prohibits a plan 
fiduciary from dealing with the assets of the plan in his own interest 
or for his own account. Moreover, section 406(b)(2) of the Act 
prohibits a plan fiduciary, in his individual or in any other capacity, 
from acting in any transaction involving the plan on behalf of a party 
whose interests are adverse to the interests of the plan or the 
interests of its participants or beneficiaries.
    The sale represents a violation of section 406(b)(1) of the Act 
since Dr. Sewell would be causing his Account to sell the Property to 
himself. In addition, the sale represents a violation of section 
406(b)(2) of the Act since Dr. Sewell would be acting on both sides of 
the transaction.
    8. Mr. Roger F. Leggett of Bardstown, Kentucky, has been appointed 
by Dr. Sewell to serve as the Appraiser and, in such capacity, to 
prepare the Appraisal Report of the Property. The Appraiser, a 
Certified General Appraiser, has been licensed in the State of Kentucky 
since 1994. The Appraiser represents that he has performed appraisal 
work in Kentucky for more than 45 years, of which he spent more than 25 
years working for the U.S. Department of Agriculture where he completed 
in-house appraisals of farms, rural residences and chattels. The 
Appraiser states that the gross revenues he received from parties in 
interest with respect to the Plan, including the preparation of the 
Appraisal Report, represented approximately 1.8% of his actual gross 
revenues in 2014.
    9. In an Appraisal Report dated October 22, 2014, the Appraiser 
describes the Property as a 277.15 acre tract of rural farmland with a 
barn situated thereon, located in the northwest section of Nelson 
County, Kentucky. The Appraiser notes that the Property has level to 
moderately sloping terrain, consisting of grassland and woodland, with 
little marketable timber.
    The Appraiser has used the Sales Comparison Approach to value the 
Property. The Appraiser states that he could not use the Income 
Approach to valuation because there are no crops or income produced by 
the Property. The Appraiser also explains that the Cost Approach could 
not be used to value the Property because there are no improvements to 
the site.
    The Appraiser represents that the Sales Comparison Approach is the 
most reliable because there were real estate sales available for 
comparison. In this regard, the Appraiser states that he reviewed 
public records, Multiple Listing Service data, and obtained information 
from other real estate agents and land owners. Based on the Sales 
Comparison Approach, the Appraiser has placed the fair market value of 
the Property at $831,450, as of October 22, 2014.
    The Appraiser is also of the view that the Property does not have 
any assemblage value. The Appraiser explains that assemblage value is 
where an adjoining property is purchased to enhance the value of the 
present property. According to the Appraiser, this factor works mainly 
in commercial or industrial property where one may need to adjoin land 
for a parking lot or to be able to make the building larger. The 
Appraiser represents that it has been his experience that assemblage 
value is not typically the case with farmland because, generally, as a 
tract of farmland increases in size, the per acre value decreases. The 
Appraiser also states that this has been demonstrated repeatedly in 
local auctions, where land almost always sells for more per acre in 
smaller tracts, as opposed to larger tracts, and there usually are more 
buyers for smaller tracts than for larger tracts.
    In an addendum to the Appraisal Report dated November 11, 2015, the 
Appraiser states that fair market value of the Property has not changed 
since the 2014 valuation.
    10. Mr. Steve Gray of Radcliff, Kentucky has been retained by Dr. 
Sewell, on behalf of the Account, to prepare a report of the estimated 
value of the timber that is located on the Property because the 
Appraiser disclaimed having knowledge of timber values. The Forester is 
a Certified Natural Resource Conservation Service-Technical Service 
Provider, and is licensed in the State of Kentucky. The Forester, who 
is a member of the Association of Consulting Foresters and the Society 
of American Foresters, represents that he has over thirty years' 
experience as a Service Forester and Forestry Supervisor with the 
Kentucky Division of Forestry. The Forester further represents that he 
has no pre-existing relationship with Dr. Sewell.
    The Forester represents that he conducted a forest inventory of the 
Property on September 22, 2015, using ``78 ten factor prism plots'' 
systematically placed throughout the forested parts of the Property. At 
each plot location, the Forester explains that trees 12 inches in 
diameter at breast height (dbh) were recorded by species, dbh, and 
merchantable height. The Forester also represents that plot data 
indicated an average of 33 merchantable trees per acre, yielding an 
average volume per acre of 3,316 board feet (bd. ft.). The Forester 
further explains that 232 acres of the Property would be classified as 
forest, which when considering the 3,616 bd. ft. per acre,

[[Page 25435]]

would yield a total estimated value of 739,480 bd. ft.
    The Forester notes that the Property lies in an area with little 
forest industry. The Forester explains that harvested forest products 
must be transported at least 50 miles to saw mills that offer 
competitive prices for these products. The Forester states that 
transportation distance not only affects the value of the standing 
timber, but also the amount of timber per acre required to make a 
timber harvest economically feasible.
    The Forester represents that based on his experience, approximately 
1,700 bd. ft. per acre is required to make a timber harvest 
economically feasible in the area of the Property. Moreover, the 
Forester explains, comparable properties in the area would likely have 
up to 1,700 bd. ft. per acre without any additional timber value being 
considered in the Property sale. Subtracting 1,700 bd. ft. per acre 
from the average of 3,316 bd. ft. per acre on the Property, the 
Forester states that this leaves 1,616 bd. ft. to be considered as 
additional value that is above the valuation in the Property Appraisal 
Report.
    According to the Forester, the Property contains 232 acres of 
forest with an estimated 1,616 bd. ft. acre, for a total volume of 
374,912 bd. ft. The Forester explains that the total volume was 
apportioned to various species of trees, resulting in a fair market 
value for the timber of $85,051 as of October 3, 2015.
    Thus, based on the $831,450 fair market value of the Property, as 
determined by the Appraiser, and the $85,051 fair market value of the 
timber, as determined by the Forester, the aggregate fair market value 
of the Property is $916,501. Both the Appraiser and the Forester will 
update their respective Appraisal Reports on the date of the Sale.
    11. The Applicant represents that the proposed transaction is 
administratively feasible because the Sale will be a one-time 
transaction for cash. The Applicant also represents that the proposed 
transaction is in the interest of the Account because the Sale will not 
cause the Account to incur any expenses, real estate commissions, or 
other fees. Further, the Applicant explains that the Sale will yield a 
profit to the Account that is attributable to the Property's 
appreciation.
    In addition, the Applicant represents that the proposed transaction 
is protective of the rights of Dr. Sewell, as a Plan participant, 
because the Sale will allow him to reinvest the proceeds from the Sale 
in other investments that are more liquid and have a greater chance of 
capital appreciation, without recurring expenses.
    The Applicant also represents that if the proposed exemption is not 
granted, the Account will experience a hardship or economic loss 
because Dr. Sewell is approaching retirement age, and his Account will 
not be able to satisfy the Internal Revenue Service's required minimum 
distribution requirements due to the lack of divisibility of the 
Property. Finally, the Applicant represents that the Sale is not part 
of an agreement, arrangement or understanding designed to benefit Dr. 
Sewell.
    12. In summary, the Applicant represents that the proposed 
transaction will satisfy the statutory criteria for an exemption as set 
forth in section 408(a) of the Act for the following reasons:
    (a) The Sale will be a one-time transaction for cash;
    (b) The sales price for the Property will be the greater of: 
$916,501; or the sum of the fair market value of the Property, as 
established by the Appraiser, and the fair market value of the timber, 
as determined by the Forester, in separate, updated Appraisal Reports 
on the date of the Sale;
    (c) The Account will pay no real estate fees or commissions in 
connection with the Sale;
    (d) The terms of the Sale will be no less favorable to the Account 
than the terms the Account would receive under similar circumstances in 
an arm's length transaction with an unrelated party; and
    (e) The Employer will bear 100% of the costs of obtaining this 
exemption, if granted.

Notice to Interested Persons

    Because Dr. Sewell is the sole person in the Plan whose Account is 
affected by the proposed transaction, it has been determined that there 
is no need to distribute the notice of proposed exemption (the Notice) 
to interested persons. Therefore, comments and requests for a hearing 
are due thirty (30) days after publication of the Notice in the Federal 
Register.
    All comments will be made available to the public.
    Warning: Do not include any personally identifiable information 
(such as name, address, or other contact information) or confidential 
business information that you do not want publicly disclosed. All 
comments may be posted on the Internet and can be retrieved by most 
Internet search engines.

FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the 
Department, telephone (202) 693-8567. (This is not a toll-free number.)

Plumbers' Pension Fund, Local 130, U.A. (the Plan, or the Applicant) 
Located in Chicago, IL

[Application No. D-11822]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code, and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (76 FR 46637, 66644, October 27, 2011).\4\ If the 
exemption is granted, the restrictions of sections 406(a)(1)(A) and 
406(a)(1)(D) 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 to the sale (the 
Sale) of two commercial buildings (the Properties), by the Plan to the 
Plumbers' Pension Fund, Local 130, U.A. (the Union), a party in 
interest with respect to the Plan, provided that the following 
conditions are satisfied:
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    \4\ For purposes of this proposed 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 Sale is a one-time transaction for cash;
    (b) The price paid by the Union to the Plan is equal to the greater 
of: (1) $1,640,000, or (2) the fair market value of the Properties, as 
determined by a qualified independent appraiser (the Independent 
Appraiser) as of the date of the Sale;
    (c) The Plan does not pay any appraisal fees, real estate fees, 
commissions, costs or other expenses in connection with the Sale;
    (d) The Plan trustees appointed by the Union (the Union Trustees) 
recuse themselves from: (1) Discussions and voting with respect to the 
Plan's decision to enter into the Sale; and (2) all aspects of the 
selection and engagement of the Independent Appraiser for the purposes 
of determining the fair market value of the Properties on the date of 
the Sale;
    (e) The Plan trustees appointed by the employer associations (the 
Employer Trustees), who have no interest in the Sale: (1) Determine, 
among other things, whether it is in the interest of the Plan to 
proceed with the Sale; (2) review and approve the methodology used by 
the Independent Appraiser in the independent appraisal report (the 
Appraisal Report) that is being relied upon; and (3) ensure that such 
methodology is applied by the Independent Appraiser in determining the 
fair market value of the Properties on the date of the Sale; and

[[Page 25436]]

    (f) The Sale is not part of an agreement, arrangement, or 
understanding designed to benefit the Union.

