Proposed Exemption From Certain Prohibited Transaction Restrictions, 20384-20388 [2017-08687]

Download as PDF 20384 Federal Register / Vol. 82, No. 82 / Monday, May 1, 2017 / Notices Register pursuant to Section 6(b) of the Act on January 31, 2017 (82 FR 8857). DEPARTMENT OF JUSTICE Antitrust Division srobinson on DSK5SPTVN1PROD with NOTICES Notice Pursuant to the National Cooperative Research and Production Act of 1993—Integrated Photonics Institute for Manufacturing Innovation Operating Under the Name of the American Institute for Manufacturing Integrated Photonics Notice is hereby given that, on March 22, 2017, pursuant to Section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301 et seq. (‘‘the Act’’), the Integrated Photonics Institute for Manufacturing Innovation operating under the name of the American Institute for Manufacturing Integrated Photonics (‘‘AIM Photonics’’) has filed written notifications simultaneously with the Attorney General and the Federal Trade Commission disclosing changes in its membership. The notifications were filed for the purpose of extending the Act’s provisions limiting the recovery of antitrust plaintiffs to actual damages under specified circumstances. Specifically, International Business Machines, Yorktown Heights, NY; Mentor Graphics Corporation, Wilsonville, OR; Keysight Technologies, Inc., Santa Rosa, CA; Analog Photonics, LLC, Boston, MA; Coventor, Inc., Cary, NC; Trustees of Boston University, Boston, MA; Georgia Tech Research Corporation, Atlanta, GA; The University of Tulsa, Tulsa, OK; University of Massachusetts Lowell, Lowell, MA; University of Delaware, Newark, DE; PricewaterhouseCoopers, LLC, Rochester, NY; and ESL Federal Credit Union, Rochester, NY have been added as parties to this venture. No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and AIM Photonics intends to file additional written notifications disclosing all changes in membership. On June 16, 2016, AIM Photonics filed its original notification pursuant to Section 6(a) of the Act. The Department of Justice published a notice in the Federal Register pursuant to Section 6(b) of the Act on July 25, 2016 (81 FR 48450). The last notification was filed with the Department on December 23, 2016. A notice was published in the Federal VerDate Sep<11>2014 20:35 Apr 28, 2017 Jkt 241001 Patricia A. Brink, Director of Civil Enforcement, Antitrust Division. [FR Doc. 2017–08694 Filed 4–28–17; 8:45 am] BILLING CODE P DEPARTMENT OF LABOR Employee Benefits Security Administration Proposed Exemption From Certain Prohibited Transaction Restrictions Employee Benefits Security Administration, Labor. ACTION: Notice of proposed exemption. AGENCY: This document contains notices of pendency before the Department of Labor (the Department) of proposed exemption 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 exemption: D– 11845, Rosetree & Company 401(k) Plan and Trust. DATES: All interested persons are invited to submit written comments or requests for a hearing on the pending exemption within May 31, 2017. 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 Security Administration (EBSA), Office of Exemption Determinations, U.S. Department of Labor, 200 Constitution Avenue NW., Suite 400, Washington, DC 20210. Attention: Application No. ll, 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) 693–8474 by the end of the scheduled comment period. The applications for exemption and the comments received will be available for SUMMARY: PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 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: The proposed exemption was requested in an application 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, this notice of proposed exemption is issued solely by the Department. The application contains representations with regard to the proposed exemption 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. Rosetree & Company 401(k) Plan and Trust (the Plan) Located in Skokie, IL [Application No. D–11845] PROPOSED EXEMPTION Based on the facts and representations set forth in the application, the Department is considering granting an exemption under 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). SECTION I. COVERED TRANSACTION If the proposed exemption is granted, the sanctions resulting from the application of section 4975(c)(1)(B) of the Code, shall not apply to the proposed guarantee (the Guarantee) by 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). E:\FR\FM\01MYN1.SGM 01MYN1 Federal Register / Vol. 82, No. 82 / Monday, May 1, 2017 / Notices srobinson on DSK5SPTVN1PROD with NOTICES Richard Rosenbaum (Mr. Rosenbaum), the Plan trustee, a disqualified person with respect to the Plan, of: (1) a loan (the Loan) made by the Great Lakes Credit Union (GLCU), an unrelated third party lender, to Kurtson Realty, LLC (Kurtson), a real estate company that is wholly owned by the Plan; 2 and (2) a future Loan made by an unrelated third party lender (hereinafter, GLCU and any third party lender is referred to as a ‘‘Lender’’) to Kurtson, provided that the general conditions that are set forth below in Section II are met. (j) No interest or any fee is charged to Kurtson or the Plan in connection with the Guarantee; and (k) The Guarantee is not part of an agreement, arrangement, or understanding in which Mr. Rosenbaum causes the assets of the Plan to be used in a manner that is designed to benefit himself or any person who has an interest which would affect the exercise of Mr. Rosenbaum’s best judgment as a fiduciary of the Plan. SECTION II. GENERAL CONDITIONS (a) The Loan is made for purposes of the Plan acquiring and rehabilitating investment property from an unrelated third party through Kurtson; (b) The Loan is made on commercially reasonable terms; (c) The debt service and value to loan ratio for the Loan, and for any future Loan, are based primarily on the characteristics of the property serving as collateral for such Loan (the Collateral Property); (d) The Lender and the Loan servicer (the Loan Servicer) are unrelated to Mr. Rosenbaum and the Plan; (e) The Lender has a pre-existing Loan service arrangement with the Loan Servicer, and maintains this relationship for the duration of the Loan; (f) Mr. Rosenbaum does not receive any compensation or derive any personal benefit from the Collateral Property; (g) For the duration of the Loan or any