Notices. Notice of proposed exemption
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/register/2008/05/09/08-1241A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
BILLING CODE 4410-01-P DEPARTMENT OF LABOR Employee Benefits Security Administration [Application Nos. D-11363 & D-11435] Proposed Exemptions Involving: D-11363—Citation Box and Paper Co. Profit Sharing Plan and Retirement Trust; and D-11435—Merrill Lynch & Co., Inc. and BlackRock, Inc. AGENCY: Employee Benefits Security Administration, Labor ACTION: Notice of proposed exemption. SUMMARY: This document contains a notice 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).
Written Comments and Hearing Requests All interested persons are invited to submit written comments or requests for a hearing on the pending exemption, unless otherwise stated in the Notice of Proposed Exemption, within 45 days from the date of publication of this **Federal Register** Notice. 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. ADDRESSES: All written comments and requests for a hearing (at least three copies) should be sent to the Employee Benefits Security Administration (EBSA), Office of Exemption Determinations, Room N-5649, 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 e-mail or FAX. Any such comments or requests should be sent either by e-mail to: * moffitt.betty@dol.gov,* or by FAX to
(202)219-0204 by the end of the scheduled comment period. The application for exemption and the comments received will be available for public inspection in the Public Documents Room of the Employee Benefits Security Administration, U.S. Department of Labor, Room N-1513, 200 Constitution Avenue, NW., Washington, DC 20210. Notice to Interested Persons Notice of the proposed exemption 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). SUPPLEMENTARY INFORMATION: The proposed exemption was 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 (55 FR 32836, 32847, August 10, 1990). 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 is summarized below. Interested persons are referred to the application on file with the Department for a complete statement of the facts and representations. Citation Box and Paper Co. Profit Sharing Plan and Retirement Trust (the Plan), Located in Chicago, Illinois [Exemption Application Number: D-11363]. 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 (55 FR 32836, 32847, August 10, 1990). If the exemption is granted, the restrictions of sections 406(a)(1)(A) and (D), and sections 406(b)(1) and (b)(2) of the Act, and the sanctions resulting from the application of section 4975 of the Code, by reason of sections 4975(c)(1)(A), (D), and
(E)of the Code, shall not apply to the proposed sale of improved real property (the Property) by the Plan to a partnership to be comprised of Anthony J. Kostiuk (the Applicant and Plan Fiduciary), Anthony L. Kostiuk, Edmund Chmiel, Andre Frydl, and David Marinier, each of whom is a party in interest with respect to the Plan, provided that the following conditions are satisfied:
(a)The sale is a one-time transaction for cash;
(b)As a result of the sale, the Plan receives the greater of:
(i)$975,000;
(ii)The fair market value of the Property as of the date of the transaction as determined by a qualified, independent appraiser; or
(iii)The cost to the Plan to acquire and hold the Property;
(c)The Plan pays no commissions, fees or other expenses in connection with the sale;
(d)The terms and conditions of the sale are at least as favorable as those obtainable in an arm's length transaction with an unrelated third party;
(e)With respect to any lease payments for the occupancy of the Property that were made by the Citation Box and Paper Co. (the Company) to the Plan on or after July 1, 1996 and which (in the opinion of an MAI-certified, qualified independent appraiser) amounted to less than the fair market rental value of the Property at the time of such payment, the Company reimburses the Plan, prior to publication of a final grant of this requested prohibited transaction exemption, for the full amount of all such rental shortfalls in the form of a lump sum payment in arrears plus interest as calculated in conformity with the requirements of section 5(b)(5) of the Department's Voluntary Fiduciary Correction
(VFC)Program described at 71 FR 20262 (April 19, 2006); and
(f)To the extent that there are rental shortfalls referenced in paragraph (e), the Applicant shall provide the Department with all relevant documentation pertaining to the calculation of such shortfall (including the fair market rental value of the Property for each applicable lease year, the amount of the rental shortfall for each year, the interest attributable to the rental shortfall for each year, and proof that the reimbursement was paid to the Plan) prior to publication of a final grant of this requested prohibited transaction exemption. Summary of Facts and Representations 1. The Plan is a defined contribution profit sharing plan sponsored by the Citation Box and Paper Co. (the Company), which is headquartered in Chicago, Illinois. As of June 30, 2006, the Plan had approximately 34 participants and total assets of approximately $3,107,545. The Plan's current and sole trustee is the Applicant, who is also a participant in the Plan and the owner of the Company. Anthony L. Kostiuk, Edmund Chmiel, Andre Frydl, and David Marinier are also participants in the Plan and, together with the Applicant, intend to establish a partnership that will purchase a parcel of improved real property (the Property), located at 4700 West Augusta Boulevard in Chicago, Illinois, from the Plan. The Applicant states that, in submitting this exemption application to the Department, he is authorized to represent the interests of his intended co-partners (Messrs. A. L. Kostiuk, Chmiel, Frydl, and Marinier) in the acquisition of the Property from the Plan. 2. The Applicant represents that the Property covers a gross area of 76,444 square feet, and is irregular in shape. The Applicant represents that the Property was acquired by the Plan from the Company on November 18, 1971 at a cost of $294,000. 1 The Property contains a two-story loft industrial structure (the Building) that houses the Company's warehouse and office facilities. The Applicant represents that the surface area of the Building at ground level totals 41,821 square feet. 1 The Applicant has provided a copy of the 1984 exemption application (the 1984 Application) submitted on behalf of the Plan which culminated in the grant of PTE 85-7. The 1984 Application states that the Property was originally purchased by the Plan in 1971 for a price of $294,000. According to the Applicant, the 1984 Notice of Proposed Exemption (49 FR 43131, October 26, 1984) contains a typographical error, because it states that the Property was acquired by the Plan for $249,000. In addition, the Notice of Proposed Exemption states that the Property is approximately 76,000 square feet in area; In the current application, as noted above, the Applicant represents that the more precise figure is 76,444 square feet. The Applicant represents that a parcel of land adjacent to the Property (the Adjacent Parcel) previously owned by the Belt Railway Company (the Railway) of Chicago was purchased in 2005 by Citation Properties, LLC, a single-member limited liability company whose sole member is the Applicant. Prior to its acquisition by the Company, the Applicant represents that Adjacent Parcel had been leased to the Company by the Railway to provide parking facilities, as well as access to and egress from the Property. The Applicant represents that this lease predated the Department's issuance of a previous administrative exemption, PTE 85-7 (50 FR 1006, January 8, 1985), involving the Plan and the Property at issue in this proposal. The Applicant represents that the Adjacent Parcel is rectangular in shape and covers an area of 17,600 square feet. The Applicant represents that the Plan has not paid the Company or Citation Properties, LLC for the use of the Adjacent Parcel since it was acquired from the Railway. The Applicant also represents that the remaining lots adjacent to the Property are owned by persons unrelated to the Company, the Applicant, and the intended co-partners. 3. PTE 85-7 (the Original Exemption) permitted the Plan to lease the Property to the Company on a continuous basis on or after July 1, 1984, provided that “the terms and conditions of such leasing are at least as favorable to the Plan as those which the Plan could receive in a similar transaction with an unrelated party.” The material facts and representations supporting the Department's grant of the Original Exemption were contained in a Notice of Proposed Exemption published on October 26, 1984, at 49 FR 43131 (the 1984 Notice). 4. Since it acquired the Property in 1971, the Plan has leased the Property to the Company on a continuous basis. Each of the successive lease agreements executed between the Plan and the Company since the time of the acquisition have been “absolute net leases” requiring the company to be responsible for all upkeep, repair, fire insurance premiums, and taxes on the Property. According to the Summary of Facts and Representations contained in the 1984 Notice published prior to the issuance of PTE 85-7, the Original Exemption was intended to permit the continued leasing (the Lease) of the Property by the Plan to the Company until June 30, 1994, with three five-year options from such date. The 1984 Notice further stated that “[t]he Lease provides that for each three-year period during the initial ten-year term and during each option period thereafter the rental amount would be adjusted based upon an MAI appraisal report as to the then-current fair rental value.” The terms of the original Lease executed on January 16, 1984, stipulated that the fair rental value of the Property would be updated two months prior to July 1, 1987 (and triennially thereafter through the year 2008), by an independent, MAI-certified appraiser. 5. According to the 1984 Notice, an independent fiduciary (originally Unibanc Trust Company, subsequently replaced in March of 1986 by Harris Trust and Savings Bank (Harris Trust)) was to exercise authority and control over and have responsibility for the operation of the lease. In addition, the 1984 Notice represented that this fiduciary was to have sole discretion to monitor the lease and enforce the rights of the Plan under the terms and conditions of any such lease. 2 In April of 2004, the Company informed Harris Trust that it was exercising its option under the lease agreement to extend the term of the lease for an additional period of five years beginning on July 1, 2004, and ending on June 30, 2009. 2 The Department expresses no opinion herein as to whether the Plan's continued ownership and leasing of the Property is consistent with the general fiduciary responsibility provisions of Part 4 of Title I of the Act. The Applicant represents that Harris Trust notified the Company in April of 2004 that it would no longer serve as an independent fiduciary to the Plan after May 31, 2004, because it was no longer providing retirement plan services to its clients. This line of business was sold by Harris Trust to another financial institution, Wells Fargo Investment and Trust Company (Wells Fargo). Upon receiving notification of Harris Trust's withdrawal, the Plan Fiduciary contacted Wells Fargo to inquire about its willingness to serve as a replacement independent fiduciary with respect to the monitoring of the Lease described in the Original Exemption. While it did assume various retirement plan services for the Plan previously performed by Harris Trust, Wells Fargo declined the Plan Fiduciary's request to serve as an independent fiduciary with respect to the Lease. The Applicant represents that the Plan Fiduciary then approached two other financial institutions to serve as a replacement independent fiduciary. However, neither of these institutions expressed a willingness to serve the Plan in such a capacity. 6. As part of its current exemption application with the Department, the Plan Fiduciary submitted copies of a series of fair market rental appraisals of the Property for several prior lease terms. The applicant represents that each of these prior appraisals was prepared by a qualified, independent appraiser, Urban Real Estate Research, Inc. (Urban Real Estate) of Chicago, Illinois, and signed by Mr. Arthur J. Murphy, MAI, a certified general real estate appraiser licensed by the State of Illinois. In each of these appraisal reports, Urban Real Estate reported that the Property covered an approximate area of 72,844 square feet. In providing this approximate square footage figure (which is less than the 76,444 square foot area represented by the Applicant as the accurate size of the Property), the Applicant represents that Urban Real Estate used the measurement from the Realty Atlas Map. The Applicant also represents that the Realty Atlas Map is almost illegible, and appeared to indicate that the Property occupied approximately 241.31 feet of frontage along the north side of West Augusta Boulevard. The Applicant further represents, however, that a plat of survey conducted by the National Survey Service, Inc. shows that the actual frontage is actually 291.31 feet, a 50-foot difference. The Applicant also acknowledges that, since at least July 1, 2006 ( *i.e.* , during the pendency of the current prohibited transaction exemption request), the annual rent paid by the Company to the Plan for the Property has been less than the fair rental value of the Property as determined by Urban Real Estate. 7. The Applicant further represents that a second real estate appraiser, Muriello Appraisal and Consulting (Muriello Appraisal) of Elk Grove Village, Illinois, was retained by the Plan for the purpose of determining the fair market value of the Property in connection with the sale. The Applicant represents that Muriello Appraisal is independent of, and unrelated to, the Company, the Applicant, and the intended co partners. Muriello Appraisal represents that less than 1% of its gross annual revenue was derived from appraisal services performed for the Plan and the Company. On June 18, 2007, an updated appraisal report was issued by Muriello Appraisal concerning the fair market value of the Property as of June 11, 2007. The updated report was signed by Frank J. Muriello, MAI (a general real estate appraiser licensed by the State of Illinois) and Paul J. Muriello, a senior appraiser also licensed by the State of Illinois. In this updated report, Muriello Appraisal states that consideration was given in the appraisal to three approaches to value: The cost approach, the sales comparison approach, and the income capitalization approach. Relying upon the sales comparison approach, Muriello Appraisal issued a report dated June 18, 2007 which stated that the fair market value of the Property was $975,000 as of June 11, 2007. The Applicant later determined, however, that the appraisal report improperly aggregated the values of both the Property and the Adjacent Parcel in arriving at the $975,000 figure. The Applicant represents that Paul Muriello has subsequently acknowledged in writing that, if the Adjacent Parcel were disaggregated from the June, 2007, appraisal, the standalone value of the Property may have to be adjusted below $975,000. Nevertheless, the Applicant represents that the proposed partnership is willing to pay the Plan the greater of $975,000 or the fair market value of the Property on the date of the transaction. 8. Accordingly, the Applicant proposes a one-time cash sale of the Property by the Plan to the proposed partnership for the greater of
(1)$975,000 or
(2)the fair market value of the Property on the date of the transaction as established by a qualified, independent appraiser. The Applicant represents that no Plan assets or monies allocated to individual participant accounts in the Plan will be utilized to purchase the Property. The Applicant further states that the proposed partnership intends to obtain financing from a financial institution to enable the sale of the Property in exchange for cash; the financial institution selected for this purpose shall be independent of and unrelated to the Company, the Applicant, and the intended copartners. Any mortgage obtained by the proposed partnership in connection with the acquisition of the Property shall be a nonrecourse loan with no obligations or liability to the Plan. The Applicant represents that the sale of the Property by the Plan is administratively feasible in that it will be a one-time transaction for cash. The Applicant also represents that the sale is in the interests of the Plan because it would provide additional liquidity to the Plan. In addition, the Applicant represents that the sale is protective of the interests of the Plan because the cash proceeds derived from the sale of the Property will be invested in a manner that diversifies the assets of the Plan. 9. In summary, the proposed transaction satisfies the requirements of section 408(a) of the Act because:
(a)The sale is a one-time transaction for cash;
(b)As a result of the sale, the Plan receives the greater of
(i)$975,000,
(ii)the fair market value of the Property as of the date of the transaction as determined by a qualified, independent appraiser, or
(iii)the cost to the Plan to acquire and hold the Property;
(c)The Plan pays no commissions, fees or other expenses in connection with the sale;
(d)The terms and conditions of the sale are at least as favorable as those obtainable in an arm's length transaction with an unrelated third party;
(e)With respect to any lease payments for the occupancy of the Property that were made by the Company to the Plan on or after July 1, 1996 and which (in the opinion of an MAI-certified, qualified independent appraiser) amounted to less than the fair market rental value of the Property at the time of such payment, the Company reimburses the Plan, prior to publication of a final grant of this requested prohibited transaction exemption, for the full amount of all such rental shortfalls in the form of a lump sum payment in arrears plus interest as calculated in conformity with the requirements of section 5(b)(5) of the Department's Voluntary Fiduciary Correction
(VFC)Program described at 71 FR 20262 (April 19, 2006); and
(f)To the extent that there are rental shortfalls referenced in paragraph (e), the Applicant shall provide the Department with all relevant documentation pertaining to the calculation of such shortfall (including the fair market rental value of the Property for each applicable lease year, the amount of the rental shortfall for each year, the interest attributable to the rental shortfall for each year, and proof that the reimbursement was paid to the Plan) prior to publication of a final grant of this prohibited transaction exemption. *Notice to Interested Persons:* A copy of this notice of the proposed exemption (the Notice) shall be given to all interested persons in the manner agreed upon by the applicant and the Department within fifteen
(15)days of the date of its publication in the **Federal Register** . The Department must receive all written comments and requests for a hearing no later than forty-five
(45)days after publication of the Notice in the **Federal Register** . FOR FURTHER INFORMATION CONTACT: Mr. Mark Judge of the Department, telephone
(202)693-8339. (This is not a toll-free number.) Merrill Lynch & Co., Inc. (ML&Co.) and BlackRock, Inc. (BlackRock); (Collectively, the Applicants), Located in New York, New York [Exemption Application No. D-11435]. Proposed Exemption Based on the facts and representations set forth in the application, the Department of Labor (the Department) is considering granting an exemption under the authority of section 408(a) of the Employee Retirement Income Security Act of 1974 (the Act) and section 4975(c)(2) of the Internal Revenue Code of 1986 (the Code) and in accordance with the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990): 1. Definitions
(a)For purposes of this proposed exemption, the term “Merrill Lynch/BlackRock Related Entity or Entities” includes all entities listed in Section I(a)(1), (a)(2) and (a)(3):
(1)Merrill Lynch & Co. ( *i.e.* , ML&Co.) and any person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with ML&Co.,
(2)BlackRock, Inc. ( *i.e.* , BlackRock) and any person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with BlackRock, and
(3)Any entity that meets the definition of a Merrill Lynch/BlackRock Related Entity during the term of the exemption.