Summary of Facts and Representations \5\
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    \5\ The Summary of Facts and Representations is based on the 
Applicant's representations and does not reflect the views of the 
Department, unless indicated otherwise.
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    1. The Plan. The Plan is a multi-employer defined benefit plan 
which was established on June 1, 1953, pursuant to a collective 
bargaining agreement between various contractor associations (the 
Employer Associations) and the Union (the CBA). Pursuant to the CBA, 
the Employer Associations are required to make monthly contributions to 
the Plan on behalf of their members at a specified amount based upon 
hours worked. As of September 30, 2015, the Plan covered 9,169 
participants and held $931,622,990 in total assets.
    The Plan is administered by a ten member Board of Trustees (the 
Trustees), consisting of five Employer Trustees and five Union 
Trustees. The Trustees have ultimate fiduciary, operational, and 
investment discretion over the Plan's assets, and have entered into an 
agreement for The Northern Trust Company to act as Master Trustee and 
Custodian for the Plan.
    2. The Properties. Included among the assets of the Plan are the 
Properties, which are located at 1330-1332 and 1336 West Washington 
Boulevard, Chicago, Illinois. The Properties were originally purchased 
by the Plan on November 30, 2000, from an unrelated party for a total 
purchase price of $1,365,000. The Plan did not finance the purchase of 
either Property and neither is currently encumbered by a mortgage.
    The building located at 1330-1332 West Washington Boulevard (the 
1330-1332 Building) was constructed in 1939 and consists of a single 
warehouse and industrial space that covers 9,600 square feet. As 
represented by the Applicant, the 1330-1332 Building is specifically 
suited to accommodate printing operations and, as constructed, is 
unsuitable for use as an office space. Since its acquisition by the 
Plan, the 1330-1332 Building has not been leased to, or used by, a 
party in interest to the Plan. The 1330-1332 Building, which is 
currently vacant, was formerly leased by the Plan to an unrelated 
party. The Building located at 1336 West Washington Boulevard (the 1336 
Building) was constructed in 1926 and consists of 6,500 square feet of 
office and storage space.
    3. Lease of the 1336 Building. Effective October 1, 2002, the 
Trustees entered into an agreement to lease office space in the 1336 
Building to the Union for a term of eight years (the 1336 Building 
Lease). Pursuant to its terms, the 1336 Building Lease requires the 
Union to pay to the Plan an annual base rental amount of $51,620, 
payable in equal monthly installments of $4,301.67. As represented by 
the Applicant, and as reflected in the relevant Trustee meeting 
minutes, the Union Trustees recused themselves from the decision-making 
process regarding the 1336 Building Lease.
    Since the initial execution, the Plan and Union have agreed to two 
amendments to the 1336 Building Lease. First, on December 11, 2002, the 
Plan and Union executed an amendment to provide for semi-annual rent 
adjustments based upon the Consumer Price Index (CPI). Second, on 
October 1, 2010, the Plan and Union executed a Lease Modification and 
Extension Agreement (the 1336 Building Lease Extension) which: (a) 
Extended the term of the 1336 Building Lease for an additional 8 years, 
expiring September 30, 2018; and (b) raised the base monthly rent 
amount to $5,192, with provisions for future CPI adjustments to the 
rent. As documented in the relevant Trustee meeting minutes, the Union 
Trustees recused themselves from the decision-making process regarding 
the 1336 Building Lease Extension. Current monthly rent under the 1336 
Building Lease is $5,492.
    With respect to the 1336 Building Lease, the Applicant is relying 
upon Prohibited Transaction Exemption (PTE) 76-1 (41 FR 12740, March 
26, 1976, as corrected by 41 FR 16620, April 20, 1976), and PTE 77-10 
(42 FR 33918, July 1, 1977). Part C of PTE 76-1 provides conditional 
exemptive relief from the prohibited transaction provisions of sections 
406(a) and 407(a) of the Act for the leasing of office space by a 
multiple employer plan to a participating employee organization, 
participating employer, or another multiemployer plan. PTE 77-10, which 
complements PTE 76-1, provides conditional exemptive relief from the 
prohibited transaction provisions of section 406(b)(2) of the Act with 
respect to the leasing of office space by a multiple employer plan to a 
participating employee organization, participating employer, or another 
multiemployer plan. The Applicant represents that the 1336 Building 
Lease meets all of the required conditions under PTEs 76-1 and 77-10. 
The Department, however, expresses no opinion herein on whether the 
requirements of PTEs 76-1 and 77-10 have been met by the Applicant.
    4. Property-Related Expenses. In connection with its ownership of 
the Properties, the Plan currently generates approximately $65,784 in 
rental income on an annual basis from the 1336 Building Lease. This 
income, however, is offset by recurring expenses on the Properties, 
which include real estate taxes, general maintenance costs, and utility 
costs. For the Plan year ending May 31, 2015, the Plan incurred 
expenses totaling $34,389.24 in connection with its ownership of the 
Properties. These incurred expenses included $13,780.75 in real estate 
taxes, $11,112.00 in insurance costs, and $9,505.49 in utility and 
maintenance costs.
    5. Attempt to Sell the 1330-1332 Building. In August 2012, the 
Trustees agreed to pursue a sale of the 1330-1332 Building to an 
unrelated buyer. At the time, the Trustees had determined that the 
1330-1332 Building had become a non-performing asset for the Plan. On 
August 1, 2012, the Trustees entered into an Exclusive Sale and Lease 
Agreement (the Sale and Lease Agreement) with Jameson Real Estate, LLC 
(Jameson), of Chicago, Illinois, an unrelated party with respect to the 
Plan. Pursuant to the Sale and Lease Agreement, the Trustees granted to 
Jameson the exclusive right to either: (a) Sell the 1330-1332 Building 
for an amount within the range of $75.00-$95.00 per square foot; or (b) 
lease the 1330-1332 Building to an unrelated party for a monthly amount 
within the range of $8.50-$10.00 per square foot. The Plan received no 
offers in connection with its efforts to sell or rent the 1330-1332 
Building.
    6. Union's Offer to Purchase the Properties. During the Trustees' 
March 14, 2013 meeting, Union Trustee, Ken Turnquist, informed the 
Trustees that the Union was interested in purchasing both of the 
Properties from the Plan, and that he was in the early stages of 
putting together a Letter of Intent to do so. The Union subsequently 
assessed an inspection report (the Inspection Report), which revealed 
that the Properties were in need of certain remedial masonry and 
environmental work. Specifically, the Inspection Report concluded that 
the 1336 Building required complete tuck-pointing of its North and West 
facing elevations and a rebuild of the six inch exterior veneer of its 
chimneys (the Masonry Repairs). Additionally, the Inspection Report 
concluded that environmental considerations warranted the removal of an 
obsolete underground

[[Page 25437]]

oil tank from beneath the 1330-1332 Building (the Environmental 
Repairs).
    Following receipt of the Inspection Report, the Union solicited and 
received multiple bids to complete the above-cited masonry and 
environmental repairs. With regard to the Masonry Repairs, the Union 
received a low bid of $174,421.00 (the Masonry Bid) from Grove Masonry 
Maintenance, Inc. of Alsip, Illinois, an unrelated party with respect 
to the Plan. With regard to the Environmental Repairs, the Union 
received a low bid of $39,500.00 (the Water Tank Removal Bid) from WM. 
J. Scown Building Company of Wheeling, Illinois, also an unrelated 
party with respect to the Plan.
    7. During the Trustees' March 6, 2014 meeting, Mr. Turnquist 
presented the Trustees with three documents: (a) An offer from the 
Union to purchase the Properties for $1,416,000.00 (the March 2014 
Offer); (b) an appraisal report completed by Charles G. Argianas and 
Robert S. Huth of the Industrial Appraisal Company, of Pittsburgh, 
Pennsylvania (the Independent Appraiser), valuing the Properties at 
$1,630,000.00 as of January 23, 2014 (the January 2014 Appraisal 
Report); and (c) the above-noted Masonry and Water Tank Removal Bids. 
Following recusal by the Union Trustees, the Employer Trustees 
proceeded to review and discuss the March 2014 Offer.
    The Employer Trustees determined that it was in the best interest 
of the Plan and its participants and beneficiaries to sell the 
Properties at their fair market value. In this regard, the Employer 
Trustees determined that the Plan would not assume the Remediation 
Costs as an offset to the purchase price. On September 15, 2015, the 
Employer Trustees communicated to the Union that the Plan was seeking 
full fair market value of $1,640,000.00 for the Properties with no 
offset. The Union thereafter accepted the Employer Trustees' amended 
offer.
    8. Relevant Terms of the Sale. As stated in the Purchase Agreement, 
the Union will deposit $50,000 into an escrow account held for the 
benefit of the Plan with an unrelated escrow agent. The remaining 
balance of $1,590,000 will be paid by the Union to the Plan at closing 
by cash, certified or cashier's check, or wire transfer. As also stated 
in the Purchase Agreement, the Plan will pay no real estate fees or 
commissions, or incur any other expenses or costs as a result of the 
Sale. In this regard, the Union will assume all closing costs 
associated with the Sale, including the city, county, and state 
transfer taxes that are associated with the transaction. Finally, the 
Plan will pay no fees to the Independent Appraiser in connection with 
the Sale.
    9. Legal Analysis. The Applicant has requested an administrative 
exemption from the Department because the proposed Sale violates 
several provisions of the Act. Section 406(a)(1)(A) of the Act provides 
that a fiduciary with respect to a plan shall not cause a plan to 
engage in a transaction if the fiduciary knows or should know that such 
transaction constitutes a direct or indirect sale or exchange, or 
leasing, of any property between a plan and a party in interest. 
Further, section 406(a)(1)(D) of the Act provides that a fiduciary with 
respect to a plan shall not cause a plan to engage in a transaction if 
the fiduciary knows or should know that such transaction constitutes a 
direct or indirect transfer to, or use by or for the benefit of, a 
party in interest, of any assets of the plan.
    Section 3(14)(D) of the Act defines the term ``party in interest'' 
to include an employee organization any of whose members are covered by 
such plan. Section 3(14)(A) of the Act defines the term ``party in 
interest'' to include any fiduciary of such plan. Thus, the Union, as 
an employee organization whose members are covered by the Plan, and the 
Trustees, as fiduciaries to the Plan, are parties in interest with 
respect to the Plan, pursuant to sections 3(14)(A) and 3(14)(D) of the 
Act, respectively. Accordingly, the Sale would constitute a violation 
of section 406(a)(1)(A) and (D) of the Act.
    10. The Qualified Independent Appraiser. On November 2, 2012, Terry 
Musto, Fund Administrator to the Plan, engaged the Industrial Appraisal 
Company to render an opinion as to the fair market value of the 
Properties. As represented by the Applicant, Mr. Musto is neither a 
Union official nor a Union member. The Applicant further represents 
that Mr. Musto has been delegated the power and authority to engage 
service providers on behalf of the Plan.
    As mentioned above, Charles C. Argianas and Robert S. Huth of the 
Industrial Appraisal Company completed the January 2014 Appraisal 
Report. Subsequently, on January 9, 2015, Mr. Argianas and Maksym 
Smolyak completed an updated appraisal report of the Properties, as of 
December 22, 2014 (the January 2015 Appraisal Report).\6\
---------------------------------------------------------------------------