future Loan, the Collateral Property is not used by or leased to: (1) any other disqualified persons with respect to the Plan; (2) Rosetree or any affiliate of Rosetree; or (3) any person or entity in which Mr. Rosenbaum may have an interest that would affect his best judgment as a Plan fiduciary; (h) The Guarantee is a condition that is: (1) customarily required in similar transactions between Kurtson and the Lender, and is not unique to the Loan or to the specific parties to the Loan; and (2) solely due to a regulatory requirement of the National Credit Union Administration that is imposed upon credit unions, including GLCU; (i) If the Plan defaults on a Loan, Mr. Rosenbaum pays the balance of such Loan, and has no recourse against the Plan for repayment; The Parties 1. The Plan is a 401(k) Plan sponsored by Rosetree, a licensed CPA firm, insurance agency, and registered investment adviser. Mr. Rosenbaum (the Applicant) is the sole shareholder and employee of Rosetree. He performs all of Rosetree’s operations and receives periodic compensation. Mr. Rosenbaum is also the sole participant in the Plan, as well as the Plan administrator and trustee. As of March 31, 2016, the Plan had approximately $480,000 in total assets. 2. Kurtson is a real estate operating company that is wholly owned by the Plan. Kurtson currently owns three investment properties, including a 3unit apartment building located at 1842 S. Drake, Chicago, Illinois (the Collateral Property), which is rented to unrelated parties. Mr. Rosenbaum performs administrative duties for Kurtson, but he receives no compensation for his services. 3. The Plan contemplates entering into a Loan from GLCU, a credit union based in Bannockburn, Illinois. As of December 31, 2015, GLCU had $719 million in assets. 4. Spectrum Business Resources, LLC (Spectrum) is GLCU’s loan servicing agent in Lisle, Illinois. As the Loan Servicer for several member credit unions, Spectrum identifies potential borrowers, prepares loan write-ups for the credit union loan committees, prepares loan documents and maintains correspondence and relationships with the borrowers. Both GLCU and Spectrum are unrelated to the Plan and Mr. Rosenbaum.4 2 Because Mr. Rosenbaum is the sole owner of Rosetree & Company, Ltd. (Rosetree), the Plan sponsor, and the only participant in the Plan, there is no jurisdiction under Title I of the Employee Retirement Income Security Act of 1974 (the Act), pursuant to 29 CFR 2510.3–3(b). However, there is jurisdiction under Title II of the Act pursuant to section 4975 of the Code. VerDate Sep<11>2014 20:35 Apr 28, 2017 Jkt 241001 20385 The Loans 5. Kurtson seeks an initial Loan from GLCU in order to acquire and rehabilitate a new investment property that will serve as the Collateral Property for the Loan. A Loan proposal (the Loan Proposal) from Spectrum, which specifies the terms and conditions under which the requested financing will be provided to Kurtson, states that ‘‘GLCU will provide up to a $90,000, secured, guaranteed commercial mortgage on the [Collateral Property], [which will require] 60 monthly payments of principal and interest through maturity in 5 years, based on a 20-year amortization schedule, at a 5.95% fixed interest rate.’’ The Loan Proposal also provides that ‘‘the Loan amount will not exceed 75% of the appraised value of the [Collateral Property].’’ 6. In addition to the Collateral Property, the collateral for the Loan will consist of an assignment of rents on the Collateral Property by Kurtson to GLCU. Other terms of the Loan Proposal require an appraisal of the Collateral Property prior to the formal approval of such Loan, to confirm a minimum market value of $120,000. Further, pursuant to credit union regulations, the Loan will require a written Guarantee from Mr. Rosenbaum.5 7. With respect to fees and other expenses associated with the Loan, the Applicant represents that there will be a processing fee of $250. In addition, Kurtson will be required to reimburse GLCU for all costs associated with the transaction, including but not limited to attorney’s fees, appraisal fees, recording fees, title insurance costs, survey costs, searches, documentation fees, and any other costs and fees associated with the transaction. The Loan will not have any prepayment penalties. Although the Loan Proposal allows for a Loan amount of up to $90,000, Kurtson will obtain a Loan for $80,000, resulting in a value to loan ratio of 150%. The Loan would represent approximately 14.29% of the Plan’s assets. 8. The Applicant anticipates that the Plan will engage in additional Loans of a similar nature in the future. Accordingly, Kurtson will obtain all future Loans from the Lender under similar, commercially-reasonable terms, subject to changes in market conditions that would affect the interest rate. The debt service and value to loan ratio for the Loan, and for any future Loan, will be based primarily on the characteristics of the Collateral Property. 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. 4 Mr. Rosenbaum also represents that he has no relationship with any of Spectrum’s member credit unions other than as a depositor or borrower. 5 Mr. Rosenbaum represents that he is also a guarantor of other loans made to entities he controls for transactions that are substantially similar to the proposed exemption transaction. He states that the outstanding loan amounts for which he serves as a guarantor are approximately $767,000 on properties having an appraised value of $1,240,000. SUMMARY OF FACTS AND REPRESENTATIONS 3 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 E:\FR\FM\01MYN1.SGM 01MYN1 20386 Federal Register / Vol. 82, No. 82 / Monday, May 1, 2017 / Notices srobinson on DSK5SPTVN1PROD with NOTICES In addition, the Lender and the Loan Servicer will be unrelated to Mr. Rosenbaum and the Plan. Although, the Lender may not have a pre-existing loan service arrangement with the Loan Servicer, it will maintain this relationship with Spectrum for the duration of a Loan. Further, Mr. Rosenbaum will not receive any compensation or derive any personal benefit from the Collateral Property. Finally, the Collateral Property for the Loan or any future Loan, may not be used by or leased to: (a) any other disqualified persons with respect to the Plan; (b) Rosetreee or any affiliate of Rosetree; or (c) any person or entity in which Mr. Rosenbaum may have an interest that would affect his best judgment as a Plan fiduciary. Appraisal of the Collateral Property 9. The Collateral Property for the initial Loan has been appraised by Steven F. Eggler, a Certified Residential Real Estate Appraiser, of C.A. Benson and Associates, Inc., which is located in La Grange Park, Illinois. Mr. Eggler represents that he has no interest in the Collateral Property and no bias with respect to the participants in the proposed transaction, or with respect to Rosetree, the Plan, or Kurtson. Mr. Eggler also represents that his employment and/or compensation for performing the appraisal or any future appraisals was not conditioned on any agreement or understanding that he would report (or present analysis, supporting), among other things, a predetermined specific value, a predetermined minimum value, a range or direction in value, or a value that favors the cause of any party. 