(b)For purposes of section (a), the term “control” means the power to exercise a controlling influence over the management or policies of a person other than an individual. 2. General Conditions
(a)The applicable Merrill Lynch/BlackRock Related Entity or Entities maintain(s) or cause(s) to be maintained for a period of six
(6)years from the date of any transaction described herein, such records as are necessary to enable the persons described in paragraph
(b)to determine whether the conditions of this exemption were met, except that—
(1)If the records necessary to enable the persons described in paragraph (b)(1)(i)-(iv) to determine whether the conditions of the exemption have been met are lost or destroyed, due to circumstances beyond the control of the Merrill Lynch/BlackRock Related Entity or Entities, then no prohibited transaction will be considered to have occurred solely on the basis of the unavailability of those records; and
(2)No party in interest with respect to a plan which engages in the covered transactions, other than any Merrill Lynch/BlackRock Related Entity or Entities, shall be subject to the civil penalty that may be assessed under section 502(i) of the Act or to the taxes imposed by section 4975(a) and
(b)of the Code if the records have not been maintained or are not available for examination as required by paragraph
(b)below. (b)(1) Except as provided below in paragraph (b)(2), and notwithstanding the provisions of subsections (a)(2) and
(b)of section 504 of the Act, the records referred to above in paragraph
(a)above are unconditionally available for examination during normal business hours at their customary location to the following persons or an authorized representative thereof—
(i)Any duly authorized employee or representative of the Department or the Internal Revenue Service, or the SEC; or
(ii)Any fiduciary of any plan that engages in the covered transactions, or any duly authorized employee or representative of such fiduciary; or
(iii)Any employer of participants and beneficiaries and any employee organization whose members are covered by a plan that engages in the transactions covered herein, or any authorized employee or representative of these entities; or
(iv)Any participant or beneficiary of a plan that engages in the transactions covered herein, or duly authorized representative of such participant or beneficiary;
(2)None of the persons described above in paragraph (b)(1)(ii)-(iv) shall be authorized to examine trade secrets of the Merrill Lynch/BlackRock Related Entity or Entities, or commercial or financial information, which is privileged or confidential; and
(3)Should the Merrill Lynch/BlackRock Related Entity or Entities refuse to disclose information on the basis that such information is exempt from disclosure, pursuant to paragraph (b)(2) above, the Merrill Lynch/BlackRock Related Entity or Entities shall, by the thirtieth (30th ) day following the request, provide a written notice advising that person of the reasons for the refusal and that the Department may request such information. 3. Exemptions From Prohibitions Respecting Certain Classes of Transactions Involving Employee Benefit Plans and Certain Broker-Dealers and Banks—Underwritings The restrictions of sections 406 of the Act, and the taxes imposed by reason of section 4975(a) and
(b)of the Code, by reason of section 4975(c)(1) of the Code, shall not apply to the purchase or other acquisition of certain securities by an employee benefit plan during the existence of an underwriting or selling syndicate with respect to such securities, from any person other than a Merrill Lynch/BlackRock Related Entity or Entities, when such Merrill Lynch/BlackRock Related Entity or Entities is a fiduciary with respect to such plan, and a member of such syndicate, provided that the following conditions are met:
(a)No Merrill Lynch/BlackRock Related Entity or Entities which is involved in any way in causing the plan to make the purchase is a manager of such underwriting or selling syndicate. For purposes of this exemption, the term “manager” means any member of an underwriting or selling syndicate who, either alone or together with other members of the syndicate, is authorized to act on behalf of the members of the syndicate in connection with the sale and distribution of the securities being offered or who receives compensation from the members of the syndicate for its services as a manager of the syndicate.
(b)The securities to be purchased or otherwise acquired are—
(1)Part of an issue registered under the Securities Act of 1933 or, if exempt from such registration requirement, are
(i)issued or guaranteed by the United States or by any person controlled or supervised by and acting as an instrumentality of the United States pursuant to authority granted by the Congress of the United States,
(ii)issued by a bank,
(iii)issued by a common or contract carrier, if such issuance is subject to the provisions of section 20a of the Interstate Commerce Act, as amended,
(iv)exempt from such registration requirement pursuant to a Federal statute other than the Securities Act of 1933, or
(v)are the subject of a distribution and are of a class which is required to be registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 781), and the issuer of which has been subject to the reporting requirements of section 13 of the Act (15 U.S.C. 78m) for a period of at least 90 days immediately preceding the sale of securities and has filed all reports required to be filed thereunder with the Securities and Exchange Commission during the preceding 12 months.
(2)Purchased at not more than the public offering price prior to the end of the first full business day after the final term of the securities have been fixed and announced to the public, except that—
(i)if such securities are offered for subscription upon exercise of rights, they are purchased on or before the fourth day preceding the day on which the rights offering terminates; or
(ii)if such securities are debt securities, they may be purchased at a public offering price on a day subsequent to the end of such first full business day, provided that the interest rates on comparable debt securities offered to the public subsequent to such first full business day and prior to the purchase are less than the interest rate of the debt securities being purchased.
(3)Offered pursuant to an underwriting agreement under which the members of the syndicate are committed to purchase all of the securities being offered, except if—
(i)such securities are purchased by others pursuant to a rights offering; or
(ii)such securities are offered pursuant to an over-allotment option.
(c)The issuer of such securities has been in continuous operation for not less than three years, including the operations of any predecessors, unless—
(1)Such securities are non-convertible debt securities rated in one of the four highest rating categories by at least one of the following rating organizations: Standard & Poor's Rating Services, Moody's Investors Service, Inc., Fitch Ratings Inc., Dominion Bond Ratings Service Limited, and Dominion Bond Rating Service, Inc., or any successors thereto;
(2)Such securities are issued or fully guaranteed by a person described in paragraph (b)(1)(i) of this exemption; or
(3)Such securities are issued or fully guaranteed by a person who has issued securities described in paragraph (b)(1)(ii), (iii),
(iv)or (v), and this paragraph
(c)of this exemption.
(d)The amount of such securities to be purchased or otherwise acquired by the plan does not exceed 3% of the total amount of such securities being offered.
(e)The consideration to be paid by the plan in purchasing or otherwise acquiring such securities does not exceed three percent of the fair market value of the total assets of the plan as of the last day of the most recent fiscal quarter of the plan prior to such transaction, provided that if such consideration exceeds $1 million, it does not exceed 1% of such fair market value of the total assets of the plan. If such securities are purchased by the plan from a party in interest or disqualified person with respect to the plan, such party in interest or disqualified person shall not be subject to the civil penalty which may be assessed under section 502(i) of the Act, or to the taxes imposed by section 4975(a) and
(b)of the Code, if the conditions of this exemption are not met. However, if such securities are purchased from a party in interest or disqualified person with respect to the plan, the restrictions of section 406(a) of the Act shall apply to any fiduciary with respect to the plan and the taxes imposed by section 4975(a) and
(b)of the Code, by reason of section 4975(c)(1)(A) through
(D)of the Code, shall apply to such party in interest or disqualified person, unless the conditions for exemption of PTE 75-1 (40 FR 50845, October 31, 1975), Part II (relating to certain principal transactions) are met. 4. *Exemptions From Prohibitions Respecting Certain Classes of Transactions Involving Employee Benefit Plans and Certain Broker-Dealers, Reporting Broker-Dealers and Banks—Market-Making* The restrictions of sections 406 of the Act, and the taxes imposed by section 4975(a) and
(b)of the Code, by reason of section 4975(c)(1) of the Code, shall not apply to any purchase or sale of any securities by an employee benefit plan from or to a Merrill Lynch/BlackRock Related Entity or Entities which is a market-maker with respect to such securities, when a Merrill Lynch/BlackRock Related Entity or Entities is also a fiduciary with respect to such plan, provided that the following conditions are met:
(a)The issuer of such securities has been in continuous operation for not less than three years, including the operations of any predecessors, unless—
(1)Such securities are non-convertible debt securities rated in one of the four highest rating categories by at least one of the following rating organizations: Standard & Poor's Rating Services, Moody's Investors Service, Inc., Fitch Ratings Inc., Dominion Bond Ratings Service Limited, and Dominion Bond Rating Service, Inc., or any successors thereto;
(2)Such securities are issued or guaranteed by the United States or by any person controlled or supervised by and acting as an instrumentality of the United States pursuant to authority granted by the Congress of the United States; or
(3)Such securities are fully guaranteed by a person described in this paragraph (a).
(b)As a result of purchasing such securities—
(1)The fair market value of the aggregate amount of such securities owned, directly or indirectly, by the plan and with respect to which such Merrill Lynch/BlackRock Related Entity or Entities is a fiduciary, does not exceed 3% of the fair market value of the assets of the plan with respect to which such Merrill Lynch/BlackRock Related Entity or Entities is a fiduciary, as of the last day of the most recent fiscal quarter of the plan prior to such transaction, provided that if the fair market value of such securities exceeds $1 million, it does not exceed one percent of such fair market value of such assets of the plan, except that this paragraph shall not apply to securities described in (a)(2) of this exemption; and
(2)The fair market value of the aggregate amount of all securities for which such Merrill Lynch/BlackRock Related Entity or Entities is a market-maker, which are owned, directly or indirectly, by the plan and with respect to which such Merrill Lynch/BlackRock Related Entity or Entities is a fiduciary, does not exceed 10% of the fair market value of the assets of the plan with respect to which such Merrill Lynch/BlackRock Related Entity or Entities is a fiduciary, as of the last day of the most recent fiscal quarter of the plan prior to such transaction, except that this paragraph shall not apply to securities described in paragraph (a)(2) of this exemption.
(c)At least one person other than a Merrill Lynch/BlackRock Related Entity or Entities is a market-maker with respect to such securities.
(d)The transaction is executed at a net price to the plan for the number of shares or other units to be purchased or sold in the transaction which is more favorable to the plan than that which such Merrill Lynch/BlackRock Related Entity or Entities acting as fiduciary and acting in good faith, reasonably believes to be available at the time of such transaction from all other market-makers with respect to such securities. For purposes of this exemption, the term “market-maker” shall mean any specialist permitted to act as a dealer, and any dealer who, with respect to a security, holds himself out (by entering quotations in an inter-dealer communications system or otherwise) as being willing to buy and sell such security for his own account on a regular or continuous basis. 5. *Exemption Involving Mutual Fund In-House Plans* The restrictions of sections 406 and 407(a) of the Act and the taxes imposed by section 4975(a) and
(b)of the Code, by reason of section 4975(c)(1) of the Code, shall not apply to the acquisition or sale of shares of an open-end investment company registered under the Investment Company Act of 1940 by an employee benefit plan covering only employees of such investment company, employees of the investment adviser or principal underwriter for such investment company, or employees of any affiliated person (as defined in section 2(a)(3) of the Investment Company Act of 1940) of such investment adviser or principal underwriter, provided that the investment adviser or principal underwriter or their affiliates are a Merrill Lynch/BlackRock Related Entity or Entities, and the following conditions are met (whether or not such investment company, investment adviser, principal underwriter or any affiliated person thereof is a fiduciary with respect to the plan):
(a)The plan does not pay any investment management, investment advisory or similar fee to such investment adviser, principal underwriter or affiliated person. This condition does not preclude the payment of investment advisory fees by the investment company under the terms of its investment advisory agreement adopted in accordance with section 15 of the Investment Company Act of 1940.
(b)The plan does not pay a redemption fee in connection with the sale by the plan to the investment company of such shares unless
(1)such redemption fee is paid only to the investment company, and
(2)the existence of such redemption fee is disclosed in the investment company prospectus in effect both at the time of the acquisition of such shares and at the time of such sale.
(c)The plan does not pay a sales commission in connection with such acquisition or sale.
(d)All other dealings between the plan and the investment company, the investment adviser or principal underwriter for the investment company, or any affiliated person of such investment adviser or principal underwriter are on a basis no less favorable to the plan than such dealings are with other shareholders of the investment company. 6. *Exemption for Certain Transactions Between Investment Companies and Employee Benefit Plans* The restrictions of section 406 of the Act and the taxes imposed by section 4975(a) and
(b)of the Code, by reason of section 4975(c)(1) of the Code, shall not apply to the purchase or sale by an employee benefit plan of shares of an open-end investment company registered under the Investment Company Act of 1940, where the investment adviser of the investment company is a Merrill Lynch/BlackRock Related Entity or Entities, who is also a fiduciary with respect to the plan but not an employer of employees covered by the plan, provided that the following conditions are met:
(a)The plan does not pay a sales commission in connection with such purchase or sale.
(b)The plan does not pay a redemption fee in connection with the sale by the plan to the investment company of such shares unless
(1)such redemption fee is paid only to the investment company, and
(2)the existence of such redemption fee is disclosed in the investment company prospectus in effect both at the time of the purchase of such shares and at the time of such sale.
(c)The plan does not pay an investment management, investment advisory or similar fee with respect to the plan assets invested in such shares for the entire period of such investment. This condition does not preclude the payment of investment advisory fees by the investment company under the terms of its investment advisory agreement adopted in accordance with section 15 of the Investment Company Act of 1940. This condition also does not preclude payment of an investment advisory fee by the plan based on total plan assets from which a credit has been subtracted representing the plan's *pro rata* share of investment advisory fees paid by the investment company. If, during any fee period for which the plan has prepaid its investment management, investment advisory or similar fee, the plan purchases shares of the investment company, the requirement of this paragraph
(c)shall be deemed met with respect to such prepaid fee if by a method reasonably designed to accomplish the same, the amount of the prepaid fee that constitutes the fee with respect to the plan assets invested in the investment company shares
(1)is anticipated and subtracted from the prepaid fee at the time of payment of such fee,
(2)is returned to the plan no later than during the immediately following fee period, or
(3)is offset against the prepaid fee for the immediately following fee period or for the fee period immediately following thereafter. For purposes of this paragraph (c), a fee shall be deemed to be prepaid for any fee period if the amount of such fee is calculated as of a date not later than the first day of such period.