    \6\ The January 2014 and the January 2015 Appraisal Reports are 
together referred to herein as the ``Appraisal Reports.''
---------------------------------------------------------------------------

    Mr. Argianas is a Certified General Real Estate Appraiser in the 
State of Illinois (License #553.000164). He is also a member of the 
Appraisal Institute. Mr. Smolyak is an Associate Real Estate Trainee 
Appraiser, and has performed and assisted in real estate consulting and 
appraisal assignments involving various properties throughout Illinois, 
Indiana, and Wisconsin.
    Messrs. Argianas and Smolyak have certified that they have ``no 
present or prospective interest in the [P]roperty that is the subject 
of this report and no personal interest with respect to the parties 
involved,'' and that the fees derived from parties in interest are 
equal to less than \1/10\th of 1% of Industrial Appraisal Company's 
revenues for 2014, from all sources, and that the Industrial Appraisal 
Company has never been engaged by the Union, or any other party in 
interest to the Plan. Messrs. Argianas and Smolyak have also 
acknowledged that they are aware that the Appraisal Reports are being 
used for the purposes of obtaining an individual exemption from the 
Department.
    As represented in the Appraisal Reports, Messrs. Argianas and 
Smolyak performed the following underlying tasks to determine the 
Properties' value: (a) An analysis of regional, city, market area, 
site, and improvement data; (b) an inspection of the Properties and the 
immediate market area; and (c) a review of data regarding real estate 
taxes, zoning, and utilities.
    In valuing the Properties, Messrs. Argianas and Smolyak considered 
all of the commonly-accepted approaches to property valuation, 
including the Cost Approach, Income Capitalization Approach and Sales 
Comparison Approach. After considering each of the three approaches 
separately, they determined that the Sales Comparison Approach 
warranted primary consideration in establishing market value for the 
Properties. Messrs. Argianas and Smolyak state that the Sales 
Comparison Approach is most reliable when there are a sufficient number 
of veritable sales and offerings that are representative of a subject 
property. In such a case, they explain, fewer adjustments increase the 
reliability of the ultimate valuation. With respect to the other 
valuation approaches, Messrs. Argianas and Smolyak accorded ``due 
consideration'' to the Income Capitalization Approach, and ``little 
consideration'' to the Cost Approach.
    After inspecting the Properties and analyzing all relevant data, 
Messrs. Argianas and Smolyak determined the ``AS-IS'' Fee Simple Market 
Value of the Properties to be $1,430,000, as of December 22, 2014 in 
the January 2015 Appraisal Report. To arrive at their valuation 
conclusion for the Properties,

[[Page 25438]]

Messrs. Argianas and Smolyak first assigned a full fair market value of 
$1,640,000 to the Properties' land, structure, and improvements. They 
then deducted $210,000 from that amount to account for the Remediation 
Costs.
    The Employer Trustees and the Union have agreed to the purchase 
price of $1,640,000, which represents the full fair market value of the 
Properties with no offsets for the Remediation Costs or other costs. As 
a specific condition of this proposed exemption, the Independent 
Appraiser will reassess the fair market value of the Properties on the 
Sale date in an updated appraisal (the Updated Appraisal). With respect 
to the Updated Appraisal, the Employer Trustees will ensure that the 
Independent Appraiser's valuation methodology is properly applied in 
determining the fair market value of the Properties.
    11. Statutory Findings. The Applicant represents that the proposed 
exemption is administratively feasible because it involves a one-time 
sale of the Properties for cash. As such, the proposed exemption will 
not require ongoing oversight by the Department. In addition, the 
Applicant represents that the proposed exemption is in the interest of 
the Plan and its participants and beneficiaries because the Sale will 
facilitate a more productive investment vehicle for the Plan. In this 
regard, the Applicant estimates that the proceeds from the Sale will 
generate annual income in excess of $100,000 for the Plan, going 
forward.
    In addition, the Applicant represents that anticipated income to 
the Plan following the Sale will significantly exceed the income which 
the Plan would realize through a continued ownership of the Properties. 
The Applicant points out that the Plan currently generates 
approximately $65,000 in rental income on an annual basis as the owner 
of the Properties. This income, however, is offset by recurring 
expenses, which include real estate taxes, general upkeep and 
maintenance costs, and utility costs. The Applicant represents that an 
offset of these costs leaves the Plan with approximately $11,000 in 
annual net income as owner of the Properties.
    13. Summary. In summary, it is represented that the proposed 
transaction satisfies or will satisfy the statutory criteria for an 
exemption under section 408(a) of the Act because:
    (a) The Sale will be a one-time transaction for cash.
    (b) The price paid by the Union to the Plan will be equal to the 
greater of: (1) $1,640,000, or (2) the fair market value of the 
Properties, as determined by the Independent Appraiser as of the date 
of the Sale;
    (c) The Plan will not pay any appraisal fees, real estate fees, 
commissions, costs or other expenses in connection with the Sale;
    (d) The Union Trustees will recuse themselves from: (1) Discussions 
and voting with respect to the Plan's decision to enter into the Sale; 
and (2) all aspects of the selection and engagement of the Independent 
Appraiser for the purposes of determining the fair market value of the 
Properties on the date of the Sale;
    (e) The Employer Trustees, who have no interest in the Sale: (1) 
Will determine, among other things, whether it is in the best interest 
of the Plan to proceed with the Sale of the Properties; (2) will review 
and approve the methodology used by the Independent Appraiser in the 
Appraisal Report that is being relied upon; and (3) will ensure that 
such methodology is applied by the Independent Appraiser in determining 
the fair market value of the Properties on the date of the Sale; and
    (f) The Sale will not be part of an agreement, arrangement, or 
understanding designed to benefit the Union.

Notice to Interested Persons

    The persons who may be interested in the publication in the Federal 
Register of the Notice of Proposed Exemption (the Notice) include all 
individuals who are participants in the Plan. It is represented that 
such interested persons will be notified of the publication of the 
Notice by first class mail to such interested person's last known 
address within fifteen (15) days of publication of the Notice in the 
Federal Register. Such mailing will contain a copy of the Notice, as it 
appears in the Federal Register on the date of publication, plus a copy 
of the Supplemental Statement, as required, pursuant to 29 CFR 
2570.43(b)(2), which will advise all interested persons of their right 
to comment on and/or to request a hearing. All written comments or 
hearing requests must be received by the Department from interested 
persons within 45 days of the publication of this proposed exemption in 
the Federal Register.
    All comments will be made available to the public. Warning: Do not 
include any personally identifiable information (such as name, address, 
or other contact information) or confidential business information that 
you do not want publicly disclosed. All comments may be posted on the 
Internet and can be retrieved by most Internet search engines.

FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department 
at (202) 693-8456. (This is not a toll-free number.)

Liberty Media 401(k) Savings Plan (the Plan)

    Located in Englewood, CO
[Application No. D-11858]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA or the Act) and section 4975(c)(2) of 
the Internal Revenue Code of 1986, as amended (the Code) and in 
accordance with the procedures set forth in 29 CFR part 2570, subpart B 
(76 FR 66637, 66644, October 27, 2011).\7\
---------------------------------------------------------------------------

    \7\ For purposes of this proposed exemption, references to the 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

Section I. Covered Transactions

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the Act shall not apply 
to: (1) The acquisition by the Plan of certain stock subscription 
rights (the Rights) to purchase shares of Liberty Broadband Series C 
common stock (LB Series C Stock), in connection with a rights offering 
(the Rights Offering) held by Liberty Broadband Corporation (Liberty 
Broadband), a party in interest with respect to the Plan; and (2) the 
holding of the Rights by the Plan during the subscription period of the 
Rights Offering, provided that the conditions described in Section II 
below have been met.