10. In an appraisal report dated September 30, 2014 (the 2014 Appraisal), Mr. Eggler certifies that he developed his opinion of the market value of the Collateral Property based solely on the Sales Comparison and Income Approaches to valuation. As of September 23, 2014, Mr. Eggler placed the fair market value of the Collateral Property at $120,000, under the Sales Comparison Approach, and at $117,000, under the Income Approach. After reconciling both valuations, Mr. Eggler ultimately determined that the Collateral Property was worth $120,000, as of September 30, 2014. 11. In a statement dated May 31, 2016, Charles A. Benson, Jr., SRA of C. A. Benson and Associates, Inc., who was the supervisory appraiser for the 2014 Appraisal, provided an update to the sales data discussed in the 2014 Appraisal, as it applies to the Collateral Property. As noted in the 2014 Appraisal, Mr. Benson represents that VerDate Sep<11>2014 20:35 Apr 28, 2017 Jkt 241001 the average sale price of a 2–4 unit [in the $100,000–200,000 price range] in the North Lawndale community, where the Collateral Property is located, was $136,171 over the 12-month period prior to the 2014 Appraisal. According to Mr. Benson, in the ensuing 12 month period, the average sale price for properties in the same price range as the Collateral Property was $131,287, which represented a 3.6% decline in value. Mr. Benson also represents that from September 25, 2015 to May 10, 2016, the average sale price of properties that were comparable to the Collateral Property was $137,953. According to Mr. Benson, this amount represents a 1.3% increase from the average sale price noted in the 2014 Appraisal. Mr. Benson explains that this price difference reflects a small decrease in the year after the 2014 Appraisal, followed by an increase to a level that was slightly higher than what was noted in the 2014 Appraisal. Overall, Mr. Benson represents that market conditions in the area have stabilized since the 2014 Appraisal. The Applicant represents that any investment property used by the Applicant as Collateral Property to support a future Loan will be similarly valued by a qualified, independent appraiser. Rationale for the Loans 13. Mr. Rosenbaum represents that he is an experienced real estate investor. As a former Partner in charge of the Chicago Real Estate practice of Coopers & Lybrand (now Price Waterhouse Coopers), Mr. Rosenbaum states that he has been a senior executive at other real estate industry entities, and that he personally owns ten properties that are similar to the Collateral Property. It is Mr. Rosenbaum’s opinion that, given the current investment environment, real estate investments of this type provide higher rates of return and less risk than other investments available. Mr. Rosenbaum is also of the view that the proposed Loans will enable the Plan to earn a higher rate of return by investing in an additional property, which would not be obtainable if the exemption request is denied. The Guarantee 14. As represented above, the Loan Proposal requires Mr. Rosenbaum’s Guarantee. Accordingly, the Applicant is requesting an administrative exemption from the Department that will allow Mr. Rosenbaum to provide a Guarantee for the Loan that Kurtson, a wholly-owned entity of the Plan and thus, a Plan asset, is requesting from PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 GLCU, as well as for future Loans from Lenders, which may include GLCU. The proposed Loan will be made on commercially reasonable terms, and both the debt service and value to loan ratios for the Loan from GLCU indicate that the Loan will be based primarily upon the characteristics of the Collateral Property that is being financed for purposes of the Loan. The Applicant represents that, although the Plan is dealing with GLCU, an independent lender, Mr. Rosenbaum is being asked by GLCU to participate as a Loan guarantor. The Applicant represents that the proposed Guarantee is solely due to a regulatory requirement of the National Credit Union Administration 6 that is imposed upon credit unions, including GLCU. Further, the Applicant represents that it is not aware of any other bank or savings institution that makes nonrecourse loans at present.7 The Applicant represents that only insurance companies do not require guarantees, but only for loans over $1 million. Notwithstanding the regulatory requirement, the Applicant believes that with respect to the Loan, the Collateral Property provides adequate collateral and cash flow to repay the Loan without relying upon Mr. Rosenbaum’s personal credit or funds. No interest or any fee will be charged to Kurtson or the Plan in connection with the Guarantee. In addition, the Guarantee will not be part of an agreement, arrangement, or understanding in which Mr. Rosenbaum causes the assets of the Plan to be used in a manner that is designed to benefit himself or any person who has an interest which would affect the exercise of Mr. Rosenbaum’s best judgment as a fiduciary of the Plan. The Applicant also requests exemptive relief for Mr. Rosenbaum’s Guarantee of certain future Loans that may be made to Kurtson by a Lender. As represented above, the debt service and value to loan ratios for all future Loans will be based primarily upon the characteristics of the Collateral Property for the specific Loan. Legal Analysis 15. Section 4975(c)(1)(B) of the Code prohibits any direct or indirect lending 6 See 12 CFR 723.7(b)—(‘‘Principals, other than a not for profit organization, as defined by the Internal Revenue Service Code (26 U.S.C. 501) or those where the Regional Director grants a waiver, must provide their personal liability and guarantee.’’) 