(d)A second fiduciary with respect to the plan, who is independent of and unrelated to the fiduciary/investment adviser or any affiliate thereof, receives a current prospectus issued by the investment company, and full and detailed written disclosure of the investment advisory and other fees charged to or paid by the plan and the investment company, including the nature and extent of any differential between the rates of such fees, the reasons why the fiduciary/investment adviser may consider such purchases to be appropriate for the plan, and whether there are any limitations on the fiduciary/investment adviser with respect to which plan assets may be invested in shares of the investment company and, if so, the nature of such limitations. For purposes of this paragraph (d), such second fiduciary will not be deemed to be independent of and unrelated to the fiduciary/investment adviser or any affiliate thereof if:
(1)Such second fiduciary directly or indirectly controls, is controlled by, or is under common with the fiduciary/investment adviser or any affiliate thereof;
(2)Such second fiduciary, or any officer, director, partner, employee or relative of such second fiduciary is an officer, director, partner, employee or relative of such fiduciary/investment adviser or any affiliate thereof; or
(3)Such second fiduciary directly or indirectly receives any compensation or other consideration for his or her own personal account in connection with any transaction described in this exemption. If an officer, director, partner, employee or relative of such fiduciary/investment adviser or any affiliate thereof is a director of such second fiduciary, and if he or she abstains from participation in
(i)the choice of the plan's investment adviser,
(ii)the approval of any such purchase or sale between the plan and the investment company, and
(iii)the approval of any change of fees charged to or paid by the plan, then paragraph
(d)of this exemption shall not apply. For purposes of paragraph (d)(1) above, the term “control” means the power to exercise a controlling influence over the management or policies of a person other than an individual, and the term “relative” means a “relative” as that term is defined in section 3(15) of the Act (or a “member of the family” as that term is defined in section 4975(e)(6) of the Code), or a brother, a sister, or a spouse of a brother or a sister.
(e)On the basis of the prospectus and disclosure referred to in paragraph (d), the second fiduciary referred to in paragraph
(d)approves such purchases and sales consistent with the responsibilities obligations, and duties imposed on fiduciaries by Part 4 of Title I of the Act. Such approval may be limited solely to the investment advisory and other fees paid by the mutual fund in relation to the fees paid by the plan and need not relate to any other aspects of such investments. In addition, such approval must be either
(1)set forth in the plan documents or in the investment management agreement between the plan and the fiduciary/investment adviser,
(2)indicated in writing prior to each purchase or sale, or
(3)indicated in writing prior to the commencement of a specified purchase or sale program in the shares of such investment company.
(f)The second fiduciary referred to in paragraph (d), above, or any successor thereto, is notified of any change in any of the rates of fees referred to in paragraph
(d)and approves in writing the continuation of such purchases or sales and the continued holding of any investment company shares acquired by the plan prior to such change and still held by the plan. Such approval may be limited solely to the investment advisory and other fees paid by the mutual fund in relation to the fees paid by the plan and need not relate to any other aspects of such investment. 7. Exemption Involving Closed-End Investment Company In-House Plans The restrictions of sections 406 and 407(a) of the Act, and the taxes imposed by section 4975
(a)and
(b)of the Code, by reason of section 4975(c)(1) of the Code, shall not apply to the acquisition, ownership or sale of shares of a closed-end investment company which is registered under the Investment Company Act of 1940 and is not a small business investment company as defined by section 103 of the Small Business Investment Company Act of 1958, by an employee benefit plan covering only employees of such investment company, employees of the investment adviser of such investment company, or employees of any affiliated person (as defined in section 2(a)(3) of the Investment Company Act of 1940) of such investment company or investment adviser, provided that such entity or entities are a Merrill Lynch/BlackRock Related Entity or Entities, and the following conditions are met (whether or not such investment company, investment adviser or any affiliated person thereof is a fiduciary with respect to the plan):
(a)The plan does not pay any investment management, investment advisory, or similar fee to such investment adviser or affiliated person. This condition does not preclude the payment of investment advisory fees by the investment company under the terms of its investment advisory agreement adopted in accordance with section 15 of the Investment Company Act of 1940.
(b)The plan does not pay a sales commission in connection with such acquisition or sale to any such investment company or to any such investment company, investment adviser or affiliated person; and
(c)All other dealings between the plan and such investment company, the investment adviser, or affiliated person, are on a basis no less favorable to the plan than such dealings are with other shareholders of the investment company. 8. Exemption for Securities Transactions Involving Employee Benefit Plans and Broker-Dealers Section I: Definition and Special Rules *The following definitions and special rules apply to this exemption:*
(a)The term “Merrill Lynch/BlackRock Related Entity or Entities” includes affiliates of such entity or entities.
(b)An “affiliate” of a Merrill Lynch/BlackRock Related Entity or Entities includes the following:
(1)Any officer, director, partner, employee, relative (as defined in section 3(15) of the Act), brother, sister, or spouse of a brother or sister, of the Merrill Lynch/BlackRock Related Entity or Entities; and
(2)any corporation or partnership of which the Merrill Lynch/BlackRock Related Entity or Entities is an officer, director or partner. A person is not an affiliate of another person solely because one of them has investment discretion over the other's assets.
(c)An “agency cross transaction” is a securities transaction in which the same Merrill Lynch/BlackRock Related Entity or Entities act(s) as agent for both any seller and any buyer for the purchase or sale of a security.
(d)The term “covered transaction” means an action described in Section II (a),
(b)or
(c)of this exemption.
(e)The term “effecting or executing a securities transaction” means the execution of a securities transaction as agent for another person and/or the performance of clearance, settlement, custodial or other functions ancillary thereto.
(f)A plan fiduciary is independent of a Merrill Lynch/BlackRock Related Entity or Entities only if the fiduciary has no relationship to or interest in such Merrill Lynch/BlackRock Related Entity or Entities that might affect the exercise of such fiduciary's best judgment as a fiduciary.
(g)The term “profit” includes all charges relating to effecting or executing securities transactions, less reasonable and necessary expenses including reasonable indirect expenses (such as overheard costs) properly allocated to the performance of these transactions under generally accepted accounting principles.
(h)The term “securities transaction” means the purchase or sale of securities.
(i)The term “nondiscretionary trustee” of a plan means a trustee or custodian whose powers and duties with respect to any assets of the plan are limited to
(1)the provision of nondiscretionary trust services to the plan, and
(2)duties imposed on the trustee by any provision or provisions of the Act or the Code. The term “nondiscretionary trust services and services” means custodial services and services ancillary to custodial services, none of which services are discretionary. For purposes of this exemption, a person does not fail to be a nondiscretionary trustee solely by reason of having been delegated, by the sponsor of a master or prototype plan, the power to amend such plan. Section II: Covered Transactions If each condition of Section III of this exemption is either satisfied or not applicable under Section IV of this exemption, the restrictions of section 406(b) of the Act and the taxes imposed by section 4975(a) and
(b)of the Code by reason of section 4975(c)(1)(E) and
(F)of the Code shall not apply to—
(a)A Merrill Lynch/BlackRock Related Entity or Entities that is a plan fiduciary using its authority to cause a plan to pay a fee to a Merrill Lynch/BlackRock Related Entity or Entities as agent for the plan, for effecting or executing securities transactions, but only to the extent that such transactions are not excessive, under the circumstances, in either amount or frequency;
(b)A Merrill Lynch/BlackRock Related Entity or Entities that is a plan fiduciary acting as the agent in an agency cross transaction for both the plan and one or more other parties to the transaction; or
(c)The receipt by any Merrill Lynch/BlackRock Related Entity or Entities that is a plan fiduciary of reasonable compensation for effecting or executing an agency cross transaction to which a plan is a party from one or more other parties to the transaction. Section III: Conditions Except to the extent otherwise provided in Section IV of this exemption, Section II of this exemption applies only if the following conditions are satisfied:
(a)The Merrill Lynch/BlackRock Related Entity engaging in the covered transaction is not an administrator of the plan, or an employer any of whose employees are covered by the plan. (b)(1) The covered transaction is performed under a written authorization executed in advance by a fiduciary of each plan whose assets are involved in the transaction, which plan fiduciary is independent of the Merrill Lynch/BlackRock Related Entity or Entities engaging in the covered transaction.
(2)For purposes of this exemption, Section III(b) will be deemed satisfied for the period commencing September 29, 2006, notwithstanding Merrill Lynch Investment Managers, LLC (MLIM)'s reliance on written authorizations obtained prior to the consummation of the Merger 3 , provided that after the closing of the Merger, MLIM notified each such authorizing plan fiduciary of the fact that:
(A)As a result of the Merger, MLIM had become a subsidiary of BlackRock;
(B)the existing authorization by such authorizing plan fiduciary would continue to permit MLIM to engage in the covered transaction on behalf of the plan;
(C)such authorization is terminable at will by the plan, without penalty to the plan, upon receipt by MLIM of written notice from an authorizing plan fiduciary of termination;
(D)a form expressly providing an election to terminate the authorization with instructions on the use of such form was supplied to each such authorizing plan fiduciary; and
(E)failure to return such termination form would result in the continued authorization of MLIM to engage in the covered transactions on behalf of the plan. Notwithstanding the foregoing, this exception does not apply to new authorizations to engage in covered transactions entered into after the consummation of the Merger. 3 On September 29, 2006, ML&Co. and BlackRock consummated a transaction (the Merger), in which ML&Co. contributed MLIM and various other assets and subsidiaries that comprised its investment management business to BlackRock in exchange for approximately 45% of the outstanding voting securities of BlackRock.
(c)The authorization referred to in paragraph
(b)of this Section is terminable at will by the plan, without penalty to the plan, upon receipt by the authorized Merrill Lynch/BlackRock Related Entity or Entities of written notice of termination. A form expressly providing an election to terminate the authorization described in paragraph
(b)of this Section with instructions on the use of the form must be supplied to the authorizing plan fiduciary no less than annually. The instructions for such form must include the following information:
(1)The authorization is terminable at will by the plan, without penalty to the plan, upon receipt by the authorized Merrill Lynch/BlackRock Related Entity or Entities of written notice from the authorizing plan fiduciary or other plan official having authority to terminate the authorization; and
(2)Failure to return the form will result in the continued authorization of the authorized Merrill Lynch/BlackRock Related Entity or Entities to engage in the covered transactions on behalf of the plan.
(d)Within three months before an authorization is made, the authorizing plan fiduciary is furnished with any reasonably available information that the Merrill Lynch/BlackRock Related Entity or Entities seeking authorization reasonably believes to be necessary for the authorizing plan fiduciary to determine whether the authorization should be made including (but not limited to) a copy of this exemption, the form for termination of authorization described in Section III(c) of this exemption, a description of the Merrill Lynch/BlackRock Related Entity or Entities' brokerage placement practices, and any other reasonably available information regarding the matter that the authorizing plan fiduciary requests.
(e)The Merrill Lynch/BlackRock Related Entity or Entities engaging in a covered transaction furnishes the authorizing plan fiduciary with either:
(1)A confirmation slip for each securities transaction underlying a covered transaction within ten business days of the securities transaction containing the information described in Rule 10b-10(a)(1-7) under the Securities Exchange Act of 1934, 17 CFR 240.10b-10; or
(2)at least once every three months and not later than 45 days following the period to which it relates, a report disclosing:
(A)A compilation of the information that would be provided to the plan pursuant to subparagraph (e)(1) of this Section during the three-month period covered by the report;
(B)The total of all securities transaction-related charges incurred by the plan during such period in connection with such covered transactions; and
(C)The amount of the securities transaction-related charges retained by such Merrill Lynch/BlackRock Related Entity or Entities and the amount of such charges paid to other persons for execution or other services. For purposes of this paragraph (e), the words “incurred by the plan” shall be construed to mean “incurred by the pooled fund” when such Merrill Lynch/BlackRock Related Entity or Entities engages in covered transactions on behalf of a pooled fund in which the plan participates.
(f)The authorizing plan fiduciary is furnished with a summary of the information required under paragraph (e)(1) of this Section at least once per year. The summary must be furnished within 45 days after the end of the period to which it relates, and must contain the following:
(1)The total of all securities transaction-related charges incurred by the plan during the period in connection with covered securities transactions.
(2)The amount of the securities transaction-related charges retained by the authorized Merrill Lynch/BlackRock Related Entity or Entities and the amount of these charges paid to other persons for execution or other services.
(3)A description of the Merrill Lynch/BlackRock Related Entity or Entities' brokerage placement practices, if such practices have materially changed during the period covered by the summary.
(i)A portfolio turnover ratio is calculated in a manner which is reasonably designed to provide the authorizing plan fiduciary with the information needed to assist in discharging its duty of prudence. The requirements of this paragraph (f)(4)(i) will be met if the “annualized portfolio turnover ratio”, calculated in the manner described in paragraph (f)(4)(ii), is contained in the summary.
(ii)The “annualized portfolio turnover ratio” shall be calculated as a percentage of the plan assets consisting of securities or cash over which the authorized Merrill Lynch/BlackRock Related Entity or Entities had discretionary investment authority, or with respect to which such Merrill Lynch/BlackRock Related Entity or Entities rendered, or had any responsibility to render, investment advice (the portfolio) at any time or times (management period(s)) during the period covered by the report. First, the “portfolio turnover ratio” (not annualized) is obtained by dividing
(A)the lesser of the aggregate dollar amounts of purchases or sales of portfolio securities during the management period(s) by
(B)the monthly average of the market value of the portfolio securities during all management period(s). Such monthly average is calculated by totaling the market values of the portfolio securities as of the beginning and ending of each management period and as of the end of each month that ends within such period(s), and dividing the sum by the number of valuation dates so used. For purposes of this calculation, all debt securities whose maturities at the time of acquisition were one year or less are excluded from both the numerator and the denominator. The “annualized portfolio turnover ratio” is then derived by multiplying the “portfolio turnover ratio” by an annualizing factor. The annualizing factor is obtained by dividing
(C)the number twelve by
(D)the aggregate duration of the management period(s) expressed in months (and fractions thereof).
(iii)The information described in this paragraph (f)(4) is not required to be furnished in any case where the authorized Merrill Lynch/BlackRock Related Entity or Entities acting as plan fiduciary has not exercised discretionary authority over trading in the plan's account during the period covered by the report. For purposes of this paragraph (f), the words “incurred by the plan” shall be construed to mean “incurred by the pooled fund” when such Merrill Lynch/BlackRock Related Entity or Entities engages in covered transactions on behalf of a pooled fund in which the plan participates.
(g)If an agency cross transaction to which Section IV(b) of this exemption does not apply is involved, the following conditions must also be satisfied:
(1)The information required under Section III(d) or IV(d)(1)(B) of this exemption includes a statement to the effect that with respect to agency cross transactions, the Merrill Lynch/BlackRock Related Entity or Entities effecting or executing the transactions will have a potentially conflicting division of loyalties and responsibilities regarding the parties to the transactions;
(2)The summary required under Section III(f) of this exemption includes a statement identifying the total number of agency cross transactions during the period covered by the summary and the total amount of all commissions or other remuneration received or to be received from all sources by the Merrill Lynch/BlackRock Related Entity or Entities engaging in the transactions in connection with those transaction during the period;
(3)The Merrill Lynch/BlackRock Related Entity or Entities effecting or executing the agency cross transaction has the discretionary authority to act on behalf of, and/or provide investment advice to, either
(A)one or more sellers or
(B)one or more buyers with respect to the transaction, but not both.
(4)The agency cross transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery of a security for which market quotations are readily available; and
(5)The agency cross transaction is executed or effected at a price that is at or between the independent bid and independent ask prices for the security prevailing at the time of the transaction.