Section II. Conditions for Relief

    (a) The Plan's acquisition of the Rights resulted solely from an 
independent corporate act of Liberty Broadband;
    (b) All holders of Liberty Broadband Series A common stock and 
Liberty Broadband Series C common stock (collectively, the LB Stock), 
including the Plan, were issued the same proportionate number of Rights 
based on the number of shares of LB Stock held by each such 
shareholder;
    (c) For purposes of the Rights Offering, all holders of LB Stock, 
including the Plan, were treated in a like manner;
    (d) The acquisition of the Rights by the Plan was made in a manner 
that was consistent with provisions of the Plan for the individually-
directed investment of participant accounts;
    (e) The Liberty Media 401(k) Savings Plan Administrative Committee 
(the

[[Page 25439]]

Committee) directed the Plan trustee to sell the Rights on the NASDAQ 
Global Select Market, in accordance with Plan provisions that precluded 
the Plan from acquiring additional shares of LB Stock;
    (f) The Committee did not exercise any discretion with respect to 
the acquisition and holding of the Rights; and
    (g) The Plan did not pay any fees or commissions in connection with 
the acquisition or holding of the Rights, and did not pay any 
commissions to Liberty Broadband, Liberty Media Corporation, 
TruePosition, Inc., or any affiliates of the foregoing in connection 
with the sale of the Rights.
    Effective Date: The proposed exemption, if granted, will be 
effective from December 15, 2014, the date that the Plan received the 
Rights, until December 17, 2014, the date the Rights were sold by the 
Plan on the NASDAQ Global Select Market.

Summary of Facts and Representations \8\
---------------------------------------------------------------------------

    \8\ The Summary of Facts and Representations is based on Liberty 
Media's representations and does not reflect the views of the 
Department, unless indicated otherwise.
---------------------------------------------------------------------------

Background
    1. Liberty Media Corporation (Liberty Media) is a Delaware 
corporation with its principal place of business in Englewood, 
Colorado. Liberty Media is a publicly traded corporation primarily 
engaged in media, communications and entertainment operating businesses 
through several subsidiaries, including Liberty Broadband Corporation 
(Liberty Broadband). Liberty Broadband holds ownership interests in 
Charter Communications, Inc. (Charter Communications), TruePosition, 
Inc. (TruePosition), and a minority equity investment in Time Warner 
Cable, among other debt and equity assets.
    2. Liberty Media sponsors and maintains the Liberty Media 401(k) 
Savings Plan (the Plan). The assets of the Plan are held in the Liberty 
Media 401(k) Savings Plan Trust (the Trust). The Plan and Trust were 
created for the exclusive benefit of employee-participants and their 
beneficiaries. Liberty Media represents that the Plan is intended to 
qualify under sections 401(a) and 401(k) of the Code, and the Trust is 
intended to be exempt under Section 501(a) of the Code.
    The Plan allows participants to direct the investment of their 
entire Plan accounts into any of 22 investment alternatives, including 
certain employer securities issued by Liberty Media such as Liberty 
Media's Series A and Series C common stock, as well as employer 
securities issued by other participating employers in the Plan. The 
Liberty Media 401(k) Savings Plan Administrative Committee (the 
Committee) is appointed by the board of directors of Liberty Media and 
has investment discretion over the Plan's investments, except to the 
extent that the participants can direct the investment of their Plan 
accounts. The trustee of the Plan (the Trustee) is Fidelity Management 
Trust Company (Fidelity). The Trustee acts as custodian of Plan assets, 
holding legal title to Plan assets, and executing investment directions 
in accordance with the participants' written instructions.
The Spin-Off of Liberty Broadband
    3. On November 4, 2014, Liberty Media engaged in a spin-off (the 
Spin-Off) of its subsidiary, Liberty Broadband. Liberty Media notes 
that, at the time of the Spin-Off, Liberty Broadband owned a 100% 
ownership interest in TruePosition, and certain other equity and debt 
interests.
    4. According to Liberty Media, for every share of Liberty Media's 
Series A common stock held by a shareholder, including the Plan, as of 
5:00 p.m., New York City time, on October 29, 2014, the shareholder 
received one quarter (1/4) of a share of Liberty Broadband's Series A 
common stock (LB Series A Stock), with cash issued in lieu of 
fractional shares. Furthermore, for every share of Liberty Media's 
Series C common stock held by a shareholder, including the Plan, as of 
5:00 p.m., New York City time, on October 29, 2014, the shareholder 
received one quarter (1/4) of a share of Liberty Broadband's Series C 
common stock (LB Series C Stock), with cash issued in lieu of 
fractional shares. Liberty Media explains that the shares of LB Series 
A Stock and LB Series C Stock (collectively, the LB Stock) were 
distributed as of 5:00 p.m., New York City time, on November 4, 2014 
(the Spin-Off Date). Liberty Media notes that Liberty Broadband 
continued to own its interests in TruePosition, among its other 
interests, following the Spin-Off Date.
    5. According to Liberty Media, the LB Stock received by the Plan as 
a result of the Spin-Off was allocated to the Plan participants' 
accounts in the same proportion as the shares were distributed in the 
Spin-Off. However, Liberty Media explains that, effective as of the 
Spin-Off Date, both the Plan and Trust were amended so as to preclude 
additional investments in LB Stock. As such, Liberty Media explains, 
the Plan was frozen to additional investments in LB Stock as of the 
Spin-Off Date. Plan participants holding the LB Stock received in the 
Spin-Off in their accounts could then elect to sell or transfer out the 
LB Stock held in their Plan accounts at any time.
    6. Liberty Media explains that TruePosition, a participating 
employer with respect to the Plan prior to the Spin-Off, had considered 
establishing a new 401(k) plan for its employees that would be 
available for those employees immediately upon the Spin-Off. However, 
it was unable to do so within the ten-day timeframe prior to the Spin-
Off Date. At the same time, TruePosition did not want its employees to 
be without a 401(k) plan to contribute to during this period. As such, 
Liberty Media allowed TruePosition to continue to participate in the 
Plan for the remainder of 2014. Liberty Media represents that 
TruePosition employees no longer participate in the Plan.
The Rights Offering
    7. Liberty Media represents that, on December 10, 2014, Liberty 
Broadband initiated a rights offering (the Rights Offering) and issued 
subscription rights (individually, a Right, and collectively, the 
Rights) to purchase shares of LB Series C Stock to holders of the LB 
Stock, including the Plan, as of 5:00 p.m., New York City time, on 
December 4, 2014 (the Record Date). In a Form S-1 filed with the SEC on 
October 16, 2014, Liberty Broadband stated that it conducted the Rights 
Offering to raise capital for general corporate purposes. According to 
Liberty Media, under the terms of the Rights Offering, one Right was 
issued for every five shares of LB Stock held by the shareholder, 
including the Plan. Once received, each Right gave the respective 
shareholder the right to purchase one share of LB Series C Stock at a 
20% discount to the 20-trading day volume weighted average price of the 
LB Series C Stock following the Spin-Off Date.
    According to Liberty Media, the Rights could be exercised or sold 
during the period of the Rights Offering, which ran from December 11, 
2014 through January 9, 2015. Liberty Media notes that the Rights began 
trading on the Nasdaq Global Select Market (the NASDAQ) on a when-
issued basis on December 10, 2014, and began fully trading on December 
11, 2014, under the symbol ``LBRKR.'' During the Rights Offering 
period, the Rights traded at an average daily volume of 254,232 Rights/
day and at a total cumulative trading volume of 5,338,866 Rights.
    According to Liberty Media, the Plan held 287,143.473 shares of LB 
Stock as of the Record Date. As such, Liberty Media states that the 
Plan received 57,428.641 Rights in connection with the Rights Offering.

[[Page 25440]]

    8. Liberty Media represents that, because of the restrictions 
placed on the Plan's ability to invest in LB Stock described above, 
Plan participants could not exercise Rights for their Plan accounts. 
Liberty Media states that, because the exercise of the Rights received 
in the Rights Offering was not permitted, the Committee directed the 
Trustee to sell the Rights received by the Plan, in accordance with its 
instructions.
    9. According to Liberty Media, the Trustee received the Rights on 
behalf of the Plan on December 15, 2014. Liberty Media represents that 
the Plan established a separate temporary investment fund to receive 
and hold the Rights (the Rights Fund) pending the disposition of the 
Rights by the Trustee. Liberty Media notes that the Trustee acted as 
custodian of the Rights held in the Rights Fund. Liberty Media explains 
that the Rights were credited to participants' Plan accounts based on 
their respective holdings of LB Stock.
    10. Liberty Media represents that the Trustee sold the Plan's 
Rights on the NASDAQ at market value on December 17, 2014, and the 
settlement from the sale of such Rights was completed by December 22, 
2014. Liberty Media explains that, during the period that the Rights 
were traded on the NASDAQ from December 10, 2014 through January 9, 
2015), the Rights sold for prices between $6.64 and $11.82 per Right. 
Liberty Media represents that the Plan received an average price of 
$7.6323 per Right for the sale of the Rights on the NASDAQ, for a total 
of $438,312.65.
    11. According to Liberty Media, the Committee did not exercise any 
discretion with respect to the acquisition and holding of the Rights, 
because the Rights were unilaterally issued by Liberty Broadband to all 
holders of the LB Stock, including the Plan, without any action on the 
part of any stockholder. Liberty Media explains that, because the 
exercise of the Rights to purchase additional LB Series C Stock was not 
permitted, due to the fact that new investments in the Shares were not 
permitted under the Plan, the Committee directed the Trustee to sell 
the Rights.
    12. Liberty Media represents that the Plan did not pay any fees or 
commissions in connection with the acquisition and holding of the 
Rights. Liberty Media notes that the Plan paid a commission rate of 2.9 
cents per Right to Fidelity Brokerage Services LLC (Fidelity 
Brokerage), an affiliate of Fidelity, the Trustee, in connection with 
the sale of the Rights.\9\ Liberty Media explains that the commissions 
were paid out of the Plan's forfeiture accounts.
---------------------------------------------------------------------------