7 The Applicant represents that prior to 2008, it is aware of only two financial institutions that made non-recourse loans to retirement plans. However, the Applicant explains that both institutions are no longer in business. E:\FR\FM\01MYN1.SGM 01MYN1 Federal Register / Vol. 82, No. 82 / Monday, May 1, 2017 / Notices of money or other extension of credit between a plan and a disqualified person. Section 4975(e)(2)(A) of the Code defines the term ‘‘disqualified person’’ to include a plan fiduciary. Section 4975(e)(3) of the Code defines the term ‘‘fiduciary,’’ in part, to include any person who exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control regarding management or disposition of its assets. As Plan trustee, with investment discretion over the assets of the Plan, Mr. Rosenbaum is a fiduciary and therefore, a disqualified person. Thus, in absence of a statutory or administrative exemption, the Guarantee would violate section 4975(c)(1)(B) of the Code. Statutory Findings 17. The Applicant states that the proposed exemption is administratively feasible in that it covers a specific factual situation that will not require ongoing monitoring by the Department. In addition, the Applicant states that the proposed exemption is in the best interests of the Plan and Mr. Rosenbaum as the sole participant because the Loan will allow the Plan to invest in another property in which the rate of return will be substantially higher for the Plan than investing in traditional assets, such as the stock market, and with less risk.8 Further, the Applicant represents that the proposed exemption is protective of the rights of Mr. Rosenbaum as the sole Plan participant because the Loan is made by an unrelated, third party to the Plan and guaranteed by Mr. Rosenbaum in his individual capacity. In addition, the Applicant represents that no interest or fee is charged to Kurtson or the Plan in connection with the Guarantee. srobinson on DSK5SPTVN1PROD with NOTICES Summary 18. In summary, the Applicant represents that the proposed transaction satisfies the statutory criteria of section 4975(c)(2) of the Code because: (a) The Loan will be made for purposes of the Plan acquiring and rehabilitating investment property from an unrelated third party through Kurtson; (b) The Loan will be made on commercially reasonable terms; (c) The debt service and value to loan ratio for the Loan, and for any future 8 As an example, the Applicant states that the typical property he acquires costs $100,000 to purchase and rehabilitate, which then generates $25,000 annually in cash flow and appraises for $150,000. The Applicant further explains that there is strong demand for apartments that are similar to the Collateral Property, and the rents are generally guaranteed by the Federal Government under the Section 8 Housing Program. VerDate Sep<11>2014 20:35 Apr 28, 2017 Jkt 241001 Loan, will be based primarily on the characteristics of the Collateral Property; (d) The Lender and the Loan Servicer will be unrelated to Mr. Rosenbaum and the Plan; (e) The Lender will have a preexisting Loan service arrangement with the Loan Servicer, and will maintain this relationship for the duration of the Loan; (f) Mr. Rosenbaum will not receive any compensation or derive any personal benefit from the Collateral Property; (g) For the duration of the Loan or any future Loan, the Collateral Property will not be used by or leased to: (1) any other disqualified persons with respect to the Plan; (2) Rosetree or any affiliate of Rosetree; or (3) any person or entity in whom Mr. Rosenbaum may have an interest that would affect his best judgment as a Plan fiduciary; (h) The Guarantee will be a condition that is: (1) customarily required in similar transactions between Kurtson and the Lender, and will not be unique to the Loan or to the specific parties to the Loan; and (2) solely due to a regulatory requirement of the National Credit Union Administration that is imposed upon credit unions, including GLCU; (i) If the Plan defaults on a Loan, Mr. Rosenbaum will pay the balance of each Loan and will have no recourse against the Plan for repayment; (j) No interest or any fee will be charged to Kurtson or the Plan in connection with the Guarantee; and (k) The Guarantee will not be part of an agreement, arrangement, or understanding in which Mr. Rosenbaum causes the assets of the Plan to be used in a manner that is designed to benefit himself or any person who has an interest which would affect the exercise of Mr. Rosenbaum’s best judgment as a fiduciary of the Plan. NOTICE TO INTERESTED PERSONS As Mr. Rosenbaum is the sole participant and beneficiary of the Plan, it has been determined that there is no need to distribute the Notice of Proposed Exemption (Notice) to interested persons. Therefore, comments and requests for a hearing must be received by the Department within thirty (30) days of the publication of this 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 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 20387 be posted on the Internet and can be retrieved by most Internet search engines. Ms. Anna Mpras Vaughan of the Department, telephone (202) 693–8565. (This is not a toll-free number.) FOR FURTHER INFORMATION CONTACT: 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 exemption, 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 exemption, if granted, will be subject to the express condition that the material facts and representations contained in the application are true and complete, and that the application accurately describes all material terms of the transaction which is the subject of the exemption. E:\FR\FM\01MYN1.SGM 01MYN1 20388 Federal Register / Vol. 82, No. 82 / Monday, May 1, 2017 / Notices Signed at Washington, DC, this 24th day of April, 2017. Lyssa E. Hall, Director, Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor. [FR Doc. 2017–08687 Filed 4–28–17; 8:45 am] BILLING CODE 4510–29–P DEPARTMENT OF LABOR Occupational Safety and Health Administration OSHA Training Institute (OTI) Education Center; Notice of Competition and Request for Applications Occupational Safety and Health Administration (OSHA), Labor. ACTION: Notice of competition and request for applications for the OSHA Training Institute Education Centers Program. AGENCY: This notice announces the opportunity for interested non-profit organizations, including qualifying educational institutions, trade associations, labor unions, and community-based and faith-based organizations that are not an agency of a state or local government to submit applications to become an OSHA Training Institute Education Center and deliver standard classroom instruction on a regional basis. State or local government-supported institutions of higher education are eligible to apply. Eligible organizations can apply independently or in partnership with other eligible organizations, but in such a case, a lead organization must be identified along with a list of any consortium partners. Current OSHAauthorized OSHA Training Institute Education Centers required to renew their status must submit a new application in order to maintain their OSHA Training Institute Education Center status. If the corporate identity of an applicant, or its membership have changed, the new entity must submit an application. Applications will only be accepted during the solicitation period and will be rated on a competitive basis. Complete application instructions are contained in this notice. This notice also contains information on a proposal conference designed to provide potential applicants with information about the OSHA Training Institute Education Centers Program. The conference will clarify OSHA expectations for OSHA Training Institute Education Centers, courses and methods of instruction, as well as administrative and program srobinson on DSK5SPTVN1PROD with NOTICES SUMMARY: VerDate Sep<11>2014 20:35 Apr 28, 2017 Jkt 241001 requirements for OSHA Training Institute Education Centers and the OSHA Outreach Training Program. Applicants are strongly encouraged to attend the proposal conference. OSHA will enter into five-year, nonfinancial cooperative agreements with successful applicants. These authorization agreements are intended solely to facilitate the ongoing monitoring and evaluation of safety training provided by authorized OSHA Training Institute Education Centers. These cooperative agreements will not constitute a grant or financial assistance instrument, and OSHA will provide no compensation to authorized OSHA Training Institute Education Centers. Such non-financial cooperative agreements are renewable, at the Government’s sole option, for one fiveyear period, if the organization has performed satisfactorily during the initial term. DATES: Applications (three copies) must be received no later than 4:30 p.m. Central Time on June 30, 2017. Requests for extension of this application deadline will not be granted. A proposal conference will be held on May 17, 2017, at the OSHA Directorate of Training and Education, 2020 South Arlington Heights Rd., Arlington Heights, Illinois 60005–4102. Attendees are required to pre-register for this conference. Specific details are discussed in the Proposal Conference section of this notice. ADDRESSES: Submit applications (three copies) to the OSHA Directorate of Training and Education, Office of Training Programs and Administration, Attn: James Brock, 2020 South Arlington Heights Rd., Arlington Heights, Illinois 60005–4102. Applicants selected to be OSHA Training Institute Education Centers must attend a mandatory orientation meeting to be held at the OSHA Directorate of Training and Education, 2020 South Arlington Heights Rd., Arlington Heights, Illinois 60005–4102 at a time and date to be determined. FOR FURTHER INFORMATION CONTACT: Any questions regarding this opportunity should be directed to: James Brock, OSHA Training Institute Education Centers Program Manager, email address brock.james.e@dol.gov, or Annette Braam, Assistant Director, Training Programs, OSHA Directorate of Training and Education, email address braam.annette@dol.gov. Both can be reached at: (847) 759–7700. SUPPLEMENTARY INFORMATION: The SUPPLEMENTARY INFORMATION contains details concerning the following: • Background Information PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 • • • • • • • • • • • • • • • • • • • • Overview of the OSHA Directorate of Training and Education (DTE) Overview of the OSHA Training Institute (OTI) Overview of the OTI Education Centers Program Overview of the OSHA Outreach Training Program Organizational Responsibilities OTI Education Centers Responsibilities OSHA DTE Responsibilities OSHA Jurisdiction Geographic Distribution Application Submission Requirements Selection Guidelines Selection Criteria Consortia and Partnerships Funding Provisions Cooperative Agreement Duration Proposal Conference Application Submission Application Deadline Application Evaluation and Selection Process Notification of Selection Freedom of Information Act Paperwork Reduction Act Transparency Notification of Non-Selection Non-Selection Appeal Appendix A—Current List of Required, Elective, and Short Courses Background Information Overview of the OSHA Directorate of Training and Education (DTE) DTE, located in Arlington Heights, Illinois, supports the Agency’s mission and performance goals of securing safe and healthy workplaces and increasing workers’ voice in the workplace through the development and delivery of training courses and educational programs. The Directorate has three distinct functional areas: the OSHA Training Institute (OTI), the Office of Training Programs and Administration, and the Office of Training Educational Development. The Directorate provides training for federal and state compliance officers and state consultants. The Directorate administers three distinct external training programs including the OSHA Training Institute (OTI) Education Centers Program, the Outreach Training Program, and the Susan Harwood Training Grants Program. The Directorate also develops training and educational materials that support OTI courses and the Agency’s compliance assistance initiatives. Overview of the OSHA Training Institute (OTI) OTI, located in Arlington Heights, Illinois, is OSHA’s primary training provider. OTI conducts over 50 unique course offerings on an annual basis. Training includes job hazard recognition as well as OSHA standards, policies, and procedures for persons responsible for enforcing or directly E:\FR\FM\01MYN1.SGM 01MYN1