(h)A trustee (other than a nondiscretionary trustee) may only engage in a covered transaction with a plan that has total net assets with a value of at least $50 million and in the case of a pooled fund, the $50 million net asset requirement will be met if 50 percent or more of the units of beneficial interest in such pooled fund are held by plans each of which has total net assets with a value of at least $50 million. For purposes of the net asset tests described above, where a group of plans is maintained by a single employer or controlled group of employers, as defined in section 407(d)(7) of the Act, the $50 million net asset requirement may be met by aggregating the assets of such plans, if the assets are pooled for investment purposes in a single master trust.
(i)The trustee (other than a nondiscretionary trustee) engaging in a covered transaction furnishes, at least annually, to the authorizing plan fiduciary of each plan the following:
(1)The aggregate brokerage commissions, expressed in dollars, paid by the plan to brokerage firms affiliated with the trustee;
(2)The aggregate brokerage commissions, expressed in dollars, paid by the plan to brokerage firms unaffiliated with the trustee;
(3)The average brokerage commissions, expressed as cents per share, paid by the plan to brokerage firms affiliated with the trustee; and
(4)The average brokerage commissions, expressed as cents per share, paid by the plan to brokerage firms unaffiliated with the trustee. For purposes of this paragraph (i), the words “paid by the plan” should be construed to mean “paid by the pooled fund” when the trustee engages in covered transactions on behalf of a pooled fund in which the plan participates. Section IV: Exceptions From Conditions
(a)Certain plans not covering employees. Section III of this exemption does not apply to covered transactions to the extent they are engaged in on behalf of individual retirement accounts meeting the conditions of 29 CFR 2510.3-2(d), or plans, other than training programs, that cover no employees within the meaning of 29 CFR 2510.3-3.
(b)Certain agency cross transactions. Section III of this exemption does not apply in the case of an agency cross transaction, provided that the Merrill Lynch/BlackRock Related Entity or Entities effecting or executing the transaction:
(1)Does not render investment advice to any plan for a fee within the meaning of section 3(21)(A)(ii) of the Act with respect to the transaction;
(2)Is not otherwise a fiduciary who has investment discretion with respect to any plan assets involved in the transaction, see 29 CFR 2510.3-21(d); and
(3)Does not have the authority to engage, retain or discharge any person who is or is proposed to be a fiduciary regarding any such plan assets.
(c)Recapture of profits. Section III(a) of this exemption does not apply in any case where the Merrill Lynch/BlackRock Related Entity or Entities engaging in a covered transaction returns or credits to the plan all profits earned by that Merrill Lynch/BlackRock Related Entity or Entities in connection with the securities transactions associated with the covered transaction.
(d)Special rules for pooled funds. In the case of a Merrill Lynch/BlackRock Related Entity or Entities engaging in a covered transaction on behalf of an account or fund for the collective investment of the assets of more than one plan (pooled fund):
(1)Section III (b), (c), and
(d)of this exemption does not apply if—
(A)The arrangement under which the covered transaction is performed is subject to the prior and continuing authorization, in the manner described in this paragraph (d)(1), of an authorizing plan fiduciary with respect to each plan whose assets are invested in the pooled fund that is independent of the Merrill Lynch/BlackRock Related Entity or Entities. The requirement that the authorizing plan fiduciary be independent of the Merrill Lynch/BlackRock Related Entity or Entities shall not apply in the case of a plan covering only employees of the Merrill Lynch/BlackRock Related Entity or Entities, if the requirements of Section IV(d)(2)(A) and
(B)of this exemption are met.
(B)The authorizing plan fiduciary is furnished with any reasonably available information that the Merrill Lynch/BlackRock Related Entity or Entities engaging or proposing to engage in the covered transactions reasonably believes to be necessary for the authorizing plan fiduciary to determine whether the authorization should be given or continued, not less than 30 days prior to implementation of the arrangement or material change thereto, including (but not limited to) a description of the Merrill Lynch/BlackRock Related Entity or Entities' brokerage placement practices, and, where requested, any reasonable available information regarding the matter upon the reasonable request of the authorizing plan fiduciary at any time.
(C)In the event an authorizing plan fiduciary submits a notice in writing to the Merrill Lynch/BlackRock Related Entity or Entities engaging in or proposing to engage in the covered transaction objecting to the implementation of, material change in, or continuation of, the arrangement, the plan on whose behalf the objection was tendered is given the opportunity to terminate its investment in the pooled fund, without penalty to the plan, within such time as may be necessary to effect the withdrawal in an orderly manner that is equitable to all withdrawing plans and to the nonwithdrawing plans. In the case of a plan that elects to withdraw under this subparagraph (d)(1)(C), the withdrawal shall be effected prior to the implementation of, or material change in, the arrangement; but an existing arrangement need not be discontinued by reason of a plan electing to withdraw.
(D)In the case of plans whose assets are proposed to be invested in the pooled fund subsequent to the implementation of the arrangement that has not authorized the arrangement in the manner described in subparagraphs (d)(1)(B) and
(C)of this Section, the plan's investment in the pooled fund is subject to the prior written authorization of an authorizing plan fiduciary who satisfies the requirements of subparagraph (d)(1)(A).
(2)To the extent that Section III(a) of this exemption prohibits any Merrill Lynch/BlackRock Related Entity or Entities from being the employer of employees covered by a plan investing in a pool managed by the Merrill Lynch/BlackRock Related Entity or Entities, Section III(a) of this exemption does not apply if—
(A)The Merrill Lynch/BlackRock Related Entity or Entities is an “investment manager” as defined in section 3(38) of the Act, and
(B)Either
(i)the Merrill Lynch/BlackRock Related Entity or Entities returns or credits to the pooled fund all profits earned by the Merrill Lynch/BlackRock Related Entity or Entities in connection with all covered transactions engaged in by the Merrill Lynch/BlackRock Related Entity or Entities on behalf of the fund, or
(ii)the pooled fund satisfies the requirements of paragraph IV(d)(3).
(3)A pooled fund satisfies the requirements of this paragraph for a fiscal year of the fund if—
(A)On the first day of such fiscal year, and immediately following each acquisition of an interest in the pooled fund during the fiscal year by any plan covering employees of any Merrill Lynch/BlackRock Related Entity or Entities, the aggregate fair market value of the interests in such fund of all plans covering employees of any Merrill Lynch/BlackRock Related Entity or Entities does not exceed twenty percent of the fair market value of the total assets of the fund; and
(B)The aggregate brokerage commissions received by any Merrill Lynch/BlackRock Related Entity or Entities, in connection with covered transactions engaged in by any Merrill Lynch/BlackRock Related Entity or Entities on behalf of all pooled funds in which a plan covering employees of any Merrill Lynch/BlackRock Related Entity or Entities participates, do not exceed five percent of the total brokerage commissions received by any Merrill Lynch/BlackRock Related Entity or Entities from all sources in such fiscal year. 9. Exemption for Cross-Trades of Securities by Index and Model-Driven Funds Section I. Proposed Exemption for Cross-Trading of Securities by Index and/or Model-Driven Funds The restrictions of sections 406(a)(1)(A) and 406(b)(2) of the Act, and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A) of the Code, shall not apply to the transactions described below if the applicable conditions set forth in Sections II and III of this exemption, below, are satisfied.
(a)The purchase and sale of securities between an Index Fund or a Model-Driven Fund (either, a Fund; or collectively, the Funds), as defined in Section IV(a) and
(b)of this exemption, below, and another Fund, at least one of which holds “plan assets” subject to the Act; or
(b)The purchase and sale of securities between a Fund and a Large Account, as defined in Section IV(e) of this exemption, below, at least one of which holds “plan assets” subject to the Act, pursuant to a portfolio restructuring program, as defined in Section IV(f) of this exemption, below, of the Large Account; Notwithstanding the foregoing, this exemption shall apply to cross-trades between two or more Large Accounts pursuant to a portfolio restructuring program if such cross-trades occur as part of a single cross-trading program involving both Funds and Large Accounts for which securities are cross-traded solely as a result of the objective operation of the program. Section II. Specific Conditions
(a)The cross-trade is executed at the closing price, as defined in Section IV(h) of this exemption below.
(b)Any cross-trade of securities by a Fund occurs as a direct result of a “triggering event,” as defined in Section IV(d) of this exemption, and is executed no later than the close of the third business day following such “triggering event.”
(c)If the cross-trade involves a Model-Driven Fund, the cross-trade does not take place within three
(3)business days following any change made by the Manager to the model underlying the Fund.
(d)The Manager has allocated the opportunity for all Funds or Large Accounts to engage in the cross-trade on an objective basis which has been previously disclosed to the authorizing fiduciaries of plan investors, and which does not permit the exercise of discretion by the Manager ( *e.g.* , a pro rata allocation system).
(e)No more than twenty
(20)percent of the assets of the Fund or Large Account at the time of the cross-trade is comprised of assets of employee benefit plans maintained by the Manager for its own employees (Manager Plans) for which the Manager exercises investment discretion. (f)(1) Cross-trades of equity securities involve only securities that are widely-held, actively-traded, and for which market quotations are readily available from independent sources that are engaged in the ordinary course of business of providing financial news and pricing information to institutional investors and/or the general public, and are widely recognized as accurate and reliable sources for such information. For purposes of this requirement, the terms “widely-held” and “actively-traded” shall be deemed to include any security listed in an Index, as defined in Section IV(c) of this exemption; and
(2)Cross-trades of fixed-income securities involve only securities for which market quotations are readily available from independent sources that are engaged in the ordinary course of business of providing financial news and pricing information to institutional investors and/or the general public, and are widely recognized as accurate and reliable sources for such information.
(g)The Manager receives no brokerage fees or commissions as a result of the cross-trade.
(h)As of the date this exemption is granted, a plan's participation in the cross-trading program of a Manager, as a result of investments made in any Index or Model-Driven Fund that holds plan assets is subject to a written authorization executed in advance of such investment by a fiduciary of the plan which is independent of the Manager engaging in the cross-trade transactions. For purposes of this exemption, the requirement that the authorizing plan fiduciary be independent of the Manager shall not apply in the case of a Manager Plan.
(i)With respect to existing plan investors in any Index or Model-Driven Fund that holds plan assets as of the date this exemption is granted, the independent fiduciary is furnished with a written notice, not less than forty-five
(45)days prior to the implementation of the cross-trading program, that describes the Fund's participation in the cross-trading program of the Manager, provided that:
(1)Such notice allows each plan an opportunity to object to the plan's participation in the cross-trading program as a Fund investor by providing the plan with a special termination form;
(2)The notice instructs the independent plan fiduciary that failure to return the termination form to the Manager, by a specified date (which shall be at least 30 days following the plan's receipt of the form) shall be deemed to be an approval by the plan of its participation in the Manager's cross-trading program as a Fund investor; and
(3)If the independent plan fiduciary objects to the plan's participation in the cross-trading program as a Fund investor by returning the termination form to the Manager by the specified date, the plan is given the opportunity to withdraw from each Index or Model-Driven Fund without penalty prior to the implementation of the cross-trading program, within such time as may be reasonably necessary to effectuate the withdrawal in an orderly manner.
(j)Prior to obtaining the authorization described in Section II(h) of this exemption, and in the notice described in Section II(i) of this exemption, the following statement must be provided by the Manager to the independent plan fiduciary: Investment decisions for the Fund (including decisions regarding which securities to buy or sell, how much of a security to buy or sell, and when to execute a sale or purchase of securities for the Fund) will not be based in whole or in part by the Manager on the availability of cross-trade opportunities and will be made prior to the identification and determination of any cross-trade opportunities. In addition, all cross-trades by a Fund will be based solely upon a “triggering event” set forth in this exemption. Records documenting each cross-trade transaction will be retained by the Manager.
(k)Prior to any authorization set forth in Section II(h) of this exemption, and at the time of any notice described in Section II(i) of this exemption, the independent plan fiduciary must be furnished with any reasonably available information necessary for the fiduciary to determine whether the authorization should be given, including (but not limited to) a copy of this exemption, an explanation of how the authorization may be terminated, detailed disclosure of the procedures to be implemented under the Manager's cross-trading practices (including the “triggering events” that will create the cross-trading opportunities, the independent pricing services that will be used by the Manager to price the cross-traded securities, and the methods that will be used for determining closing price), and any other reasonably available information regarding the matter that the authorizing plan fiduciary requests. The independent plan fiduciary must also be provided with a statement that the Manager will have a potentially conflicting division of loyalties and responsibilities to the parties to any cross-trade transaction and must explain how the Manager's cross-trading practices and procedures will mitigate such conflicts. With respect to Funds that are added to the Manager's cross-trading program or changes to, or additions of, triggering events regarding Funds, following the authorizations described in Section II(h) or Section II(i) of this exemption, the Manager shall provide a notice to each relevant independent plan fiduciary of each plan invested in the affected Funds prior to, or within ten
(10)days following, such addition of Funds or change to, or addition of, triggering events, which contains a description of such Fund(s) or triggering event(s). Such notice will also include a statement that the plan has the right to terminate its participation in the cross-trading program and its investment in any Index Fund or Model-Driven Fund without penalty at any time, as soon as is necessary to effectuate the withdrawal in an orderly manner.
(l)At least annually, the Manager notifies the independent fiduciary for each plan that has previously authorized participation in the Manager's cross-trading program as a Fund investor, that the plan has the right to terminate its participation in the cross-trading program and its investment in any Index Fund or Model-Driven Fund that holds plan assets without penalty at any time, as soon as is necessary to effectuate the withdrawal in an orderly manner. This notice shall also provide each independent plan fiduciary with a special termination form and instruct the fiduciary that failure to return the form to the Manager by a specified date (which shall be at least thirty
(30)days following the plan's receipt of the form) shall be deemed an approval of the subject plan's continued participation in the cross-trading program as a Fund investor. In lieu of providing a special termination form, the notice may permit the independent plan fiduciary to utilize another written instrument by the specified date to terminate the plan's participation in the cross-trading program, provided that in such case the notice explicitly discloses that a termination form may be obtained from the Manager upon request. Such annual re-authorization must provide information to the relevant independent plan fiduciary regarding each Fund in which the plan is invested, as well as explicit notification that the plan fiduciary may request and obtain disclosures regarding any new Funds in which the plan is not invested that are added to the cross-trading program, or any new triggering events (as defined in Section IV(d) of this exemption) that may have been added to any existing Funds in which the plan is not invested, since the time of the initial authorization described in Section II(h) of this exemption, or the time of the notice described in Section II(i) of this exemption.
(m)With respect to a cross-trade involving a Large Account:
(1)The cross-trade is executed in connection with a portfolio restructuring program, as defined in Section IV(f) of this exemption, with respect to all or a portion of the Large Account's investments which an independent fiduciary of the Large Account (other than in the case of any assets of a Manager Plan) has authorized the Manager to carry out or to act as a “trading adviser,” as defined in Section IV(g) of this exemption, in carrying out a Large Account-initiated liquidation or restructuring of its portfolio;
(2)Prior to the cross-trade, a fiduciary of the Large Account who is independent of the Manager (other than in the case of any assets of a Manager Plan) 4 has been fully informed of the Manager's cross-trading program, has been provided with the information required in Section II(k) of this exemption, and has provided the Manager with advance written authorization to engage in cross-trading in connection with the restructuring, provided that— 4 However, proper disclosures must be made to, and written authorization must be made by, an appropriate plan fiduciary for the Manager Plan in order for the Manager Plan to participate in a specific portfolio restructuring program as part of a Large Account.
(A)Such authorization may be terminated at will by the Large Account upon receipt by the Manager of written notice of termination.