    \9\ Liberty Media explains that the parties are relying on the 
exemptive relief provided by section 408(b)(2) of the Act, relating 
to the provision by a party-in-interest to the Plan, and the payment 
therefor, of services necessary for the administration of the Plan, 
if no more than reasonable compensation is paid for such service. 
Liberty Media represents that the Plan Committee determined that 
Fidelity Brokerage was an appropriate provider of brokerage services 
in connection with the sale of the Rights on the NASDAQ and that the 
fees charged by Fidelity Brokerage for those services was 
reasonable. The Department is expressing no opinion herein as to 
whether the provision of services by Fidelity Brokerage to the Plan 
and the payment of commissions by the Plan to Fidelity Brokerage 
satisfy the requirements of section 408(b)(2) of the Act.
---------------------------------------------------------------------------

Exemptive Relief Requested
    13. Liberty Media represents that the acquisition and holding by 
the Plan of the Rights constitute prohibited transactions in violation 
of sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the Act. 
Section 406(a)(1)(E) of the Act provides that a fiduciary with respect 
to a plan shall not cause the plan to engage in a transaction if he or 
she knows or should know that such transaction constitutes the 
acquisition, on behalf of the plan, of any employer security in 
violation of section 407(a) of the Act. Section 406(a)(2) of the Act 
provides that a fiduciary of a plan shall not permit the plan to hold 
any employer security if he or she knows or should know that holding 
such security violates section 407(a) of the Act. Under section 
407(a)(1)(A) of the Act, a plan may not acquire or hold any ``employer 
security'' which is not a ``qualifying employer security.'' Under 
section 407(d)(1) of the Act, ``employer securities'' are defined, in 
relevant part, as securities issued by an employer of employees covered 
by the plan, or by an affiliate of such employer. Section 407(d)(5) of 
the Act provides, in relevant part, that ``qualifying employer 
securities'' are stock or marketable debt obligations.
    Liberty Media states that the Rights constitute ``employer 
securities'' under section 407(d)(1) of the Act because the employees 
of TruePosition, an affiliate of Liberty Broadband, participated in the 
Plan at the time of the Rights Offering. Therefore, because the Rights 
were issued by an affiliate of TruePosition, which was an employer of 
employees covered by the Plan at the time of the Rights Offering, the 
Rights constituted employer securities. Liberty Media states further 
that, since the Rights did not constitute stock or marketable debt 
securities, they were not qualifying employer securities. Therefore, 
Liberty Media requests a retroactive exemption from sections 
406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the Act for the 
acquisition and holding of the Rights in connection with the Rights 
Offering.
    14. As explained above, Liberty Media represents that the 
acquisition of the Rights has been completed. Liberty Media represents 
that no Plan accounts currently hold any Rights. Liberty Media notes 
that the Rights were sold by the Plan on the NASDAQ and that no Rights 
were exercised while in the Plan accounts. Liberty Media seeks 
retroactive relief effective from December 15, 2014, the date that the 
Plan received the Rights, until December 17, 2014, the date the Rights 
were sold on the NASDAQ.
Statutory Findings
    15. Liberty Media represents that the proposed exemption is 
administratively feasible. Liberty Media represents that all 
shareholders, including the Plan, were treated in a like manner with 
respect to the acquisition and holding of the Rights. Furthermore, 
Liberty Media notes that the Rights were distributed to all 
shareholders of LB Stock, and upon receipt of the Rights by the Plan, 
they were placed in the Rights Fund. Thereafter, because the Plan was 
not permitted to acquire additional LB Stock, the Committee directed 
the Trustee to sell all of the Rights on the NASDAQ in accordance with 
their instructions. As such, Liberty Media represents that there is no 
reason for any continuing Departmental oversight.
    16. Liberty Media represents that an exemption for the Plan's 
acquisition and holding of the Rights through its participation in the 
Rights Offering is in the interests of the Plan and its participants 
and beneficiaries because it allowed participants and beneficiaries to 
benefit from the sale of the Rights at no cost to the Plan, with the 
exception of a commission paid in connection with the sale of the 
Rights.
    In this regard, the Rights were credited to participants' Plan 
accounts based on their respective holdings of Shares, and the 
proportionate cash proceeds from the sale of the Rights were placed in 
each respective account.
    17. Liberty Media represents that an exemption for the acquisition 
and holding of the Rights in the Rights Offering is protective of the 
rights of participants and beneficiaries because the Rights were sold 
on the NASDAQ by the Trustee for their market value, in arms'-length 
transactions between unrelated parties. Furthermore, Liberty

[[Page 25441]]

Media represents that the Plan did not pay any fees or commissions with 
respect to the acquisition or holding of the Rights, and it did not pay 
any commissions to any affiliate of Liberty Broadband, Liberty Media, 
or TruePosition with respect to the sale of the Rights.
Summary
    18. In summary, Liberty Media represents that the proposed 
exemption satisfies the statutory criteria for an exemption under 
section 408(a) of the Act for the reasons stated above and for the 
following reasons:
    a. The Plan's acquisition of the Rights resulted solely from an 
independent corporate act of Liberty Broadband;
    b. All holders of LB Stock, including the Plan, were issued the 
same proportionate number of Rights based on the number of shares of LB 
Stock held by each such shareholder;
    c. For purposes of the Rights Offering, all holders of LB stock, 
including the Plan, were treated in a like manner;
    d. The acquisition of the Rights by the Plan was made in a manner 
that was consistent with provisions of the Plan for the individually-
directed investment of participant accounts;
    e. The Committee directed the Plan trustee to sell the Rights on 
the NASDAQ, in accordance with Plan provisions that precluded the Plan 
from acquiring additional shares of LB Stock;
    f. The Committee did not exercise any discretion with respect to 
the acquisition and holding of the Rights; and
    g. The Plan did not pay any fees or commissions in connection with 
the acquisition or holding of the Rights, and did not pay any 
commissions to Liberty Broadband, Liberty Media, TruePosition, or any 
affiliates of the foregoing in connection with the sale of the Rights.

Notice to Interested Persons

    Notice of the proposed exemption will be given to all Interested 
Persons within 7 days of the publication of the notice of proposed 
exemption in the Federal Register, by first class U.S. mail to the last 
known address of all such individuals. Such notice will contain a copy 
of the notice of proposed exemption, as published in the Federal 
Register, and a supplemental statement, as required pursuant to 29 CFR 
2570.43(a)(2). The supplemental statement will inform interested 
persons of their right to comment on the pending exemption. Written 
comments are due within 37 days of the publication of the notice of 
proposed exemption in the Federal Register.
    All comments will be made available to the public.
    Warning: If you submit a comment, EBSA recommends that you include 
your name and other contact information in the body of your comment, 
but DO NOT submit information that you consider to be confidential, or 
otherwise protected (such as Social Security number or an unlisted 
phone number) or confidential business information that you do not want 
publicly disclosed. All comments may be posted on the Internet and can 
be retrieved by most Internet search engines.

FOR FURTHER INFORMATION CONTACT: Scott Ness of the Department, 
telephone (202) 693-8561. (This is not a toll-free number.)

Baxter International Inc. (Baxter or the Applicant) Located in 
Deerfield, IL

[Application No. D-11866]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974, as amended, (ERISA) and section 4975(c)(2) of the Internal 
Revenue Code of 1986, as amended (the Code), and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 
66644, October 27, 2011).

Section I. Transaction

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(A) and (D) and sections 406(b)(1) and (2) of ERISA and 
sections 4975(c)(1)(A), (D), and (E) of the Code shall not apply to the 
contribution of publicly traded common stock of Baxalta (the 
Contributed Stock) by Baxter (the Contribution) to the Baxter 
International Inc. and Subsidiaries Pension Plan (the Plan), provided:
    (a) Fiduciary Counselors Inc. (the Independent Fiduciary) will 
represent the interests of the Plan, the participants, and 
beneficiaries with respect to the Contribution, including but not 
limited to, taking the following actions:
    (i) Determining whether the Contribution is in the interests of the 
Plan and of its participants and beneficiaries, and is protective of 
the rights of participants and beneficiaries of the Plan;
    (ii) Determining whether and on what terms the Contribution should 
be accepted by the Plan;
    (iii) If the Contribution is accepted by the Plan, establishing and 
administering the process (subject to such modifications as the 
Independent Fiduciary may make from time to time) for liquidating the 
Contributed Stock, as is prudent under the circumstances;
    (iv) Determining the fair market value of the Contributed Stock as 
of the date of the Contribution;
    (v) Monitoring the Contribution and holding of Contributed Stock on 
a continuing basis and taking all appropriate actions necessary to 
safeguard the interests of the Plan; and
    (vi) If the Contribution is accepted by the Plan, voting proxies 
and responding to tender offers with respect to the Contributed Stock 
held by the Plan;
    (b) Solely for purposes of determining the Plan's minimum funding 
requirements (as determined under section 412 of the Code), adjusted 
funding target attainment percentage (AFTAP) (as determined under 
Treas. Reg. section 1.436-1(j)(1)), and funding target attainment 
percentage (as determined under section 430(d)(2) of the Code), the 
Plan's actuary (the Actuary) will not count as a contribution to the 
Plan any shares of Contributed Stock that have not been liquidated;
    (c) For purposes of determining the amount of any Contribution, the 
Contributed Stock shall be deemed contributed only at the time it is 
sold, equal to the lesser of: (1) The proceeds from the sale of such 
Contributed Stock; or (2) the value of such Contributed Stock on the 
date of the initial contribution as determined by the Independent 
Fiduciary;
    (d) The Contributed Stock represents no more than 20% of the fair 
market value of the total assets of the Plan at the time it is 
contributed to the Plan;
    (e) The Plan pays no commissions, costs, or other expenses in 
connection with the Contribution, holding, or subsequent sale of the 
Contributed Stock, and any such expenses paid by Baxter will not be 
treated as a contribution to the Plan;
    (f) Baxter makes cash contributions to the Plan to the extent that 
the cumulative proceeds from the sale of the Contributed Stock at each 
contribution due date (determined under section 303(j) of ERISA) are 
less than the cumulative cash contributions Baxter would have been 
required to make to the Plan, in the absence of the Contribution. Such 
cash contributions shall be made until all of the Contributed Stock is 
sold by the Plan; and
    (g) Baxter contributes to the Plan cash amounts needed for the Plan 
to attain an AFTAP (determined under Treas. Reg. section 1.436-1(j)(1)) 
of at least 80% as of the first day of each plan year during

[[Page 25442]]

which the Plan holds Contributed Stock, as determined by the Actuary, 
without taking into account any unsold Contributed Stock as of April 1 
of the plan year.