Agencies

[Federal Register Volume 82, Number 82 (Monday, May 1, 2017)]
[Notices]
[Pages 20384-20388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08687]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Proposed Exemption From Certain Prohibited Transaction 
Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemption.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemption 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 exemption: D-11845, Rosetree & Company 401(k) Plan and Trust.

DATES: All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemption within May 31, 2017.

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 Security Administration 
(EBSA), Office of Exemption Determinations, U.S. Department of Labor, 
200 Constitution Avenue NW., Suite 400, 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) 693-8474 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: 
    The proposed exemption was requested in an application 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, this notice of proposed exemption is 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 application contains representations with regard to the 
proposed exemption 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.

Rosetree & Company 401(k) Plan and Trust (the Plan)

Located in Skokie, IL

[Application No. D-11845]

PROPOSED EXEMPTION
    Based on the facts and representations set forth in the 
application, the Department is considering granting an exemption under 
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).
SECTION I. COVERED TRANSACTION
    If the proposed exemption is granted, the sanctions resulting from 
the application of section 4975(c)(1)(B) of the Code, shall not apply 
to the proposed guarantee (the Guarantee) by

[[Page 20385]]

Richard Rosenbaum (Mr. Rosenbaum), the Plan trustee, a disqualified 
person with respect to the Plan, of: (1) a loan (the Loan) made by the 
Great Lakes Credit Union (GLCU), an unrelated third party lender, to 
Kurtson Realty, LLC (Kurtson), a real estate company that is wholly 
owned by the Plan; \2\ and (2) a future Loan made by an unrelated third 
party lender (hereinafter, GLCU and any third party lender is referred 
to as a ``Lender'') to Kurtson, provided that the general conditions 
that are set forth below in Section II are met.
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    \2\ Because Mr. Rosenbaum is the sole owner of Rosetree & 
Company, Ltd. (Rosetree), the Plan sponsor, and the only participant 
in the Plan, there is no jurisdiction under Title I of the Employee 
Retirement Income Security Act of 1974 (the Act), pursuant to 29 CFR 
2510.3-3(b). However, there is jurisdiction under Title II of the 
Act pursuant to section 4975 of the Code.
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SECTION II. GENERAL CONDITIONS
    (a) The Loan is made for purposes of the Plan acquiring and 
rehabilitating investment property from an unrelated third party 
through Kurtson;
    (b) The Loan is made on commercially reasonable terms;
    (c) The debt service and value to loan ratio for the Loan, and for 
any future Loan, are based primarily on the characteristics of the 
property serving as collateral for such Loan (the Collateral Property);
    (d) The Lender and the Loan servicer (the Loan Servicer) are 
unrelated to Mr. Rosenbaum and the Plan;
    (e) The Lender has a pre-existing Loan service arrangement with the 
Loan Servicer, and maintains this relationship for the duration of the 
Loan;
    (f) Mr. Rosenbaum does not receive any compensation or derive any 
personal benefit from the Collateral Property;
    (g) For the duration of the Loan or any future Loan, the Collateral 
Property is not used by or leased to: (1) any other disqualified 
persons with respect to the Plan; (2) Rosetree or any affiliate of 
Rosetree; or (3) any person or entity in which Mr. Rosenbaum may have 
an interest that would affect his best judgment as a Plan fiduciary;
    (h) The Guarantee is a condition that is: (1) customarily required 
in similar transactions between Kurtson and the Lender, and is not 
unique to the Loan or to the specific parties to the Loan; and (2) 
solely due to a regulatory requirement of the National Credit Union 
Administration that is imposed upon credit unions, including GLCU;
    (i) If the Plan defaults on a Loan, Mr. Rosenbaum pays the balance 
of such Loan, and has no recourse against the Plan for repayment;
    (j) No interest or any fee is charged to Kurtson or the Plan in 
connection with the Guarantee; and
    (k) The Guarantee is not part of an agreement, arrangement, or 
understanding in which Mr. Rosenbaum causes the assets of the Plan to 
be used in a manner that is designed to benefit himself or any person 
who has an interest which would affect the exercise of Mr. Rosenbaum's 
best judgment as a fiduciary of the Plan.
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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The Parties

    1. The Plan is a 401(k) Plan sponsored by Rosetree, a licensed CPA 
firm, insurance agency, and registered investment adviser. Mr. 
Rosenbaum (the Applicant) is the sole shareholder and employee of 
Rosetree. He performs all of Rosetree's operations and receives 
periodic compensation. Mr. Rosenbaum is also the sole participant in 
the Plan, as well as the Plan administrator and trustee. As of March 
31, 2016, the Plan had approximately $480,000 in total assets.
    2. Kurtson is a real estate operating company that is wholly owned 
by the Plan. Kurtson currently owns three investment properties, 
including a 3-unit apartment building located at 1842 S. Drake, 
Chicago, Illinois (the Collateral Property), which is rented to 
unrelated parties. Mr. Rosenbaum performs administrative duties for 
Kurtson, but he receives no compensation for his services.
    3. The Plan contemplates entering into a Loan from GLCU, a credit 
union based in Bannockburn, Illinois. As of December 31, 2015, GLCU had 
$719 million in assets.
    4. Spectrum Business Resources, LLC (Spectrum) is GLCU's loan 
servicing agent in Lisle, Illinois. As the Loan Servicer for several 
member credit unions, Spectrum identifies potential borrowers, prepares 
loan write-ups for the credit union loan committees, prepares loan 
documents and maintains correspondence and relationships with the 
borrowers. Both GLCU and Spectrum are unrelated to the Plan and Mr. 
Rosenbaum.\4\
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    \4\ Mr. Rosenbaum also represents that he has no relationship 
with any of Spectrum's member credit unions other than as a 
depositor or borrower.
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The Loans

    5. Kurtson seeks an initial Loan from GLCU in order to acquire and 
rehabilitate a new investment property that will serve as the 
Collateral Property for the Loan. A Loan proposal (the Loan Proposal) 
from Spectrum, which specifies the terms and conditions under which the 
requested financing will be provided to Kurtson, states that ``GLCU 
will provide up to a $90,000, secured, guaranteed commercial mortgage 
on the [Collateral Property], [which will require] 60 monthly payments 
of principal and interest through maturity in 5 years, based on a 20-
year amortization schedule, at a 5.95% fixed interest rate.'' The Loan 
Proposal also provides that ``the Loan amount will not exceed 75% of 
the appraised value of the [Collateral Property].''
    6. In addition to the Collateral Property, the collateral for the 
Loan will consist of an assignment of rents on the Collateral Property 
by Kurtson to GLCU. Other terms of the Loan Proposal require an 
appraisal of the Collateral Property prior to the formal approval of 
such Loan, to confirm a minimum market value of $120,000. Further, 
pursuant to credit union regulations, the Loan will require a written 
Guarantee from Mr. Rosenbaum.\5\
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    \5\ Mr. Rosenbaum represents that he is also a guarantor of 
other loans made to entities he controls for transactions that are 
substantially similar to the proposed exemption transaction. He 
states that the outstanding loan amounts for which he serves as a 
guarantor are approximately $767,000 on properties having an 
appraised value of $1,240,000.
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    7. With respect to fees and other expenses associated with the 
Loan, the Applicant represents that there will be a processing fee of 
$250. In addition, Kurtson will be required to reimburse GLCU for all 
costs associated with the transaction, including but not limited to 
attorney's fees, appraisal fees, recording fees, title insurance costs, 
survey costs, searches, documentation fees, and any other costs and 
fees associated with the transaction. The Loan will not have any 
prepayment penalties.
    Although the Loan Proposal allows for a Loan amount of up to 
$90,000, Kurtson will obtain a Loan for $80,000, resulting in a value 
to loan ratio of 150%. The Loan would represent approximately 14.29% of 
the Plan's assets.
    8. The Applicant anticipates that the Plan will engage in 
additional Loans of a similar nature in the future. Accordingly, 
Kurtson will obtain all future Loans from the Lender under similar, 
commercially-reasonable terms, subject to changes in market conditions 
that would affect the interest rate. The debt service and value to loan 
ratio for the Loan, and for any future Loan, will be based primarily on 
the characteristics of the Collateral Property.