(B)A form expressly providing an election to terminate the authorization, with instructions on the use of the form, is supplied to the authorizing Large Account fiduciary concurrent with the receipt of the written information describing the cross-trading program. The instructions for such form must specify that the authorization may be terminated at will by the Large Account, without penalty to the Large Account, upon receipt by the Manager of written notice from the authorizing Large Account fiduciary;
(3)All cross-trades made in connection with the portfolio restructuring program must be completed by the Manager within sixty
(60)days of the initial authorization (or initial receipt of assets associated with the restructuring, if later) to engage in such restructuring by the Large Account's independent fiduciary, unless such fiduciary agrees in writing to extend this period for another thirty
(30)days; and,
(4)No later than thirty
(30)days following the completion of the Large Account's portfolio restructuring program, the Large Account's independent fiduciary must be fully apprised in writing of all cross-trades executed in connection with the restructuring. Such writing shall include a notice that the Large Account's independent fiduciary may obtain, upon request, the information described in Section III(a) of this exemption, subject to the limitations described in Section III(b) of this exemption. However, if the program takes longer than sixty
(60)days to complete, interim reports containing the transaction results must be provided to the Large Account fiduciary no later than fifteen
(15)days following the end of the initial sixty
(60)day period and the succeeding thirty
(30)day period. Section III. General Conditions
(a)The Manager maintains or causes to be maintained for a period of six
(6)years from the date of each cross-trade the records necessary to enable the persons described in paragraph
(b)of this Section to determine whether the conditions of this exemption have been met, including records which identify:
(1)On a Fund by Fund basis, the specific triggering events which result in the creation of the model prescribed output or trade list of specific securities to be cross-traded;
(2)On a Fund by Fund basis, the model prescribed output or trade list which describes:
(A)Which securities to buy or sell; and
(B)how much of each security to buy or sell; in detail sufficient to allow an independent plan fiduciary to verify that each of the above decisions for the Fund was made in response to specific triggering events; and
(3)On a Fund by Fund basis, the actual trades executed by the Fund on a particular day and which of those trades resulted from triggering events. Such records must be readily available to assure accessibility and maintained so that an independent fiduciary, or other persons identified below in paragraph
(b)of this Part, may obtain them within a reasonable period of time. However, a prohibited transaction will not be considered to have occurred if, due to circumstances beyond the control of the Manager, the records are lost or destroyed prior to the end of the six-year period, and no party in interest other than the Manager shall be subject to the civil penalty that may be assessed under section 502(i) of the Act or to the taxes imposed by sections 4975(a) and
(b)of the Code if the records are not maintained or are not available for examination as required by paragraph
(b)below. (b)(1) Except as provided in paragraph (b)(2) and notwithstanding any provisions of sections 504(a)(2) and
(b)of the Act, the records referred to in paragraph
(a)of this Part are unconditionally available at their customary location for examination during normal business hours by—
(A)Any duly authorized employee or representative of the Department of Labor or the Internal Revenue Service,
(B)Any fiduciary of a Plan participating in a cross-trading program who has the authority to acquire or dispose of the assets of the Plan, or any duly authorized employee or representative of such fiduciary,
(C)Any contributing employer with respect to any Plan participating in a cross-trading program or any duly authorized employee or representative of such employer, and
(D)Any participant or beneficiary of any Manager Plan participating in a cross-trading program, or any duly authorized employee or representative of such participant or beneficiary.
(2)If, in the course of seeking to inspect records maintained by a Manager pursuant to this Part, any person described in paragraph (b)(1)(B) through
(D)seeks to examine trade secrets, or commercial or financial information of the Manager that is privileged or confidential, and the Manager is otherwise permitted by law to withhold such information from such person, the Manager may refuse to disclose such information provided that, by the close of the thirtieth
(30th)day following the request, the Manager gives a written notice to such person advising the person of the reasons for the refusal and that the Department of Labor may request such information.
(3)The information required to be disclosed to persons described in paragraph (b)(1)(B) through
(D)shall be limited to information that pertains to cross-trades involving a Fund or Large Account in which they have an interest. Section IV. Definitions *The following definitions apply for purposes of this exemption:*
(a)“Index Fund”—Any investment fund, account, or portfolio sponsored, maintained, trusteed, or managed by a Manager or an Affiliate, in which one or more investors invest, and—
(1)Which is designed to track the rate of return, risk profile, and other characteristics of an Index, as defined in Section IV(c) of this exemption, by either
(i)replicating the same combination of securities which compose such Index or
(ii)sampling the securities which compose such Index based on objective criteria and data;
(2)For which the Manager does not use its discretion, or data within its control, to affect the identity or amount of securities to be purchased or sold;
(3)That either contains “plan assets” subject to the Act, is an investment company registered under the Investment Company Act of 1940, or contains assets of one or more institutional investors, which may include, but not be limited to, such entities as an insurance company separate account or general account, a governmental plan, a university endowment fund, a charitable foundation fund, a trust or other fund which is exempt from taxation under section 501(a) of the Code; and,
(4)That involves no agreement, arrangement, or understanding regarding the design or operation of the Index Fund which is intended to benefit a Manager or an Affiliate, or any party in which a Manager or an Affiliate may have an interest.
(b)“Model-Driven Fund”—Any investment fund, account, or portfolio sponsored, maintained, trusteed, or managed by the Manager or an Affiliate in which one or more investors invest, and—
(1)Which is composed of securities the identity of which and the amount of which are selected by a computer model that is based on prescribed objective criteria using independent third party data, not within the control of the Manager, to transform an Index, as defined in Section IV(c) of this exemption;
(2)Which either contains “plan assets” subject to the Act, is an investment company registered under the Investment Company Act of 1940, or contains assets of one or more institutional investors, which may include, but not be limited to, such entities as an insurance company separate account or general account, a governmental plan, a university endowment fund, a charitable foundation fund, a trust or other fund which is exempt from taxation under section 501(a) of the Code; and
(3)That involves no agreement, arrangement, or understanding regarding the design or operation of the Model-Driven Fund or the utilization of any specific objective criteria which is intended to benefit a Manager or an Affiliate, or any party in which a Manager or an Affiliate may have an interest.
(c)“Index”—A securities index that represents the investment performance of a specific segment of the public market for equity or debt securities in the United States and/or foreign countries, but only if—
(1)The organization creating and maintaining the index is—
(A)Engaged in the business of providing financial information, evaluation, advice, or securities brokerage services to institutional clients,
(B)A publisher of financial news or information, or
(C)A public securities exchange or association of securities dealers; and,
(2)The index is created and maintained by an organization independent of the Manager, as defined in Section IV(i) of this exemption; and,
(3)The index is a generally accepted standardized index of securities which is not specifically tailored for the use of the Manager.
(d)“Triggering Event”:
(1)A change in the composition or weighting of the Index underlying a Fund by the independent organization creating and maintaining the Index;
(2)A material amount of net change in the overall level of assets in a Fund, as a result of investments in and withdrawals from the Fund, provided that:
(A)Such material amount has either been identified in advance as a specified amount of net change relating to such Fund and disclosed in writing as a “triggering event” to an independent fiduciary of each plan having assets held in the Fund prior to, or within ten
(10)days following, its inclusion as a “triggering event” for such Fund or the Manager has otherwise disclosed in the description of its cross-trading practices pursuant to Section II(k) of this exemption the parameters for determining a material amount of net change, including any amount of discretion retained by the Manager that may affect such net change, in sufficient detail to allow the independent fiduciary to determine whether the authorization to engage in cross-trading should be given; and
(B)Investments or withdrawals as a result of the Manager's discretion to invest or withdraw assets of a Manager Plan, other than a Manager Plan which is a defined contribution plan under which participants direct the investment of their accounts among various investment options, including such Fund, will not be taken into account in determining the specified amount of net change;
(3)An accumulation in the Fund of a material amount of either:
(A)Cash which is attributable to interest or dividends on, and/or tender offers for, portfolio securities; or
(B)Stock attributable to dividends on portfolio securities; provided that such material amount has either been identified in advance as a specified amount relating to such Fund and disclosed in writing as a “triggering event” to an independent fiduciary of each plan having assets held in the Fund prior to, or within ten
(10)days after, its inclusion as a “triggering event” for such Fund, or the Manager has otherwise disclosed in the description of its cross-trading practices pursuant to Section II(k) of this exemption the parameters for determining a material amount of accumulated cash or securities, including any amount of discretion retained by the Manager that may affect such accumulated amount, in sufficient detail to allow the independent fiduciary to determine whether the authorization to engage in cross-trading should be given;
(4)A change in the composition of the portfolio of a Model-Driven Fund mandated solely by operation of the formulae contained in the computer model underlying the Model-Driven Fund where the basic factors for making such changes (and any fixed frequency for operating the computer model) have been disclosed in writing to an independent fiduciary of each plan having assets held in the Model-Driven Fund, prior to, or within ten
(10)days after, its inclusion as a “triggering event” for such Model-Driven Fund; or
(5)A change in the composition or weighting of a portfolio for an Index Fund or a Model-Driven Fund which results from an independent fiduciary's direction to exclude certain securities or types of securities from the Fund, notwithstanding that such securities are part of the index used by the Fund.
(e)“Large Account”—Any investment fund, account, or portfolio that is not an Index Fund or a Model-Driven Fund sponsored, maintained, trusteed (other than a Fund for which the Manager is a nondiscretionary trustee) or managed by the Manager, which holds assets of either:
(1)An employee benefit plan within the meaning of section 3(3) of the Act that has $50 million or more in total assets (for purposes of this requirement, the assets of one or more employee benefit plans maintained by the same employer, or controlled group of employers, may be aggregated provided that such assets are pooled for investment purposes in a single master trust);
(2)An institutional investor that has total assets in excess of $50 million, such as an insurance company separate account or general account, a governmental plan, a university endowment fund, a charitable foundation fund, a trust or other fund which is exempt from taxation under section 501(a) of the Code; or
(3)An investment company registered under the Investment Company Act of 1940 ( *e.g.* , a mutual fund) other than an investment company advised or sponsored by the Manager; provided that the Manager has been authorized to restructure all or a portion of the portfolio for such Large Account or to act as a “trading adviser” (as defined in Section IV(g) of this exemption) in connection with a portfolio restructuring program (as defined in Section IV(f) of this exemption) for the Large Account.
(f)“Portfolio restructuring program”—Buying and selling the securities on behalf of a Large Account in order to produce a portfolio of securities which will be an Index Fund or a Model-Driven Fund managed by the Manager or by another investment manager, or in order to produce a portfolio of securities the composition of which is designated by a party independent of the Manager, without regard to the requirements of Section IV(a)(3) or (b)(2) of this exemption, or to carry out a liquidation of a specified portfolio of securities for the Large Account.
(g)“Trading adviser”—A Merrill Lynch/BlackRock Related Entity or Entities whose role is limited with respect to a Large Account to the disposition of a securities portfolio in connection with a portfolio restructuring program that is a Large Account-initiated liquidation or restructuring within a stated period of time in order to minimize transaction costs. The Merrill Lynch/BlackRock Related Entity or Entities does not have discretionary authority or control with respect to any underlying asset allocation, restructuring or liquidation decisions for the account in connection with such transactions and does not render investment advice [within the meaning of 29 CFR 2510.3-21(c)] with respect to such transactions.
(h)“Closing price”—The price for a security on the date of the transaction, as determined by objective procedures disclosed to investors in advance and consistently applied with respect to securities traded in the same market, which procedures shall indicate the independent pricing source (and alternates, if the designated pricing source is unavailable) used to establish the closing price and the time frame after the close of the market in which the closing price will be determined.
(i)“Manager”—A Merrill Lynch/BlackRock Related Entity which is:
(1)A bank or trust company, or any Affiliate thereof, which is supervised by a state or federal agency; or
(2)An investment adviser or any Affiliate thereof which is registered under the Investment Advisers Act of 1940.
(j)“Affiliate”—An affiliate of a Manager includes:
(1)Any person, directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the Manager:
(2)Any officer, director, employee or relative of such Manager, or partner of any such Manager; and
(3)Any corporation or partnership of which such Manager is an officer, director, partner or employee.
(k)“Control”—The power to exercise a controlling influence over the management or policies of a person other than an individual.
(l)“Relative”—A relative is a person that is defined in section 3(15) of the Act (or a “member of the family” as that term is defined in section 4975(e)(6) of the Code), or a brother, a sister, or a spouse of a brother or sister.
(m)“Nondiscretionary trustee”—A plan trustee whose powers and duties with respect to any assets of the plan are limited to
(1)the provision of nondiscretionary trust services to the plan, and
(2)duties imposed on the trustee by any provision or provisions of the Act or the Code. The term “nondiscretionary trust services” means custodial services and services ancillary to custodial services, none of which services are discretionary. For purposes of this exemption, a person who is otherwise a nondiscretionary trustee will not fail to be a nondiscretionary trustee solely by reason of having been delegated, by the sponsor of a master or prototype plan, the power to amend such plan. Background On September 29, 2006, ML&Co. and BlackRock consummated a transaction (the Merger), in which ML&Co. contributed Merrill Lynch Investment Managers, LLC
(MLIM)and various other assets and subsidiaries that comprised its investment management business to BlackRock in exchange for approximately 45% of the outstanding voting securities of BlackRock. Prior to the Merger, ML&Co. and its affiliates engaged in various types of transactions, involving employee benefit plans, in reliance on, and in accordance with the conditions of various class exemptions (the Applicable Exemptions) 5 issued by the Department. Also, prior to the Merger, affiliates of ML&Co. engaged in the same transactions as described in the Applicable Exemptions, involving plans, with affiliates of BlackRock for which no exemption was required because ML&Co. had, at most, a *de minimis* ownership interest in BlackRock. 5 Parts III and IV of PTE 75-1 (40 FR 50845, October 31, 1975); PTE 77-3 (42 FR 18734, April 8, 1977); PTE 77-4 (42 FR 18732, April 8, 1977); PTE 79-13 (44 FR 25533, May 1, 1979); PTE 86-128 (51 FR 41686, November 18, 1986; as amended by 67 FR 64137, October 17, 2002); and PTE 2002-12 (67 FR 9483, March 1, 2002). As a result of the Merger, certain transactions involving companies affiliated with ML&Co. and companies affiliated with BlackRock may now be prohibited transactions as defined in section 406 of the Act. However, the ownership interest existing between ML&Co. and its affiliates and BlackRock and its affiliates may nevertheless not result in the various entities being considered “affiliates” of each other as defined in the Applicable Exemptions. As the Applicable Exemptions extend relief only to affiliated entities, as defined thereunder, ML&Co. and its affiliates, and BlackRock and its affiliates may not be able to take advantage of the relief provided by the Applicable Exemptions. Accordingly, the Department is proposing an individual exemption which will enable the Applicants to engage in the transactions described in the Applicable Exemptions, provided the conditions contained herein are met. Summary of Facts and Representations 1. BlackRock, headquartered in New York, NY, is one of the largest publicly-traded investment management firms in the world. BlackRock, through its Securities and Exchange Commission (SEC)-registered investment advisor subsidiaries, currently manages assets for institutional and individual investors worldwide through a variety of equity, fixed income, cash management and alternative investment products. As of June 30, 2007, BlackRock had approximately $1.2 trillion in assets under management. 2. ML&Co. is a holding company that, through its subsidiaries, provides broker-dealer, investment banking, financing, wealth management, advisory, insurance, lending and related products and services on a global basis. ML&Co. is subject to group-wide supervision by the SEC. 3. On September 29, 2006, ML&Co. combined its asset management business with BlackRock ( *i.e.* , the Merger). Prior to the Merger, PNC Financial Services Group, Inc.