Summary of Facts and Representations 10
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    \10\ The Summary of Facts and Representations is based on the 
Applicant's representations and does not reflect the views of the 
Department, unless indicated otherwise.
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Background
    1. Baxter International, Inc. (Baxter or the Applicant) is a 
Delaware corporation headquartered in Deerfield, Illinois, and does 
business throughout the world. Baxter was originally founded in 1931 as 
a manufacturer of intravenous (IV) solutions. Baxter's shares are 
publicly traded on the New York Stock Exchange (the NYSE). Prior to the 
spin-off transaction described below, Baxter had approximately 60,000 
employees worldwide and two principal lines of business with 
manufacturing and research facilities in the United States, Belgium, 
Czech Republic, France, Germany, Ireland, Italy, Malta, Poland, Spain, 
Sweden, Switzerland, and the United Kingdom. The first business line 
involved the manufacture and sale of medical devices, primarily 
products used in the delivery of fluids and drugs to patients (the 
Medical Products Business). The second business line involved the 
manufacture and sale of products derived from blood plasma and other 
natural substances and used to treat bleeding disorders, immune 
deficiencies, and other conditions (the BioScience Business). In 2014, 
Baxter had net income of approximately $2.5 billion on net sales of 
approximately $16.7 billion, and as of December 31, 2014, its total 
shareholder's equity was in excess of $8.1 billion. Additionally, its 
debt is rated ``investment grade'' by the Standard & Poor's, Moody's, 
and Fitch rating services.
    2. Baxalta Incorporated (Baxalta) is a Delaware corporation that 
was incorporated on September 8, 2014, as a wholly-owned subsidiary of 
Baxter. Baxter transferred the BioScience Business to Baxalta as part 
of the spin-off described below. For 2014, Baxalta's net sales were 
approximately $6.109 billion, and its net operating income was 
approximately $1.114 billion. As of March 31, 2015, Baxalta had total 
assets of approximately $11 billion. Baxalta has approximately 16,000 
employees worldwide, with plants located in six countries.
    3. The Plan is a defined benefit pension plan qualified under 
section 401(a) of the United States Internal Revenue Code of 1986, as 
amended (the Code) and sponsored and maintained by Baxter for the 
benefit of its employees located within the United States. As of May 1, 
2015, there were a total of 30,836 participants and beneficiaries in 
the Plan. Baxter froze the Plan to new participants on December 31, 
2006, and no person hired or re-hired, or transferred to a Baxter 
company in the United States after such date is eligible to participate 
in the Plan. Persons who were participants in the Plan on December 31, 
2006, continue to accrue benefits under the Plan, except that Baxter 
gave participants who had fewer than five years of vesting service on 
December 31, 2006, an election between: (1) Continuing to accrue 
benefits under the Plan; or (2) receiving enhanced contributions to 
Baxter's defined contribution plan (i.e., its 401(k) plan).
    4. The Plan is funded by the Baxter International Inc. and 
Subsidiaries Pension Trust (the Trust), which was established pursuant 
to a trust agreement originally entered into July 1, 1986. The Plan's 
assets are invested under the direction of independent investment 
advisers, who are selected and overseen by Baxter's Investment 
Committee. As of June 30, 2015, the Plan had approximately $3.0 billion 
in total assets.\11\
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    \11\ The number of participants and beneficiaries and the total 
Plan assets noted in this proposal represent totals after giving 
effect to the spin-off described below.
---------------------------------------------------------------------------

    5. Baxter's Administrative Committee is a committee comprised of 
employees of Baxter, which is appointed by the Compensation Committee 
of Baxter's Board of Directors. The Administrative Committee is 
responsible for the administration of Baxter's employee benefit plans, 
including the Plan, and is the designated ``plan administrator'' of the 
Plan for purposes of ERISA. The Investment Committee is also a 
committee comprised of employees of Baxter, but is appointed by 
Baxter's Board of Directors. The Investment Committee is responsible 
for directing the investment of the Plan's assets, including the 
selection and oversight of all investment managers and advisers for the 
Plan. The members of both the Administrative Committee and Investment 
Committee (together, the Committees) are named fiduciaries for purposes 
of ERISA with respect to the Plan. Both committees approved the 
proposed transaction of Contributed Stock and retention of Fiduciary 
Counselors, Inc. to act as the independent fiduciary for the Plan (the 
Independent Fiduciary).
    6. The Plan's independent actuary, Towers Watson (the Actuary), 
determined that the Plan's adjusted funding target attainment 
percentage (AFTAP) as of January 1, 2014, was 104.3%, and the AFTAP as 
of January 1, 2015, was 107.16%. Baxter elected to apply its credit 
balance under the Plan to satisfy its minimum funding obligation for 
the 2014 plan year and was not required to make any cash contribution 
for that year. Baxter's minimum contribution obligation for 2015 was 
reduced to zero by the application of funding balances from prior 
years, and accordingly Baxter was not obligated to make (and did not 
make) any 2015 contribution. Under current projections, and excluding 
the proposed Contribution, Baxter states that it will not be required 
to make any cash contributions to the Plan until the 2019 plan year.
The Spin-Off
    7. Baxter distributed approximately 80.5 percent of the common 
stock of Baxalta (the Baxalta Stock) to the shareholders of Baxter as a 
stock dividend (the Spin-Off) on July 1, 2015 (the Spin-Off Date). Each 
shareholder of Baxter received one share of Baxalta Stock for each 
share of Baxter stock owned on the record date for the Spin-Off. 
Furthermore, pursuant to a Separation and Distribution Agreement, dated 
June 30, 2015, between Baxter and Baxalta, Baxter transferred to 
Baxalta all of the assets that made up the BioScience Business, and 
Baxalta assumed the liabilities relating to the BioScience Business.
    8. In connection with the Spin-Off, effective May 1, 2015, Baxalta 
established the Baxalata Incorporated and Subsidiaries Pension Plan 
(the Baxalta Plan), and the accrued benefits of all active participants 
in the Plan whose employment was transferred to Baxalta pursuant to the 
spin-off were transferred to the Baxalta Plan. The benefits of all 
terminated and retired participants were retained by the Plan, 
regardless of whether the participant was employed in the Medical 
Products Business or the BioScience Business.
    9. In connection with the Spin-Off, but prior to the Spin-Off Date, 
Baxter caused a registration of the Baxalta Stock to be filed with the 
Securities and Exchange Commission, and caused the Baxalta Stock to be 
listed on the NYSE, so that immediately following the Spin-Off, Baxalta 
became a publicly traded stock, freely tradable on the NYSE. Baxter 
received a private letter ruling (the Private Letter Ruling) from the 
Internal Revenue Service covering certain federal income tax 
consequences

[[Page 25443]]

of the Spin-Off. According to the Applicant, the Private Letter Ruling 
provides that Baxter's use of the Baxalta Stock retained by Baxter (the 
Retained Stock) to satisfy such debts and obligations, including the 
proposed contribution of a portion of the Retained Stock to the Plan, 
will not result in the recognition by Baxter of taxable income, 
provided that the Retained Stock is used for such purpose within 
eighteen months following the Spin-Off Date.
The Contribution
    10. Baxter states that the total value of all outstanding shares of 
Baxalta Stock (including the Retained Stock) as of July 2015 was 
approximately $20.3 billion, and the total value of the Retained Stock 
was approximately $4.0 billion, based upon a value of $30 per share. On 
the Spin-Off Date, the Retained Stock constituted approximately 19.5 
percent of the total shares of Baxalta Stock. Baxter proposes to make 
an in-kind contribution (i.e., a contribution other than cash) to the 
Plan of a portion of the Retained Stock (the Contributed Stock). Baxter 
represents that the Contributed Stock will have a market value, after 
any applicable liquidity discount, of not more than $750 million. The 
Applicant states further that based upon an assumed value of $30 per 
share, the number of shares of Contributed Stock will not be more than 
25 million, which would represent approximately 18.95 percent of the 
Retained Stock and 4.4 percent of the total number of outstanding 
shares of Baxalta Stock (including the shares originally distributed as 
part of the Spin-Off and the Contributed Stock, but not the remaining 
shares of Retained Stock). The Applicant notes that, however, in no 
event will the value of the Contributed Stock exceed 20 percent of the 
total value of the Plan's assets immediately after Baxter contributes 
the Contributed Shares (the Contribution).
    11. The Applicant represents that the Private Letter Ruling from 
the IRS specifically sanctions the contribution of the Contributed 
Stock on a tax-free basis, as long as the Contribution is completed 
within 18 months after the Spin-Off Date. As a result of the Private 
Letter Ruling, Baxter would save approximately $260 million in taxes if 
the Contributed Stock is contributed to the Plan. Baxter intends to 
pass this tax savings to the Plan in order to fund future benefits. 
Thus, Baxter states that an exemption for the in-kind contribution of 
the Contributed Stock will increase the assets available to the Plan by 
approximately $262.5 million.
    12. Baxter states that the Baxalta Stock is listed on the NYSE, so 
that the Plan will be able to sell shares in open market transactions 
on the NYSE. Furthermore, according to Baxter, the shares of 
Contributed Stock will be considered ``restricted shares'' so that they 
can only be sold by the Plan in accordance with Rule 144 of the 
Securities and Exchange Commission.\12\ However Baxter states that Rule 
144's limitation on the maximum number of shares that may be sold by an 
affiliate within any three month period will not apply to the Plan. The 
Rule 144 requirement that the Plan hold the Contributed Stock for at 
least six months will apply, but Baxter expects to be able to consider 
its own holding time of the shares towards the Plan's six-month period, 
which was satisfied as of November 10, 2015. The Plan, however, would 
not be able to sell all of the Contributed Stock at one time without 
potentially depressing the market. Accordingly, the Independent 
Fiduciary has been tasked with selling the Contributed Stock on behalf 
of the Plan as quickly as is prudent and consistent with applicable 
laws.
---------------------------------------------------------------------------