[[Page 20386]]

    In addition, the Lender and the Loan Servicer will be unrelated to 
Mr. Rosenbaum and the Plan. Although, the Lender may not have a pre-
existing loan service arrangement with the Loan Servicer, it will 
maintain this relationship with Spectrum for the duration of a Loan. 
Further, Mr. Rosenbaum will not receive any compensation or derive any 
personal benefit from the Collateral Property. Finally, the Collateral 
Property for the Loan or any future Loan, may not be used by or leased 
to: (a) any other disqualified persons with respect to the Plan; (b) 
Rosetreee or any affiliate of Rosetree; or (c) any person or entity in 
which Mr. Rosenbaum may have an interest that would affect his best 
judgment as a Plan fiduciary.

Appraisal of the Collateral Property

    9. The Collateral Property for the initial Loan has been appraised 
by Steven F. Eggler, a Certified Residential Real Estate Appraiser, of 
C.A. Benson and Associates, Inc., which is located in La Grange Park, 
Illinois. Mr. Eggler represents that he has no interest in the 
Collateral Property and no bias with respect to the participants in the 
proposed transaction, or with respect to Rosetree, the Plan, or 
Kurtson. Mr. Eggler also represents that his employment and/or 
compensation for performing the appraisal or any future appraisals was 
not conditioned on any agreement or understanding that he would report 
(or present analysis, supporting), among other things, a predetermined 
specific value, a predetermined minimum value, a range or direction in 
value, or a value that favors the cause of any party.
    10. In an appraisal report dated September 30, 2014 (the 2014 
Appraisal), Mr. Eggler certifies that he developed his opinion of the 
market value of the Collateral Property based solely on the Sales 
Comparison and Income Approaches to valuation. As of September 23, 
2014, Mr. Eggler placed the fair market value of the Collateral 
Property at $120,000, under the Sales Comparison Approach, and at 
$117,000, under the Income Approach. After reconciling both valuations, 
Mr. Eggler ultimately determined that the Collateral Property was worth 
$120,000, as of September 30, 2014.
    11. In a statement dated May 31, 2016, Charles A. Benson, Jr., SRA 
of C. A. Benson and Associates, Inc., who was the supervisory appraiser 
for the 2014 Appraisal, provided an update to the sales data discussed 
in the 2014 Appraisal, as it applies to the Collateral Property. As 
noted in the 2014 Appraisal, Mr. Benson represents that the average 
sale price of a 2-4 unit [in the $100,000-200,000 price range] in the 
North Lawndale community, where the Collateral Property is located, was 
$136,171 over the 12-month period prior to the 2014 Appraisal. 
According to Mr. Benson, in the ensuing 12 month period, the average 
sale price for properties in the same price range as the Collateral 
Property was $131,287, which represented a 3.6% decline in value. Mr. 
Benson also represents that from September 25, 2015 to May 10, 2016, 
the average sale price of properties that were comparable to the 
Collateral Property was $137,953. According to Mr. Benson, this amount 
represents a 1.3% increase from the average sale price noted in the 
2014 Appraisal. Mr. Benson explains that this price difference reflects 
a small decrease in the year after the 2014 Appraisal, followed by an 
increase to a level that was slightly higher than what was noted in the 
2014 Appraisal. Overall, Mr. Benson represents that market conditions 
in the area have stabilized since the 2014 Appraisal.
    The Applicant represents that any investment property used by the 
Applicant as Collateral Property to support a future Loan will be 
similarly valued by a qualified, independent appraiser.

Rationale for the Loans

    13. Mr. Rosenbaum represents that he is an experienced real estate 
investor. As a former Partner in charge of the Chicago Real Estate 
practice of Coopers & Lybrand (now Price Waterhouse Coopers), Mr. 
Rosenbaum states that he has been a senior executive at other real 
estate industry entities, and that he personally owns ten properties 
that are similar to the Collateral Property.
    It is Mr. Rosenbaum's opinion that, given the current investment 
environment, real estate investments of this type provide higher rates 
of return and less risk than other investments available. Mr. Rosenbaum 
is also of the view that the proposed Loans will enable the Plan to 
earn a higher rate of return by investing in an additional property, 
which would not be obtainable if the exemption request is denied.

The Guarantee

    14. As represented above, the Loan Proposal requires Mr. 
Rosenbaum's Guarantee. Accordingly, the Applicant is requesting an 
administrative exemption from the Department that will allow Mr. 
Rosenbaum to provide a Guarantee for the Loan that Kurtson, a wholly-
owned entity of the Plan and thus, a Plan asset, is requesting from 
GLCU, as well as for future Loans from Lenders, which may include GLCU. 
The proposed Loan will be made on commercially reasonable terms, and 
both the debt service and value to loan ratios for the Loan from GLCU 
indicate that the Loan will be based primarily upon the characteristics 
of the Collateral Property that is being financed for purposes of the 
Loan. The Applicant represents that, although the Plan is dealing with 
GLCU, an independent lender, Mr. Rosenbaum is being asked by GLCU to 
participate as a Loan guarantor. The Applicant represents that the 
proposed Guarantee is solely due to a regulatory requirement of the 
National Credit Union Administration \6\ that is imposed upon credit 
unions, including GLCU. Further, the Applicant represents that it is 
not aware of any other bank or savings institution that makes non-
recourse loans at present.\7\ The Applicant represents that only 
insurance companies do not require guarantees, but only for loans over 
$1 million.
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    \6\ See 12 CFR 723.7(b)--(``Principals, other than a not for 
profit organization, as defined by the Internal Revenue Service Code 
(26 U.S.C. 501) or those where the Regional Director grants a 
waiver, must provide their personal liability and guarantee.'')
    \7\ The Applicant represents that prior to 2008, it is aware of 
only two financial institutions that made non-recourse loans to 
retirement plans. However, the Applicant explains that both 
institutions are no longer in business.
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    Notwithstanding the regulatory requirement, the Applicant believes 
that with respect to the Loan, the Collateral Property provides 
adequate collateral and cash flow to repay the Loan without relying 
upon Mr. Rosenbaum's personal credit or funds.
    No interest or any fee will be charged to Kurtson or the Plan in 
connection with the Guarantee. In addition, the Guarantee will not be 
part of an agreement, arrangement, or understanding in which Mr. 
Rosenbaum causes the assets of the Plan to be used in a manner that is 
designed to benefit himself or any person who has an interest which 
would affect the exercise of Mr. Rosenbaum's best judgment as a 
fiduciary of the Plan.
    The Applicant also requests exemptive relief for Mr. Rosenbaum's 
Guarantee of certain future Loans that may be made to Kurtson by a 
Lender. As represented above, the debt service and value to loan ratios 
for all future Loans will be based primarily upon the characteristics 
of the Collateral Property for the specific Loan.