(PNC)owned approximately 70.6% of BlackRock. As a result of the Merger, ML&Co. now owns a 50.3% economic interest and an approximate 45% voting interest in BlackRock, and PNC's ownership interest has been reduced to approximately 34% of BlackRock. The remaining interest in BlackRock is owned by the public and by BlackRock employees. 4. All BlackRock capital stock beneficially owned from time to time by ML&Co. and its related companies (other than in certain fiduciary capacities and customer or market-making accounts) is subject to the terms and provisions of a Stockholders' Agreement as amended by Amendment No. 1 thereto (the Stockholders' Agreement), which was entered into on February 15, 2006. 5. The Stockholders' Agreement will remain in effect until ML&Co. beneficially owns less than 20% of BlackRock's voting stock or until five years after the closing date of the Merger (Closing Date), whichever comes later, except that the transfer restrictions will continue to apply until ML&Co. beneficially owns less than 5% of such voting stock. Additionally, the restrictions, obligations and prohibitions on ML&Co. ownership of BlackRock securities may not be modified, amended or waived unless approved by either all of the independent directors of BlackRock or at least two-thirds of the directors of BlackRock. These restrictions, obligations and prohibitions fall into four broad categories: Corporate governance, share ownership, transfer restrictions, and non-competition. 6. ML&Co.'s rights to vote the shares of BlackRock voting stock, communicate with other BlackRock stockholders and to otherwise express its interests are expressly limited in the Stockholders' Agreement as follows:
(i)ML&Co. may designate only two directors, each in a separate class, to the 17-member Board of Directors of BlackRock (the Board) and, of the 17-member Board, seven directors were members of the Board prior to the Merger and were independent of BlackRock, ML&Co. and PNC, for purposes of NYSE Listed Company Manual Section 303A.02 and Section 10A of the Securities Exchange Act of 1934, and were not proposed by ML&Co. or PNC; two additional directors were determined by BlackRock's pre-Merger board and satisfy the foregoing independence standard; four directors are members of management (including three from BlackRock and one from pre-Merger MLIM); two directors, as noted, are designated by ML&Co. and two directors are designated by PNC, thereby resulting in a Board with a majority of directors who are independent of management, ML&Co. and PNC, less than 12% of whom are designated by ML&Co. or PNC and nearly 25% of whom are members of BlackRock management;
(ii)All committees of the Board (other than its executive committee) must consist solely of independent directors;
(iii)ML&Co. must ensure that all of its BlackRock voting stock is present at any stockholder meeting, either in person or by proxy, for purposes of establishing a quorum;
(iv)ML&Co. must vote all of its BlackRock voting stock on all matters (including elections of directors) as recommended by the Board as long as consistent with the terms of the Stockholders' Agreement;
(v)ML&Co. has agreed that neither it nor its affiliated companies nor any of their directors, officers or agents will seek, solicit or make any statement to BlackRock or its affiliated companies or their boards or managements, any stockholder of BlackRock or any other person regarding any proposal seeking
(1)to control or influence the management, the Board or the policies of BlackRock or its affiliated companies,
(2)any acquisition of BlackRock stock in excess of its permitted holdings,
(3)any acquisition of any securities, assets or business of BlackRock or its affiliated companies, or
(4)any recapitalization, business combination or other extraordinary transaction involving BlackRock or its affiliated companies;
(vi)Certain limited matters designated in the Stockholders' Agreement require approval by two-thirds of the independent directors of BlackRock (including appointment of a new CEO of BlackRock, sale of BlackRock, major acquisitions and charter amendments), and certain other extraordinary matters require consent from ML&Co. (the ML Consent Rights) (such as sale of BlackRock to a major global competitor of ML&Co., sale of BlackRock within the first five years of the Closing Date, sale in any one year of BlackRock subsidiaries that produce more than 20% of BlackRock's revenue, changes to certain of BlackRock's by-laws which would adversely affect ML&Co.'s interests, settlement of regulatory matters that would result in a loss of license by ML&Co., voluntary bankruptcy, actions that would cause ML&Co. to become a bank holding company or amendment of the parallel arrangements with PNC in a manner materially averse to ML&Co. or materially beneficial to PNC); and
(vii)The first three of the ML Consent Rights terminate if there is a change in control of ML&Co., and if such change occurs during the first five years after the Merger, ML&Co. must also reduce its holdings below 25% or exchange all of its shares for nonvoting participating preferred stock. 7. Among the restrictions that ML&Co. has agreed to in the Stockholders' Agreement, there are two fundamental restrictions with respect to its ownership of BlackRock capital stock:
(i)ML&Co. and its related companies may not seek to acquire or acquire beneficial ownership of any BlackRock capital stock or equivalent securities if, after giving effect to any such acquisition, ML&Co. and its related companies would beneficially own in excess of 49.8% of the total voting power of all outstanding BlackRock voting securities, or BlackRock voting securities and preferred stock in excess of 49.8% of the outstanding BlackRock voting securities and preferred stock combined on a fully diluted basis; and
(ii)ML&Co. must sell stock as necessary to keep its holdings below such levels. 8. In light of the difficulty ML&Co. may experience in acquiring additional BlackRock capital stock if BlackRock issues additional voting securities beyond certain levels, ML&Co. will have the right to purchase additional preferred stock to maintain its then current economic ownership level and to purchase additional voting securities if necessary to prevent dilution below 90% of its voting securities limitation. 9. ML&Co. is prohibited by the terms of the Stockholders' Agreement from transferring any of its BlackRock capital stock to any person who would as a result beneficially own more than 5% of BlackRock's voting stock. ML&Co. is also restricted in the following ways:
(i)ML&Co. may sell its BlackRock capital stock only in broadly distributed public offerings, or in ordinary unsolicited broker transactions to persons who will not beneficially own more than 5% of BlackRock's voting stock after such sale (after providing BlackRock with a right to match any offer), or to one of its related companies which agrees in writing with BlackRock to be bound by the Stockholders' Agreement as if it were an initial signatory thereto;
(ii)ML&Co. must obtain prior written consent to engage in any transfers not provided for in
(i)above; and
(iii)If ML&Co. wishes to or is required to transfer an amount of BlackRock voting stock constituting more than 10% of the total voting power, ML&Co. must coordinate such transfer with BlackRock. 10. The Stockholders' Agreement substantially curtails ML&Co.'s ability to compete with BlackRock in the asset management business as well as BlackRock's ability to compete with ML&Co. in the retail securities brokerage business. 11. The transactions described in this proposed exemption are the same as the transactions described in PTEs 75-1, Parts III and IV; PTE 77-3; PTE 77-4; PTE 79-13; PTE 86-128; and PTE 2002-12 ( *i.e.* , the Applicable Exemptions), and the conditions would be the same conditions provided for in the Applicable Exemptions. However, the Applicable Exemptions contain definitions of the term “affiliate” which might not apply to all of the entities related to ML&Co. and to BlackRock after the Merger. Accordingly, the Applicants have sought the individual exemption proposed herein in order that such entities may continue to engage in the transactions described in the Applicable Exemptions. 12. The Applicants have also requested relief for their related entities which may satisfy this individual exemption in the future. For a variety of business reasons, the Applicants may reorganize their respective businesses or establish new entities that will perform the same or similar functions as existing entities. Further, the Applicants may acquire entities that act as investment advisers or other service providers to plans or may otherwise be considered parties in interest to plans by virtue of their relationship to the Applicants. However, the Applicants are not requesting relief, nor is the Department herein proposing any relief, for an entity that would be a successor of ML&Co. or of BlackRock. 13. The Applicants had discussions concerning the possible ramifications of the Merger with respect to the Applicable Exemptions with the Department both prior to and continuing after the date of the Merger. The Applicants are requesting relief retroactive to September 29, 2006, the date of the Merger, to the extent that they and their related entities have been engaging in transactions described in the Applicable Exemptions in accordance with the conditions therein (other than the definition of “affiliate”). 14. The Applicants represent that transactions covered by the proposed individual exemption have been engaged in in accordance with the conditions of the Applicable Exemptions following consummation of the Merger. However, with regard to Section VIII of the proposed individual exemption pertaining to PTE 86-128, it should be noted that prior to the effective date of the merger, MLIM, as a subsidiary of ML&Co., engaged in transactions in reliance on, and in accordance with, the conditions of PTE 86-128. In this regard, it is represented that certain independent plan fiduciaries authorized MLIM to utilize the relief provided by PTE 86-128 with respect to transactions involving any broker-dealer that is affiliated with ML&Co. As a result of the Merger, MLIM became a subsidiary of BlackRock and it is represented that MLIM continued to engage in those same transactions for which relief is provided by PTE 86-128. The Applicants maintain that reliance on the existing consents obtained from certain independent plan fiduciaries was appropriate, because MLIM, notwithstanding the fact that it had become a subsidiary of BlackRock, was continuing an existing practice for which it had already obtained affirmative consent in accordance with the requirements of PTE 86-128. Accordingly, instead of seeking new authorization, BlackRock sent a letter to the authorizing plan fiduciary of each client plan and pooled fund subject to the Act or the Code after the closing of the Merger notifying such fiduciaries of the Merger and that the authorization remained in place, unless such fiduciaries elected to terminate such authorization. It is represented that in the case of plans covered by the Act, a termination form was included with such letter. The Applicants maintain that provision of notice of the Merger and the right to terminate an authorization was consistent with the annual “negative consent” provided for in Part III(c) of PTE 86-128. With respect to existing client plans of BlackRock and any of its affiliates, on the effective date of the Merger, and client plans that retained BlackRock or any of its affiliates following the effective date of the Merger, it is represented that BlackRock has implemented a compliance program designed to comply with the requirements of PTE 86-128. In this regard, for BlackRock and any of its affiliates that had not been relying on PTE 86-128 prior to the consummation of the Merger, affirmative consents have been and will be obtained. 15. In summary, the Applicants represent that the subject transactions meet the statutory criteria for an exemption under section 408(a) of the Act and section 4975(c)(2) of the Code because:
(a)The transactions covered by the proposed exemption are the same as the transactions described in the Applicable Exemptions;
(b)The conditions contained in the proposed exemption are the same as those in the Applicable Exemptions (except for the definition of “affiliate” therein);
(c)The rationale for providing the same exemptive relief as is available under the Applicable Exemptions is the same as providing the proposed exemptive relief described herein; and
(d)Absent the requested relief, plan participants and beneficiaries would be precluded from gaining access to certain favorable investment opportunities or receiving certain services from the Applicants and their related entities. Temporary Nature of Exemption The Department has determined that the relief provided by this exemption is temporary in nature. The exemption, if granted, will be effective September 29, 2006, and will expire on the day which is five
(5)years from the date of the publication of the final exemption in the **Federal Register** . Accordingly, the relief provided by this exemption will not be available upon the expiration of such five year period for any new or additional transactions, as described herein, after such date, but would continue to apply beyond the expiration of such five year period for continuing transactions entered into during the effective dates of this exemption; provided the conditions of this exemption continue to be satisfied. Should the Applicants wish to extend, beyond the expiration of such five year period, the relief provided by this exemption to new or additional transactions, the Applicants may submit another application for exemption. In this regard, the Department would require that prior to filing another exemption application seeking relief for new or additional transactions, the Applicants must document compliance with the conditions of this exemption. Notice to Interested Persons The Applicants represent that because those plans proposing to engage in the covered transactions cannot all be identified, the only practical means of notifying independent plan fiduciaries or plan participants of such affected plans is by publication of the proposed exemption in the **Federal Register** . Therefore, any comments from interested persons must be received by the Department no later than *June 9, 2008.* Written Comments and Hearing Requests All interested persons are invited to submit written comments and/or requests for a public hearing on the pending exemption to the address, as set forth above, within the time frame, as set forth above. All comments and requests for a public hearing will be made a part of the record. Comments and hearing requests should state the reasons for the writer's interest in the proposed exemption. A request for a public hearing must also state the issues to be addressed and include a general description of the evidence to be presented at the hearing. Comments and hearing requests received will also be available for public inspection with the referenced application at the address, as set forth above. FOR FURTHER INFORMATION CONTACT: Ms. Blessed Chuksorji, Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor, telephone
(202)693-8540. (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 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 29th day of April, 2008. Ivan Strasfeld, Director of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor. [FR Doc. E8-10263 Filed 5-8-08; 8:45 am] BILLING CODE 4510-29-P DEPARTMENT OF LABOR Occupational Safety and Health Administration [Docket No. OSHA-2008-0005] Request for Comments on Proposed Guidance on Workplace Stockpiling of Respirators and Facemasks for Pandemic Influenza AGENCY: Occupational Safety and Health Administration (OSHA), Labor. ACTION: Request for comments. SUMMARY: The Department of Labor is inviting comments on its document entitled “Proposed Guidance on Workplace Stockpiling of Respirators and Facemasks for Pandemic Influenza” (Proposed Guidance). The Proposed Guidance is available on OSHA's Web page and through its publications office. Interested persons may submit written or electronic comments on the Proposed Guidance as discussed below. DATES: *Written Comments:* You must submit your comments by the following dates: *Regular mail, hand-delivery, express delivery, messenger, or courier service:* You must submit your comments (postmarked or sent) by July 8, 2008. *Facsimile and electronic transmission:* You must submit your comments by July 8, 2008. OSHA is providing the public with 60 days to submit comments on the *Proposed Guidance on Workplace Stockpiling of Respirators and Facemasks for Pandemic Influenza.* ADDRESSES: I. Submitting Comments You may submit comments and information in response to this document as a hard copy, fax transmission (facsimile), or electronically. Submitted materials must include and clearly identify your name, date, and Docket No. OSHA-2008-0005 (the docket number associated with the Proposed Guidance), so OSHA can place them in the appropriate docket and, if necessary, attach them to your prior submissions.
(1)*Regular mail, hand-delivery, express delivery, messenger, or courier service:* You must submit three copies of your comments and attachments to the OSHA Docket Office, Docket No. OSHA-2008-0005, U.S. Department of Labor, Room N-2625, 200 Constitution Avenue, NW., Washington, DC 20210, telephone
(202)693-2350 (OSHA's TTY number is
(877)889-5627). The OSHA Docket Office and the Department of Labor hours of operation are 8:15 a.m. to 4:45 p.m., ET. Because of security-related procedures, the use of regular mail may cause a significant delay in the receipt of submissions. Please contact the OSHA Docket Office at:
(202)693-2350 (TTY
(877)899-5627) for information about security procedures concerning the delivery of materials by express delivery, hand delivery, and messenger service.
(2)*Facsimile:* If your comments, including any attachments, do not exceed 10 pages, you may fax them to the OSHA Docket Office at
(202)693-1648. You must include the docket number of this document, Docket No. OSHA-2008-0005, in your comments.