    \12\ See 17 CFR 230.144.
---------------------------------------------------------------------------

Reasons the Proposed Transaction is Prohibited Under ERISA and the Code
    13. Baxter represents that it is the employer--or the ultimate 
shareholder of the employer--of all of the employees covered by the 
Plan, and therefore a ``party in interest'' with respect to the Plan as 
defined in section 3(14)(C) and (E) of ERISA.\13\ Section 406(a)(1)(A) 
of ERISA provides that a fiduciary with respect to a plan shall not 
cause the plan to engage in a transaction, if he knows or should know 
that such transaction constitutes a direct or indirect sale or 
exchange, or leasing, of any property between the plan and a party in 
interest. The Applicant notes that in Commissioner of Internal Revenue 
v. Keystone Consolidated Industries, Inc., 508 US 152 (1993), the 
United States Supreme Court held that a contribution of property to a 
plan, in satisfaction of the employer's minimum funding obligation, was 
a ``sale or exchange'' for purposes of section 406(a)(1)(A) of ERISA. 
The Applicant also notes that in Interpretive Bulletin 94-3(b), 29 CFR 
2509.94-3(b), the Department concluded that any contribution of 
property to a defined benefit pension plan is a sale or exchange for 
purposes of section 406(a)(1)(A) of ERISA, even if the contribution is 
not used to satisfy a minimum funding obligation. Thus, the Applicant 
states that the Contribution will constitute a sale or exchange of the 
Contributed Stock between the Plan and a party in interest, and is 
prohibited under section 406(a)(1)(A) of ERISA.
---------------------------------------------------------------------------

    \13\ For purposes of this proposed exemption, references to 
Title I of ERISA, unless otherwise specified, refer also to the 
corresponding provisions of the Code.
---------------------------------------------------------------------------

    14. In addition, section 406(a)(1)(D) of ERISA provides that a 
fiduciary with respect to a plan shall not cause the plan to engage in 
a transaction, if he knows or should know that such transaction 
constitutes a direct or indirect transfer to, or use by or for the 
benefit of a party in interest, of any assets of the plan. The 
Applicant states that the use of the Contributed Stock to potentially 
reduce Baxter's funding obligation could be considered a use of the 
Contributed Stock after it has become a plan asset for Baxter's 
benefit.
    15. Section 406(b)(1) of ERISA provides that a fiduciary with 
respect to a plan shall not deal with the assets of the plan in his own 
interest or for his own account, and section 406(b)(2) of ERISA 
provides that a fiduciary with respect to a plan shall not in his 
individual or in any other capacity act in any transaction involving 
the plan on behalf of a party (or represent a party) whose interests 
are adverse to the interests of the plan or the interests of its 
participants or beneficiaries. By causing the Plan to receive the 
Contribution, the members of the Committees and Baxter could be viewed 
as either dealing with the Plan's assets in their own interest or for 
their own account in violation of section 406(b)(1) of ERISA or as 
acting on behalf of Baxter in the Contribution, where Baxter's 
interests are adverse to those of the Plan, in violation of section 
406(b)(2) of ERISA.
Independent Fiduciary
    16. As described in more detail below, the Committees have retained 
Fiduciary Counselors Inc., the Independent Fiduciary, to represent the 
interests of the Plan with respect to the proposed transaction pursuant 
to an agreement dated May 11, 2015 (and which was subsequently updated 
on January 22, 2016). The Independent Fiduciary is an investment 
adviser registered under the Investment Advisers Act of 1940 that 
primarily acts as an independent fiduciary for employee benefit plans. 
Furthermore, Fiduciary Counselors states that it has served as an 
independent fiduciary for employee benefit plans since 2001. Fiduciary 
Counselors represents that they are highly qualified to serve as 
independent fiduciary in connection with the proposed transactions. The 
Independent Fiduciary was selected by the Committees based upon 
proposals

[[Page 25444]]

submitted by the Independent Fiduciary and other candidates.
    17. The Independent Fiduciary states that it is not related to or 
affiliated with any of the other parties to the transaction, and has 
not previously been retained to perform services with respect to the 
Plan or any other employee benefit plan sponsored by Baxter. Fiduciary 
Counselors represents and warrants that it is independent of and 
unrelated to Baxter and Baxalta, and that: (a) It does not directly or 
indirectly control, is not controlled by, and is not under common 
control with Baxter or Baxalta; (b) neither it, nor any of its 
officers, directors, or employees is an officer, director, partner, or 
employee of Baxter or Baxalta (or is a relative of such persons); (c) 
it does not directly or indirectly receive any consideration for its 
own account in connection with the Contribution or its services 
described hereunder, except that it may receive compensation from 
Baxter for performing the services described in this proposed exemption 
as long as the amount of such payment is not contingent upon or in any 
way affected by Fiduciary Counselor's ultimate decision; and (d) the 
percentage of Fiduciary Counselor's revenue that is derived from the 
Plan, any party in interest, or its affiliates involved in the proposed 
transactions is less than 5% of its previous year's annual revenue from 
all sources. Fiduciary Counselors represents that it understands and 
acknowledges its duties and responsibilities under ERISA in acting as 
an independent fiduciary on behalf of the Plan in connection with the 
covered transactions.
    18. Fiduciary Counselors provided a preliminary report dated July 
22, 2015 (the IF Report), that analyzed the proposed Contribution and 
described its responsibilities in connection therewith. In connection 
with the IF Report, the Independent Fiduciary considered the following 
key elements:
    (a) Whether the Plan's Investment Policy would permit the Plan to 
hold the Contributed Stock as an acceptable investment. According to 
the IF Report, the Investment Committee approved the acceptance of the 
Contributed Stock as an employer contribution in the Plan, to be 
subsequently liquidated for cash. Therefore, the Independent Fiduciary 
determined that the Contributed Stock is an acceptable investment for 
the Plan and would be liquidated as soon as practicable and consistent 
with ERISA.
    (b) Whether any liquidity discount would be applicable to the 
valuation of the Contributed Stock. The Independent Fiduciary retained 
Murray, Devine & Co., Inc. (Murray Devine) as an independent valuation 
adviser in order to assist with this determination.\14\ The IF Report 
provides that the Contributed Stock could be liquidated in as few as 42 
trading days, depending on the particular circumstances, assuming (i) 
Baxter contributes 25 million shares of Baxalta stock to the Plan, (ii) 
the Contributed Stock trading volumes remain around 6 million shares 
per day, and (iii) Fiduciary Counselors limits the disposition of 
Contributed Stock to 10% or less of daily volume (provided that such 
limitation is appropriate and consistent with ERISA). Therefore, 
Fiduciary Counselors expects the liquidity discount computed by Murray 
Devine will be very small.
---------------------------------------------------------------------------

    \14\ According to Fiduciary Counselors, Murray Devine is well 
qualified for this engagement in that it is a nationally recognized 
valuation advisory firm and has provided valuation advisory services 
to private equity, corporate, venture capital, and commercial 
banking institutions since its inception in 1989. Fiduciary 
Counselors represents that it has utilized their services in other 
engagements. Furthermore, Murray Devine represents and warrants that 
it is independent of and unrelated to Baxter, Baxalta, and Fiduciary 
Counselors, and that:
     It does not directly or indirectly control, is not 
controlled by, and is not under common control with Baxter, Baxalta, 
or Fiduciary Counselors;
     Murray Devine, nor any of its officers, directors, or 
employees is an officer, director, partner or employee of Baxter, 
Baxalta or Fiduciary Counselors (or is a relative of such persons);
     The amount of compensation received by Murray Devine is 
not contingent of the valuation; and
    The percentage of Murray Devine's revenue that is derived from 
any party in interest or its affiliates involved in the stock 
contribution is less than 5% of its previous year's annual revenue 
from all sources.
---------------------------------------------------------------------------

    (c) What impact, if any, the Contribution will have on the 
diversification of the Plan's portfolio. The IF Report provides that, 
while the Plan's acceptance of the Contributed Stock will skew the 
Plan's asset class allocations above the targeted amount for Large Cap 
stock of 24% of plan assets, this will be a temporary deviation and 
Fiduciary Counselors expects the allocation will return to pre-
Contribution levels as the Contributed Stock is sold. Thus, the 
Independent Fiduciary does not believe that the Contribution will cause 
any significant disruption to the Plan's asset allocation.
    (d) Whether the Plan will have sufficient liquidity to meet 
benefits payments. The IF Report indicates that, as of June 30, 2015, 
the Plan held approximately $120 million of its assets in cash or cash 
equivalents. According to the IF Report, since the Plan does not 
currently have a minimum funding obligation, its assets will increase 
by investment income, which is currently estimated to yield a 7.25% 
annual rate of return or approximately $218 million. Further, the 
largest Plan outflow is benefit payments of $160 million a year. 
Because the majority of the Plan's assets are in investments that can 
be liquidated on a daily basis, and the Contributed Stock will be 
converted to cash as it is liquidated, the IF Report concludes that the 
Plan will have sufficient liquidity to meet its needs over the time 
period while the Contributed Stock is held by the Plan.
    (e) Whether the Contribution will sufficiently improve the Plan's 
funded status. According to the IF Report, the Contribution will 
increase the funded status of the plan by between $600 million and $750 
million, thereby significantly improving the funded status of the 
Plan.\15\ The IF Report also notes that the Actuary estimated no 
minimum funding requirement for the 2016, 2017, and 2018 plan years, 
indicating that the Plan will continue to be well-funded.
---------------------------------------------------------------------------