Legal Analysis

    15. Section 4975(c)(1)(B) of the Code prohibits any direct or 
indirect lending

[[Page 20387]]

of money or other extension of credit between a plan and a disqualified 
person. Section 4975(e)(2)(A) of the Code defines the term 
``disqualified person'' to include a plan fiduciary. Section 4975(e)(3) 
of the Code defines the term ``fiduciary,'' in part, to include any 
person who exercises any discretionary authority or discretionary 
control respecting management of such plan or exercises any authority 
or control regarding management or disposition of its assets. As Plan 
trustee, with investment discretion over the assets of the Plan, Mr. 
Rosenbaum is a fiduciary and therefore, a disqualified person. Thus, in 
absence of a statutory or administrative exemption, the Guarantee would 
violate section 4975(c)(1)(B) of the Code.

Statutory Findings

    17. The Applicant states that the proposed exemption is 
administratively feasible in that it covers a specific factual 
situation that will not require ongoing monitoring by the Department. 
In addition, the Applicant states that the proposed exemption is in the 
best interests of the Plan and Mr. Rosenbaum as the sole participant 
because the Loan will allow the Plan to invest in another property in 
which the rate of return will be substantially higher for the Plan than 
investing in traditional assets, such as the stock market, and with 
less risk.\8\
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    \8\ As an example, the Applicant states that the typical 
property he acquires costs $100,000 to purchase and rehabilitate, 
which then generates $25,000 annually in cash flow and appraises for 
$150,000. The Applicant further explains that there is strong demand 
for apartments that are similar to the Collateral Property, and the 
rents are generally guaranteed by the Federal Government under the 
Section 8 Housing Program.
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    Further, the Applicant represents that the proposed exemption is 
protective of the rights of Mr. Rosenbaum as the sole Plan participant 
because the Loan is made by an unrelated, third party to the Plan and 
guaranteed by Mr. Rosenbaum in his individual capacity. In addition, 
the Applicant represents that no interest or fee is charged to Kurtson 
or the Plan in connection with the Guarantee.

Summary

    18. In summary, the Applicant represents that the proposed 
transaction satisfies the statutory criteria of section 4975(c)(2) of 
the Code because:
    (a) The Loan will be made for purposes of the Plan acquiring and 
rehabilitating investment property from an unrelated third party 
through Kurtson;
    (b) The Loan will be made on commercially reasonable terms;
    (c) The debt service and value to loan ratio for the Loan, and for 
any future Loan, will be based primarily on the characteristics of the 
Collateral Property;
    (d) The Lender and the Loan Servicer will be unrelated to Mr. 
Rosenbaum and the Plan;
    (e) The Lender will have a pre-existing Loan service arrangement 
with the Loan Servicer, and will maintain this relationship for the 
duration of the Loan;
    (f) Mr. Rosenbaum will not receive any compensation or derive any 
personal benefit from the Collateral Property;
    (g) For the duration of the Loan or any future Loan, the Collateral 
Property will not be used by or leased to: (1) any other disqualified 
persons with respect to the Plan; (2) Rosetree or any affiliate of 
Rosetree; or (3) any person or entity in whom Mr. Rosenbaum may have an 
interest that would affect his best judgment as a Plan fiduciary;
    (h) The Guarantee will be a condition that is: (1) customarily 
required in similar transactions between Kurtson and the Lender, and 
will not be unique to the Loan or to the specific parties to the Loan; 
and (2) solely due to a regulatory requirement of the National Credit 
Union Administration that is imposed upon credit unions, including 
GLCU;
    (i) If the Plan defaults on a Loan, Mr. Rosenbaum will pay the 
balance of each Loan and will have no recourse against the Plan for 
repayment;
    (j) No interest or any fee will be charged to Kurtson or the Plan 
in connection with the Guarantee; and
    (k) The Guarantee will not be part of an agreement, arrangement, or 
understanding in which Mr. Rosenbaum causes the assets of the Plan to 
be used in a manner that is designed to benefit himself or any person 
who has an interest which would affect the exercise of Mr. Rosenbaum's 
best judgment as a fiduciary of the Plan.
NOTICE TO INTERESTED PERSONS
    As Mr. Rosenbaum is the sole participant and beneficiary of the 
Plan, it has been determined that there is no need to distribute the 
Notice of Proposed Exemption (Notice) to interested persons. Therefore, 
comments and requests for a hearing must be received by the Department 
within thirty (30) days of the publication of this 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: Ms. Anna Mpras Vaughan of the 
Department, telephone (202) 693-8565. (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 exemption, 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 exemption, if granted, will be subject to the 
express condition that the material facts and representations contained 
in the application are true and complete, and that the application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.


[[Page 20388]]


    Signed at Washington, DC, this 24th day of April, 2017.
Lyssa E. Hall,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2017-08687 Filed 4-28-17; 8:45 am]
 BILLING CODE 4510-29-P