(3)*Electronically:* You may submit your comments and attachments electronically at: *http://www.regulations.gov,* which is the Federal e-Rulemaking Portal. Information on using the *http://www.regulations.gov* Web site to submit these materials, and to access the docket, is available at the Web site's “User Tips” link. You may supplement electronic submissions by uploading document attachments and files electronically. If, instead, you wish to mail additional materials in reference to an electronic or fax submission, you must submit three copies to the OSHA Docket Office. As discussed above, submitted materials must include and clearly identify your name, date, and Docket No. OSHA-2008-0005. Contact the OSHA Docket Office for assistance in using the Internet to locate docket submissions. II. Obtaining Copies of the Proposed Guidance You can download the Proposed Guidance from OSHA's Web site at *http://www.osha.gov.* A printed copy of the Proposed Guidance is available from the OSHA Office of Publications, Room N-3101, U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210, or by telephone at
(800)321-OSHA (6742). You may fax your request for a copy of the Proposed Guidance to
(202)693-2498. FOR FURTHER INFORMATION CONTACT: Andrew Levinson, Acting Director, Office of Biological Hazards, OSHA Directorate of Standards and Guidance, Room N-3718, U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210, telephone
(202)693-1950. SUPPLEMENTARY INFORMATION: I. Internet Access to Comments All comments and submissions will be available for inspection and copying at the OSHA Docket Office at the above address. Comments and submissions will be posted without change at *http://www.regulations.gov.* Therefore, OSHA cautions commenters about submitting personal information such as social security numbers, dates of birth, etc. Although all submissions are listed in the *http://www.regulations.gov* index, some information (e.g., copyrighted material) is not publicly available to read or download through *http://www.regulations.gov.* Contact the OSHA Docket Office at
(202)693-2350 (TTY
(877)899-5627) for information about materials not available through the OSHA Web site and for assistance in using the Web site to locate docket submissions. Electronic copies of this **Federal Register** document are available at *http://www.regulations.gov.* This document, news releases and other relevant information, also are available at OSHA's Web page at *http://www.osha.gov.* II. Background An influenza pandemic could have a major effect on society and the global economy, including travel, trade, tourism, food, consumption, and investment and financial markets. Planning for pandemic influenza by business and industry is essential to minimize a pandemic's impact. During a pandemic, employers will play a key role in protecting employees' health and safety as well as in limiting the impact of a pandemic on the economy and society. Employers will likely experience increased employee absences, changes in patterns of commerce and interrupted supply and delivery schedules. Therefore, as with any catastrophe, having a contingency plan is essential. The President announced the *National Strategy for Pandemic Influenza* in November of 2005, which outlines the Federal Government's approach to prepare for and respond to an influenza pandemic ( *http://www.pandemicflu.gov* ). To further assist in National pandemic preparedness efforts, the Department of Labor (DOL), in coordination with the Department of Health and Human Services (HHS), developed the Proposed Guidance on stockpiling of respirators and facemasks in occupational settings. The Proposed Guidance is designed to help private sector and government employers in making purchasing and stockpiling decisions regarding these protective devices, thereby allowing them to better protect their employees as well as lessen the impact of a pandemic. The document provides employers with recommendations and a methodology for calculating workplace stockpiling needs for respirators and facemasks in the event of an influenza pandemic. The Proposed Guidance is supplementary to the existing DOL/HHS *Guidance on Preparing Workplaces for an Influenza Pandemic* that was released February 2007 ( *http://www.osha.gov/Publications/OSHA3327pandemic.pdf* ). The existing guidance includes information on how employers and employees can evaluate their risk of occupational exposure to pandemic influenza and explains steps that employers can take at each exposure risk level (very high, high, medium and low) to protect employees. The existing guidance document contains recommendations on the use of personal protective equipment (e.g. respirators and facemasks) at each risk level. More specifically, it recommends that employees at very high risk and high risk of exposure to pandemic influenza use respirators, while workers at medium risk of exposure use facemasks. Neither facemasks nor respirators are recommended for employees at lower risk of exposure to pandemic influenza. The Proposed Guidance supplements the existing guidance by informing employers about various types of respirators, their advantages, disadvantages, and approximate costs. In addition, when employers determine that they have employees who are at medium or higher exposure risk, the Proposed Guidance provides them with methodology to determine how many respirators and/or facemasks they would have to stockpile based upon the assumption that an influenza pandemic is expected to come in two waves, each lasting up to 12 weeks, extending over an 18-month period. OSHA encourages interested parties to comment on all aspects of the Proposed Guidance. The Agency is particularly interested in addressing the following questions: 1. Is the guidance clear and useful in helping employers determine if they should stockpile respirators and/or facemasks for their employees and the quantity of each device that should be stockpiled? 2. Are there any parts of the guidance that are not clear and if so, how can they be clarified? 3. Do the underlying assumptions used to estimate stockpiling needs, as well as cost estimates, for various types of facemasks and respirators, appear to be appropriate? If not, please explain why you feel they are inappropriate and suggest an alternative and your rationale for the alternative. A. If you have already addressed stockpiling needs for your facility, could you please provide your underlying assumptions and methodology? B. Are employers that should stockpile respirators and/or facemasks currently stockpiling these devices and if not, how can the guidance be modified to encourage them to begin stockpiling? III. Authority and Signature This notice was prepared under the direction of Edwin G. Foulke, Jr., *Assistant Secretary of Labor for Occupational Safety and Health.* It is issued under sections 4 and 8 of the Occupational Safety and Health Act of 1970 (29 U.S.C. 653, 657). Issued at Washington, DC, this 5th day of May, 2008. Edwin G. Foulke, Jr., Assistant Secretary of Labor for Occupational Safety and Health. [FR Doc. E8-10312 Filed 5-8-08; 8:45 am] BILLING CODE 4510-26-P NATIONAL SCIENCE FOUNDATION Agency Information Collection Activities: Comment Request AGENCY: National Science Foundation. ACTION: Submission for OMB Review; Comment Request. SUMMARY: The National Science Foundation
(NSF)has submitted the following information collection requirement to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104-13. This is the second notice for public comment; the first was published in the **Federal Register** at 73 FR 12222, and no comments were received. NSF is forwarding the proposed renewal submission to the Office of Management and Budget
(OMB)for clearance simultaneously with the publication of this second notice. Comments regarding
(a)whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b)the accuracy of the agency's estimate of burden including the validity of the methodology and assumptions used;
(c)ways to enhance the quality, utility and clarity of the information to be collected;
(d)ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology should be addressed to: Office of Information and Regulatory Affairs of OMB, Attention: Desk Officer for National Science Foundation, 725 17th Street, NW., Room 10235, Washington, DC 20503, and to Suzanne H. Plimpton, Reports Clearance Officer, National Science Foundation, 4201 Wilson Boulevard, Suite 295, Arlington, Virginia 22230 or send e-mail to *splimpto@nsf.gov* . Comments regarding these information collections are best assured of having their full effect if received within 30 days of this notification. Copies of the submission may be obtained by calling 703-292-7556. NSF may not conduct or sponsor a collection of information unless the collection of information displays a currently valid OMB control number and the agency informs potential persons who are to respond to the collection of information that such persons are not required to respond to the collection of information unless it displays a currently valid OMB control number. SUPPLEMENTARY INFORMATION: *Title of Collection:* Application for NATO Advanced Study Institutes Travel Award and NATO Advanced Study Institutes Travel Award Report Form. *OMB Approval Number:* 3145-0001. *Abstract:* The North Atlantic Treaty Organization
(NATO)initiated its Advanced Study Institutes Program in 1958 modeled after a small number of very successful summer science “courses” that were held in Europe and that sought to rebuild Europe's science strength following World War II. The goal was to bring together both students and researchers from the leading centers of research in highly targeted fields of science and engineering to promote the “American” approach to advanced learning, spirited give-and-take between students and teachers, that was clearly driving the rapid growth of U.S. research strength. Today the goal remains the same; but due to the expansion of NATO, each year an increasing number of ASIs are held in NATO Partner Countries along with those held in NATO Member Countries. In the spirit of cooperation with this important activity, the Foundation inaugurated in 1959 a small program of travel grants for advanced graduate students to assist with the major cost of such participation, that of transatlantic travel. It remains today a significant means for young scientists and engineers to develop contact with their peers throughout the world in their respective fields of specialization. The Advanced Study Institutes
(ASI)travel awards are offered to advanced graduate students, to attend one of the NATO's ASIs held in the NATO member and partner countries of Europe. The NATO ASI program is targeted to those individuals nearing the completion of their doctoral studies in science, technology, engineering and mathematics
(STEM)who can take advantage of opportunities to become familiar with progress in their respective fields of specialization in other countries. The Division of Graduate Education
(DGE)in the Education and Human Resources
(EHR)Directorate administers the NATO ASI Travel Awards Program. The following describes the procedures for the administration of the Foundation's NATO Advanced Study Institute
(ASI)Travel Awards, which provide travel support for a number of U.S. graduate students to attend the ASIs scheduled for Europe. • ADVANCED STUDY INSTITUTE DETERMINATION Once NATO has notified DGE that the schedule of institutes is final, and DGE has received the descriptions of each institute, DGE determines which institutes NSF will support. The ASI travel award program supports those institutes that offer instruction in the STEM fields traditionally supported by NSF as published in *Guide to Programs* . The program will not support institutes that deal with clinical topics, biomedical topics, or topics that have disease-related goals. Examples of areas of research that will not be considered are epidemiology; toxicology; the development or testing of drugs or procedures for their use; diagnosis or treatment of physical or mental disease, abnormality, or malfunction in human beings or animals; and animal models of such conditions. However, the program does support institutes that involve research in bioengineering, with diagnosis or treatment-related goals that apply engineering principles to problems in biology and medicine while advancing engineering knowledge. The program also supports bioengineering topics that aid persons with disabilities. Program officers from other Divisions in NSF will be contacted should scientific expertise outside of DGE be required in the determination process. • SOLICITATION FOR NOMINATIONS Following the final determination as to which Advanced Study Institutes NSF will support, DGE contacts each institute director to ask for a list of up to 5 nominations to be considered for NSF travel support. • DGE/EHR CONTACT WITH THE INDIVIDUALS NOMINATED Each individual who is nominated by a director will be sent the rules of eligibility, information about the amount of funding available, and the forms (NSF Form 1379, giving our Division of Financial Management
(DFM)electronic banking information; NSF Form 1310 (already cleared), and NSF Form 192 (Application for International Travel Grant)) necessary for our application process. • THE FUNDING PROCESS Once an applicant has been selected to receive NSF travel award support, his or her application is sent to DFM for funding. DFM electronically transfers the amount of $1000 into the bank or other financial institution account identified by the awardee. Our plan is to have the $1000 directly deposited into the awardee's account prior to the purchase of their airline ticket. An electronic message to the awardee states that NSF is providing support in the amount of $1000 for transportation and miscellaneous expenses. The letter also states that the award is subject to the conditions in F.L. 27, *Attachment to International Travel Grant,* which states the U.S. flag-carrier policy. As a follow-up, each ASI director may be asked to verify whether all NSF awardees attended the institute. If an awardee is identified as not utilizing the funds as prescribed, we contact the awardee to retrieve the funds. However, if our efforts are not successful, we will forward the awardee's name to the Division of Grants and Agreements (DGA), which has procedures to deal with that situation. We also ask the awardee to submit a final report on an NSF Form 250, which we provide as an attachment to the electronic award message. • SELECTION OF AWARDEES The criteria used to select NSF Advanced Study Institute travel awardees are as follows: 1. The applicant is an advanced graduate student. 2. We shall generally follow the order of the nominations, listed by the director of the institute, within priority level. 3. Those who have not attended an ASI in the past will have a higher priority than those who have. 4. Nominees from different institutions and research groups have higher priority than those from the same institution or research group. (Typically, no more than one person is invited from a school or from a research group.) *Use of the Information:* For NSF Form 192, information will be used in order to verify eligibility and qualifications for the award. For NSF Form 250, information will be used to verify attendance at Advanced Study Institute and will be included in Division reports. *Estimate of Burden:* Form 192—1.5 hours. Form 250—2 hours. *Respondents:* Individuals. *Estimated Number of Responses per Award:* 150 responses, broken down as follows: For NSF Form 250, 75 respondents; for NSF Form 192, 75 respondents. *Estimated Total Annual Burden on Respondents:* 262.5 hours, broken down by 150 hours for NSF Form 250 (2 hours per 75 respondents); and 112.5 hours for NSF Form 192 (1.5 hours per 75 respondents). *Frequency of Responses:* Annually. *Comments:* Comments are invited on
(a)whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information shall have practical utility;
(b)the accuracy of the Agency's estimate of the burden of the proposed collection of information;
(c)ways to enhance the quality, utility, and clarity of the information on respondents, including through the use of automated collection techniques or other forms of information technology; or
(d)ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology. Dated: May 6, 2008. Suzanne H. Plimpton, Reports Clearance Officer, National Science Foundation. [FR Doc. E8-10353 Filed 5-8-08; 8:45 am] BILLING CODE 7555-01-P NATIONAL TRANSPORTATION SAFETY BOARD Proposed Information Collection Activity: Submission for OMB Review, Comment Request AGENCY: National Transportation Safety Board (NTSB). ACTION: Notice. SUMMARY: The NTSB is announcing that it has submitted an Information Collection Request
(ICR)to the Office of Management and Budget
(OMB)for approval, in accordance with the Paperwork Reduction Act. This ICR describes a voluntary web site that the NTSB proposes to use to obtain feedback from the public regarding the NTSB Web site. This Notice informs the public that they may submit comments concerning the NTSB's proposed collection of information to the NTSB Desk Officer at the OMB. DATES: Submit written comments regarding this proposed collection of information by June 9, 2008. ADDRESSES: Respondents may submit written comments on the collection of information to the Office of Information and Regulatory Affairs of the Office of Management and Budget, Attention: Desk Officer for the National Transportation Safety Board, Washington, DC 20503. FOR FURTHER INFORMATION CONTACT: Christine Fortin, NTSB Office of Chief Information Officer, at
(202)314-6607. SUPPLEMENTARY INFORMATION: In accordance with the Paperwork Reduction Act, the NTSB previously published a Notice in the **Federal Register** indicating its proposal to collect feedback concerning its public Web site, and sought comments from the public concerning this proposed ICR. The NTSB did not receive any comments. At this juncture, in accordance with OMB regulations that require this additional Notice for proposed ICRs, the NTSB seeks to notify the public that it may submit comments on this proposed ICR to OMB. 5 CFR 1320.10(a). The NTSB Online Customer Satisfaction Survey will seek the public's feedback regarding a variety of aspects of the current NTSB Web site. In particular, the survey will solicit feedback concerning the public's satisfaction with the content of information on the Web site, as well as the presentation and organization of information that is available on the NTSB Web site. The survey will also ask the public for opinions regarding the overall utility of certain categories of the existing Web site. The survey will also seek responses to questions concerning ways to improve the Web site, such as whether the public would find it helpful to include certain information. In addition, the survey will seek general comments regarding ways the NTSB can improve its Web site. Finally, the survey will inquire into whether respondents are affiliated with a particular group, industry, or profession, and how often respondents visit the NTSB Web site. Respondents' participation in the survey is voluntary. The survey will only be available on the NTSB Web site, and the NTSB has carefully reviewed the survey to ensure that it has used plain, coherent, and unambiguous terminology in its requests for information and feedback. The survey is not duplicative of other agencies' collections of information. The survey will consist of seven questions, and imposes minimal burden on respondents: the NTSB estimates that respondents will spend approximately 10 minutes in completing the survey. The NTSB estimates that approximately 100 respondents will participate in the survey. Dated: May 2, 2008. Vicky D'Onofrio, Federal Register Liaison Officer. [FR Doc. E8-10117 Filed 5-8-08; 8:45 am] BILLING CODE 7533-01-M NATIONAL TRANSPORTATION SAFETY BOARD Agenda; Sunshine Act Meeting Time and Date: 9:30 a.m., Tuesday, May 13, 2008. Place: NTSB Conference Center, 429 L'Enfant Plaza, SW., Washington, DC 20594. Status: The one item is open to the public. Matters to be Considered: 7853A Railroad Accident Report-Derailment of Norfolk Southern Railway Company Train 68QB 119 with Release of Hazardous Materials and Fire, New Brighton, Pennsylvania, October 20, 2006. *News Media Contact:* Telephone:
