Rules and Regulations. Grant of individual exemptions

Agency: Pension and Welfare Benefits Administration, Labor
Action: Grant of individual exemptions
Citation: FR Doc. 01-24150

Summary

This document contains exemptions issued by the Department of Labor (the Department) from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (the Act) and/or the Internal Revenue Code of 1986 (the Code). Notices were published in the Federal Register of the pendency before the Department of proposals to grant such exemptions. The notices set forth a summary of facts and representations contained in each application for exemption and referred interested persons to the respective applications for a complete statement of the facts and representations. The applications have been available for public inspection at the Department in Washington, DC. The notices also invited interested persons to submit comments on the requested exemptions to the Department. In addition the notices stated that any interested person might submit a written request that a public hearing be held (where appropriate). The applicants have represented that they have complied with the requirements of the notification to interested persons. No public comments and no requests for a hearing, unless otherwise stated, were received by the Department. The notices of proposed exemption were issued and the exemptions are being granted solely by the Department because, effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue exemptions of the type proposed to the Secretary of Labor. Statutory Findings In accordance with section 408(a) of the Act and/or section 4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon the entire record, the Department makes the following findings: (a) The exemptions are administratively feasible; (b) They are in the interests of the plans and their participants and beneficiaries; and (c) They are protective of the rights of the participants and beneficiaries of the plans. Deferred Profit Sharing Plan of the Penske Corporation (the Plan) Located in Charlotte, North Carolina [Prohibited Transaction Exemption No. 2001-34; Exemption Application No. D-10911] Exemption The restrictions of sections 406(a) and 406(b)(1) and (b)(2) and section 407(a) of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall not apply, (1) effective June 15, 2000, to the acquisition and holding by the Plan of interests (the Interests) in the Penske Company, LLC (the LLC), a wholly owned subsidiary of the Plan sponsor, the Penske Corporation (Penske), which were distributed (the Distribution) as dividends to the Plan as a shareholder of Penske common stock (Penske Stock); and (2) the proposed redemption, by the LLC, of the Interests held by the Plan for the greater of $3.37 per-unit or their fair market value at the date of the redemption, provided that the following conditions were or will be met: (a) The Interests were acquired by the Plan pursuant to Plan provisions for individually-directed investment of participant accounts; (b) The Plan's receipt and holding of the Interests occurred in connection with the Distribution; (c) The Plan's acquisition of the Interests as a dividend paid to all holders of Penske Stock resulted from an independent act of Penske as a corporate entity, such that all holders of the Penske Stock, including the Plan, were treated in the same manner; (d) Within 15 business days after the date the notice granting the final exemption is published in the Federal Register , the LLC will redeem the Interests held by the Plan for not less than $3.37 per unit; (e) The price received by the Plan for the Interests is not less than the fair market value of the Interests on the date that the redemption occurs; and (f) The Plan paid no fees or commissions in connection with the acquisition and holding of the Interests nor will it pay any fees or commissions in connection with the redemption of the Interests. EFFECTIVE DATE: This exemption is effective as of June 15, 2000 with respect to the acquisition and holding by the Plan of the Interests. In addition, this exemption is effective as of the date the final exemption is granted with respect to the LLC's redemption of the Interests held by the Plan. For a more complete statement of the facts and representations supporting the Department's decision to grant this exemption, refer to the Notice of Proposed Exemption (the Notice) published on July 10, 2001 at 66 FR 36002. Written Comments The only written comments received by the Department were submitted by the applicant, Penske. These comments sought several changes to the Notice, each of which is discussed below. In Representation 1 of the Summary of Facts and Representations (the Summary), the applicant requests that the first two sentences of the second paragraph be revised to read as follows for technical accuracy: As of December 31, 2000, the Plan had a total of 1,174 participants. The Plan had assets, as of March 31, 2000, with an approximate aggregate fair market value of $35,477,000. Also as of March 31, 2000, 49.8% (or $17,674,629) of the fair market value of the total assets of the Plan was invested in Penske Stock. In addition, the applicant requests that the phrase “qualifying employer security” as used in footnote 2 of the Summary be revised to read “employer security”. Further, in Representation 5 of the Summary, the applicant represents that the word “Code” in the next to the last line of the first paragraph should be revised to the word “Act”. The Department concurs in these changes submitted by the applicant. Finally, the applicant requests that Representation 11(a) of the Notice and its corresponding condition (a) be revised to read as follows: “The Interests were acquired by the Plan as the result of a dividend paid to all holders of Penske Stock” to remove any implication that the Plan participants directed their accounts to invest in the Interests. In response to this comment, the Department notes the suggested modification to Representation 11(a) but has determined to leave the language in condition (a) unchanged and to modify condition (c) to read as the follows: “The Plan's acquisition of the Interests as a dividend paid to all holders of Penske Stock resulted from an independent act of Penske as a corporate entity, such that all holders of the Penske Stock, including the Plan, were treated in the same manner”. Accordingly, after giving full consideration to the entire record, including the comments by the applicant, the Department has determined to grant the exemption as modified. In this regard, the comments submitted to the Department have been included as part of the public record of the exemption application. The complete application file, including all supplemental submissions received by the Department, is made available for public inspection in the Public Disclosure Room of the Pension and Welfare Benefits Administration, Room N-1513, U.S. Department of Labor, 200 Constitution Avenue. NW, Washington, D.C. 20210.