    \15\ For purposes of the IF Report, Fiduciary Counselors 
estimated a range for the value of the Contribution that takes into 
account the requirement that, for purposes of determining minimum 
funding, the amount of the Contribution will be deemed to be the 
lesser of the proceeds from the sale of the Contributed Stock or the 
value of the Contributed Stock at the time it is contributed to the 
Plan.
---------------------------------------------------------------------------

    (f) The ability of the Contributed Stock to be readily liquidated 
given its publicly traded nature. The IF Report notes that the 
Contributed Stock is publicly traded, can be partially sold daily at 
market prices, and can be completely liquidated in as few as 42 trading 
days (nine weeks) at current trading volume without depressing the 
stock price,\16\ the Contributed Stock can be readily converted into 
cash and is considered a highly liquid investment.
---------------------------------------------------------------------------

    \16\ The IF Report indicates that Baxalta anticipates receiving 
an opinion from its securities counsel that the Plan will not be 
considered an ``affiliate'' of Baxalta within the meaning of Rule 
144. Accordingly, the limitation on the maximum number of shares 
that may be sold by an affiliate within any three month period (the 
Volume Limitation) will not apply to the sales of Contributed Stock 
by the Plan.
---------------------------------------------------------------------------

    19. The IF Report also describes the Independent Fiduciary's other 
responsibilities in connection with the Contribution. In this regard, 
the Independent Fiduciary will monitor the covered transactions on a 
continuing basis and take all appropriate actions to safeguard the 
interests of the Plan to ensure that the transactions remain in the 
interests of the Plan, and, if not, take appropriate action available 
under the circumstances. Additionally, the Independent Fiduciary will 
determine whether and on what terms the Contribution should be accepted 
by the Plan, and if the Contribution is accepted by the Plan, vote 
proxies and respond to

[[Page 25445]]

tender offers with respect to the Contributed Stock held by the Plan.
    20. After Baxter makes the Contribution, the Independent Fiduciary 
will act as an investment manager to establish and administer the 
process (subject to such modifications as the Independent Fiduciary may 
make from time to time) for liquidation of the Contributed Stock as 
quickly as is prudent and consistent with market conditions and 
applicable laws. If, following the acceptance of the Contributed Stock 
and in the course of liquidating such stock, the Independent Fiduciary 
determines that continuing the liquidation of the Contributed Stock is 
imprudent, and is likely to remain imprudent for an indefinite period 
of time, the Independent Fiduciary shall notify the Committees, who 
shall arrange for the remaining Contributed Stock to be transferred to 
the portfolio of one or more of the Plan's independent investment 
managers, and the agreement with the Independent Fiduciary shall 
terminate.
Statutory Findings--Administratively Feasible
    21. The Applicant represents that a proposed exemption is 
administratively feasible because the Independent Fiduciary, rather 
than the Department, will monitor the covered transactions for 
compliance with the terms of the proposed exemption and enforce the 
rights of the Plan in connection with the covered transactions. 
Furthermore, Baxter's proposed Contribution will be a single event, and 
the Contributed Stock will be sold by the Plan over a relatively short 
time period. Baxter states further that since Baxalta Stock is publicly 
traded and readily saleable, the sales will occur through open market 
transactions on a nationally recognized exchange, obviating the need 
for further monitoring.
Statutory Findings--In the Interest of the Plan and Its Participants 
and Beneficiaries
    22. The Applicant states that a proposed exemption is in the 
interest of the Plan and its participants and beneficiaries. According 
to Baxter, the Contributed Stock will increase the assets of the Plan 
by as much as 20 percent, which will significantly improve the funded 
status of the Plan. Since the Contributed Stock will only be counted 
towards Baxter's minimum funding requirement as the shares are sold by 
the Plan and converted into more diversified investments, Baxter will 
still be obligated to make its minimum required contributions as if the 
Contributed Stock had never been received until and unless the shares 
are sold. Thus, the Applicant states that the Plan gets the benefit of 
the additional value of the Contributed Stock without giving up the 
benefit of minimum required cash contributions from Baxter.
Statutory Findings--Protective of the Rights of the Plan and Its 
Participants and Beneficiaries
    23. The Applicant states that the requested exemption is protective 
of the rights of the Plan and its participants and beneficiaries. The 
Applicant reiterates that the principal protection for participants and 
beneficiaries is the fact that the Independent Fiduciary, acting solely 
in the interest of the participants and beneficiaries, will review the 
transaction to ensure that it is fair to the participants and 
beneficiaries, will monitor compliance with the exemption, and will 
oversee the Plan's sale of the Contributed Stock.
    24. Additionally, the requested exemption would require Baxter to 
make cash contributions to the Plan to the extent that the cumulative 
proceeds from the sale of the Contributed Stock at each contribution 
due date (determined under section 303(j) of ERISA) are less than the 
cumulative cash contributions Baxter would have been required to make 
to the Plan in the absence of the Contribution. Such cash contributions 
must be made until all of the shares of Contributed Stock are sold. 
These conditions should mitigate the risk of the Plan holding too much 
of its assets in one security. Solely for purposes of determining the 
Plan's minimum funding requirements, AFTAP, and funding target 
attainment percentage, the Actuary will not count as a contribution to 
the Plan any Contributed Stock that has not been sold. The Applicant 
states that this protection is intended to ensure that Baxter does not 
receive a credit for minimum funding purposes under section 302 of 
ERISA for the Contributed Stock prior to the time the stock is sold, 
when it could still decrease in value. If the Independent Fiduciary 
determines that the Plan should retain shares of the Contributed Stock 
on an indefinite basis, such a decision will be communicated to the 
Committees.
    25. The Applicant also states that Baxter must contribute to the 
Plan such cash amounts as are needed for the Plan to maintain an AFTAP 
of at least 80 percent as of the first day of each plan year during 
which the Plan holds shares of the Contributed Stock, as determined by 
the Actuary, without taking into account any Contributed Stock that has 
not been sold by April 1 of the plan year.
    26. The Applicant also states that the value of the Contributed 
Stock cannot be more than 20 percent of the fair market value of the 
total assets of the Plan at the time Baxter makes the Contribution to 
the Plan. Additionally, the Plan may not pay any commissions, costs, or 
other expenses in connection with the contribution, holding, or 
subsequent sale of the Contributed Stock, and any such expenses paid by 
Baxter must not be treated as a contribution to the Plan.
Summary
    27. In summary, the Applicant represents that the proposed 
Contribution will meet the criteria of section 408(a) of ERISA and 
section 4975(c)(2) of the Code for the above and the following reasons:
    (a) The Independent Fiduciary will represent the interests of the 
Plan, the participants, and beneficiaries with respect to the 
Contribution;
    (b) Solely for purposes of determining the Plan's minimum funding 
requirements, AFTAP, and funding target attainment percentage, the 
Actuary will not count as a contribution to the Plan any shares of 
Contributed Stock that have not been liquidated;
    (c) For purposes of determining the amount of any Contribution, the 
Contributed Stock shall be deemed contributed only at the time it is 
sold, equal to the lesser of: (1) The proceeds from the sale of such 
Contributed Stock; or (2) the value of such Contributed Stock on the 
date of the initial contribution as determined by the Independent 
Fiduciary;
    (d) The Contributed Stock represents no more than 20% of the fair 
market value of the total assets of the Plan at the time it is 
contributed to the Plan;
    (e) The Plan pays no commissions, costs, or other expenses in 
connection with the Contribution, holding, or subsequent sale of the 
Contributed Stock, and any such expenses paid by Baxter will not be 
treated as a contribution to the Plan;
    (f) Baxter makes cash contributions to the Plan to the extent that 
the cumulative proceeds from the sale of the Contributed Stock at each 
contribution due date are less than the cumulative cash contributions 
Baxter would have been required to make to the Plan, in the absence of 
the Contribution. Such cash contributions shall be made until all of 
the Contributed Stock is sold by the Plan; and
    (g) Baxter contributes to the Plan cash amounts needed for the Plan 
to attain an AFTAP of at least 80% as of the first day

[[Page 25446]]

of each plan year during which the Plan holds Contributed Stock, as 
determined by the Actuary, without taking into account any unsold 
Contributed Stock as of April 1 of the plan year.

Notice to Interested Persons

    Baxter will provide notice of the proposed exemption to all persons 
with accrued benefits under the Plan, all beneficiaries of deceased 
participants, and all alternate payees pursuant to qualified domestic 
relations orders within five (5) calendar days of publication of the 
proposed exemption in the Federal Register. For all persons for whom 
disclosure by electronic media is permitted by 29 CFR 2520.104b-1(c), 
notice will be posted on Baxter's internal Web site and such persons 
will be notified of the posting by email in accordance with 29 CFR 
2520.104b-1(c). Baxter will provide the notice to all other interested 
persons via first-class mail. In addition to the proposed exemption, as 
published in the Federal Register, Baxter will provide interested 
persons with a supplemental statement, as required, under 29 CFR 
2570.43(a)(2). The supplemental statement will inform such employees of 
their right to comment on and to request a hearing with respect to this 
proposed exemption. The Department must receive all written comments 
and/or requests for a hearing within 35 days of the publication of this 
proposed exemption in the Federal Register. The Department will make 
all comments available to the public.
    Warning: If you submit a comment, EBSA recommends that you include 
your name and other contact information in the body of your comment, 
but DO NOT submit information that you consider to be confidential, or 
otherwise protected (such as Social Security number or an unlisted 
phone number) or confidential business information that you do not want 
publicly disclosed. All comments may be posted on the Internet and can 
be retrieved by most Internet search engines.

FOR FURTHER INFORMATION CONTACT: Mr. Erin S. Hesse 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 of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the 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) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 25th day of April, 2016.
Lyssa E. Hall,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2016-09946 Filed 4-27-16; 8:45 am]
 BILLING CODE 4510-29-P