(202)314-6100. Individuals requesting specific accommodations should contact Antoin Downs at
(202)314-6557 by Friday, May 9, 2008. The public may view the meeting via a live or archived Webcast by accessing a link under “News & Events” on the NTSB home page at *http://www.ntsb.gov.* *For More Information Contact:* Vicky D'Onofrio,
(202)314-6410. Dated: May 2, 2008. Vicky D'Onofrio, Federal Register Liaison Officer. [FR Doc. E8-10120 Filed 5-8-08; 8:45 am] BILLING CODE 7533-01-M OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE Implementation of Textile Safeguard Measure Under the Dominican Republic—Central America—United States Free Trade Agreement AGENCY: Office of the United States Trade Representative. ACTION: Notice. SUMMARY: Pursuant to Proclamation 8228 of March 28, 2008 (73 Fed. Reg. 18,141 (2008)), the United States Trade Representative
(USTR)is providing notice of a modification to the Harmonized Tariff Schedule of the United States
(HTS)to reflect a textile safeguard measure under the Dominican Republic—Central America—United States Free Trade Agreement (CAFTA-DR or the Agreement). EFFECTIVE DATE: May 1, 2008. ADDRESSES: Inquiries may be mailed, delivered, or faxed to Rachel A. Alarid, Director of Textile Trade Policy, Office of the United States Trade Representative, 600 17th Street, NW., Washington, DC 20508, fax number
(202)395-5639. FOR FURTHER INFORMATION CONTACT: Rachel A. Alarid, Office of the United States Trade Representative, 202-395-3026. SUPPLEMENTARY INFORMATION: On April 25, 2008, the Committee for the Implementation of Textile Agreements
(CITA)determined, pursuant to Section 322(a)-(b) of the Dominican Republic—Central America—United States Free Trade Agreement Implementation Act (Pub. L. 109-53; 19 U.S.C. 4082), to impose a textile safeguard measure on certain cotton socks of Honduras. This measure takes the form of an increase in the rate of duty in the amount of 5 percent *ad valorem* on all CAFTA-DR originating cotton socks of Honduras classifiable in subheading 6115.95 of the HTS that are entered, or withdrawn from warehouse, for consumption during the period July 1, 2008 through December 31, 2008. This duty will be applied on the full value of the entered goods, regardless of the value of any United States content of such goods. *See* 73 Fed. Reg. 23,196 (2008). In Proclamation 8228 of March 28, 2008, the President directed the USTR to modify the HTS to reflect CAFTA-DR textile safeguard determinations by CITA. Pursuant to this authority, effective with respect to goods of Honduras, under the terms of general note 29 to the HTS, that are entered, or withdrawn from warehouse for consumption, on or after July 1, 2008 and before the close of December 31, 2008, subchapter XV of chapter 99 of the HTS is hereby modified as follows: EN09MY08.077 Susan C. Schwab, U.S. Trade Representative. [FR Doc. E8-10350 Filed 5-8-08; 8:45 am] BILLING CODE 3190-W8-P OFFICE OF PERSONNEL MANAGEMENT Submission for OMB Review; Comment Request for Extension, Without Change, of a Currently Approved Information Collection: RI 38-45 AGENCY: Office of Personnel Management. ACTION: Notice. SUMMARY: In accordance with the Paperwork Reduction Act of 1995 (Public Law 104-13, May 22, 1995), this notice announces that the Office of Personnel Management
(OPM)has submitted to the Office of Management and Budget
(OMB)a request for extension, without change, of a currently approved information collection. RI 38-45, We Need the Social Security Number of the Person Named Below, is used by the Civil Service Retirement System and the Federal Employees Retirement System to identify the records of individuals with similar or the same names. It is also needed to report payments to the Internal Revenue Service. Approximately 3,000 RI 38-45 forms will be completed annually. Each form requires approximately 5 minutes to complete. The annual estimated burden is 250 hours. For copies of this proposal, contact Mary Beth Smith-Toomey on
(202)606-8358, FAX
(202)418-3251 or via E-mail to *MaryBeth.Smith-Toomey@opm.gov.* Please include a mailing address with your request. DATES: Comments on this proposal should be received within 30 calendar days from the date of this publication. ADDRESSES: Send or deliver comments to— Ronald W. Melton, Deputy Assistant Director, Retirement Services Program, Center for Retirement and Insurance Services, U.S. Office of Personnel Management, 1900 E Street, NW., Room 3305, Washington, DC 20415-3500; and Brenda Aguilar, OPM Desk Officer, Office of Information & Regulatory Affairs, Office of Management and Budget, New Executive Office Building, NW., Room 10235, Washington, DC 20503. *For Information Regarding Administrative Coordination—Contact:* Cyrus S. Benson, Team Leader, Publications Team, RIS Support Services/Support Group,
(202)606-0623. Office of Personnel Management. Howard Weizmann, Deputy Director. [FR Doc. E8-10356 Filed 5-8-08; 8:45 am] BILLING CODE 6325-38-P OFFICE OF PERSONNEL MANAGEMENT Proposed Personnel Demonstration Project; Alternative Personnel Management System for the U.S. Department of Agriculture, Food Safety and Inspection Service AGENCY: U.S. Office of Personnel Management. ACTION: Notice of a proposed demonstration project plan. SUMMARY: Chapter 47 of title 5, United States Code, authorizes the U.S. Office of Personnel Management (OPM), directly or in agreement with one or more agencies, to conduct demonstration projects that experiment with new and different human resources management concepts to determine whether changes in human resources policy or procedures result in improved Federal human resources management. The Food Safety and Inspection Service (FSIS), the United States Department of Agriculture (USDA), and OPM propose to test a results-based, competency-linked pay-for-performance system that is combined with a simplified, pay banding classification and compensation system. Section 4703 of title 5 requires OPM to publish the proposed project plan in the **Federal Register** . This notice fulfills that requirement. DATES: To be considered, written comments must be submitted on or before June 9, 2008. A public hearing will be held on the proposed project plan on Thursday, June 26, 2008, and will begin at 10 a.m., Eastern Standard Time. *The location of the hearing is:* U.S. Department of Agriculture, South Building, 1400 Independence Avenue, SW., Washington, DC 20250. You must use the 7th wing entrance which is accessible from Independence Avenue. Public parking is limited, but the building is conveniently accessible to the “Smithsonian” Metro stations. The South Building is a secure facility. Members of the public must show a government-issued photo ID (e.g. State driver's license). Attendees will undergo electronic screening, and their personal belongings will be subject to a physical search. Personal items prohibited in the South Building include devices that can transmit and record, weapons (guns, knives, explosives, etc.), and alcohol. A member of the public possessing such items will be barred from entering, and such items are subject to confiscation. There will be a sign-in table set up in the lobby of the Jefferson Auditorium. A greeter and signs will direct attendees to the auditorium location. There will be a telephone call-in number for members of the public and agency who cannot attend in person. That number will be 888-790-4330 (Passcode: Demonstration Project), and the line will be active from 10 a.m. Eastern Standard Time until the conclusion of the hearing. At the time of the hearing, interested persons or organizations may present their written or oral comments on the proposed demonstration project. The hearing will be informal. However, anyone wishing to testify should contact the person listed under FOR FURTHER INFORMATION CONTACT , so that FSIS, USDA, and OPM can plan the hearing and provide sufficient lead time for all interested persons and organizations to be heard. Priority will be given to those on the schedule, with others speaking in any remaining available time. Each speaker's presentation will be limited to five minutes. Written comments may be submitted to supplement oral testimony during the public comment period. ADDRESSES: Comments may be mailed to Demonstration Projects, U.S. Office of Personnel Management, 1900 E Street, NW., Room 7677, Washington, DC 20415 or submitted by e-mail to *Demoprojects@opm.gov.* FOR FURTHER INFORMATION CONTACT:
(1)FSIS, Laurie Lindsay, Director, HR Demonstration Project Staff,
(202)720-7983, 1400 Independence Avenue, SW., Room 2134 South Building, Washington D.C, 20250;
(2)Office of Personnel Management, Patsy Stevens, Systems Innovation Group Manager,
(202)606-1574, U.S. Office of Personnel Management, 1900 E Street, NW., Room 7456, Washington, DC 20415. SUPPLEMENTARY INFORMATION: The goals of this demonstration project are to improve workforce performance and promote mission accomplishment by making employees' pay increases more performance-sensitive, so that only Fully Successful and higher performers will receive any pay adjustments and the best performers will receive the largest pay adjustments. This will produce such measurable outcomes as improving the quality of new hires, increasing the proportion of agency positions that remain filled, improving supervisors' and employees' commitment to a highly effective performance culture, retaining good performers, making line managers more responsible and accountable for human resources management, improving the effectiveness and efficiency of human resources systems, and closing human capital gaps for supervisory and mission-critical occupations (e.g., the gap between the number of employees required at each competency proficiency level to perform current and future missions and the number of existing employees at those levels). Linda M. Springer, Director. Table of Contents I. Executive Summary II. Introduction A. Purpose B. Problems with the Present System C. Changes Required/Expected Benefits D. Participating Organizations E. Participating Employees F. Labor Participation G. Project Design III. Personnel System Changes A. Pay Banding Classification and Pay System 1. Establishment of Career Paths and Pay Bands 2. Position Classification 3. Delegation of Classification Authority 4. Classification Appeals 5. Elimination of Fixed Steps 6. Rate Range 7. Locality Pay 8. Rate of Basic Pay Upon Initial Appointment 9. Rate of Basic Pay Upon Promotion 10. Rate of Basic Pay in Noncompetitive Lateral Actions 11. Other Pay Administration Provisions 12. Staffing Supplements 13. Status as GS Employees B. Performance Appraisal System 1. Program Requirements 2. Supervisory Accountability 3. Reconsideration of Ratings C. Performance-based Pay Increases and Awards 1. Performance Shares 2. Performance Pay Pools 3. Performance-based Pay Increases 4. Employees Who Cannot Receive a Performance Pay Increase 5. Performance Awards D. Developmental Pay Increases E. Staffing 1. Minimum Qualification Requirements 2. Flexible Pay Setting for New Hires 3. Promotions F. Reduction-in-Force IV. Training V. Conversion A. Conversion to the Demonstration Project B. Conversion to the General Schedule VI. Project Modification VII. Project Duration VIII. Project Evaluation IX. Costs A. Buy-in Costs B. Recurring Costs X. Waiver of Laws and Regulations Required I. Executive Summary This project was designed by the United States Department of Agriculture (USDA), including the Food Safety and Inspection Service (FSIS), with participation of and review by the U.S. Office of Personnel Management (OPM). The demonstration project will pursue several key objectives: to simplify the current classification system for greater flexibility in classifying work and paying employees; to reaffirm the performance management and rewards system for improving individual and organizational performance; to assure that the allocation of annual pay increases reflects distinctions in levels of performance in a meaningful way; and to test the effectiveness of multi-grade pay bands in recruiting, advancing and retaining employees. The duration of the project will be 5 years, except that the project may be extended by OPM if further testing and evaluation are warranted. The proposed project will test whether a results-based, competency-linked pay-for-performance system can be successful in USDA. Previous alternative pay systems that used competency models (e.g., the Government Accountability Office
(GAO)compensation system and the Department of Defense
(DOD)Acquisition Workforce Demonstration Project) did not focus on missions or occupations related to public health or food defense. Moreover, the workforce covered by the proposed demonstration project is predominantly supervisory (about 40%), and it is important to establish effective pay-for-performance policies and procedures for supervisory positions before extending such systems to large numbers of line worker positions throughout the Federal Government. Finally, a substantial number of the covered employees (approximately 30 percent) have working conditions that are dramatically different from other white-collar workers (e.g., shift-oriented work in slaughter or meat processing facilities), including the requirement for substantial amounts of regularly-scheduled and intermittent overtime. II. Introduction A. Purpose The purpose of the proposed project is to strengthen the contribution of human resources management in helping to achieve the missions of the specific program areas of FSIS. The proposed project will test whether a results-based, competency-linked, pay-for-performance system and related innovations will produce successful results in a public health regulatory environment with distinct working conditions and an ever-present concern for food defense and security. B. Problems with the Present System The USDA Strategic Human Capital Plan and the President's Management Agenda require FSIS to manage human capital in the 21st century very aggressively. FSIS must achieve comprehensive human capital goals for strategic workforce planning, learning and workforce development, recruitment and retention, and evolution of a highly effective performance culture. The FSIS Strategic Plan calls for continued transformation of the existing workforce, which was recruited and trained during a time when food safety was considered a conventional inspection program governed by legislation such as the Federal Meat Inspection Act of 1906, the Poultry Products Inspection Act of 1957, the Wholesome Meat Act of 1967, the Wholesome Poultry Products Inspection Act of 1968, and the Egg Products Inspection Act of 1970. This legislation was enacted when food industry practices were characterized by carcass-by-carcass organoleptic inspection. To carry out its public health regulatory missions today, FSIS must assure science-based development and execution of policy and must also emphasize risk-oriented assessment, planning, analysis, inspection, and management activities. Also, FSIS must recruit, develop, retain, and accomplish life-cycle management for a workforce that is educated and skilled in public health, food defense, food safety, public education, and emergency-response systems, programs, practices, and technologies. In addition to inspecting poultry and meat animals, poultry and meat products, and egg products, FSIS must accomplish a growing list of advanced public health functions to include conducting risk assessments to identify and evaluate the potential human health outcomes from the consumption of meat, poultry, and egg products. At best, the personnel system that currently covers USDA and FSIS employees is based on 20th century assumptions about the nature of public service. Although the current Federal personnel management system is based on important core principles, those principles operate in an inflexible, one-size-fits-all system of defining work, hiring staff, managing people, assessing and rewarding performance, and advancing personnel. These inherent weaknesses make support of the FSIS mission complex, costly, and, ultimately, risky from the standpoint of public health. Currently, pay and the movement of personnel are pegged to outdated, narrowly-defined work definitions, hiring processes are cumbersome, and high performers and low performers are generally paid alike. These systemic inefficiencies detract from the potential effectiveness of the public health workforce. The challenges facing USDA and FSIS today to assure and improve the public health from farm to table require a workforce transformation. FSIS employees are being asked to assume new and different responsibilities, take more initiative, and be more innovative, agile, and accountable than ever before. It is critical that USDA and FSIS support the entire public health workforce with modern systems, particularly a human resources management system that supports and protects their critical role in public health, food safety, and food security. C. Changes Required/Expected Benefits The innovations of the project and their objectives are summarized below. 1. Pay Banding and Classification Occupational groups will be placed in appropriate career paths, pay bands will replace grades, and agency pay band standards will replace OPM position classification standards. The classification system will be automated as much as possible through intranet-based classification tools, and authority will be delegated to line managers (at least one level below the Deputy Assistant Administrator level). These changes are intended to simplify and speed up the classification process, make the process more serviceable and understandable, improve the effectiveness of classification decision-making and accountability, and facilitate pay for performance. Pay bands, which generally correspond to multiple grade levels, provide larger classification targets that can be defined by shorter, simpler, and more understandable classification standards. This simpler system will be easier to automate, will require fewer resources to operate, and will facilitate delegation to line managers. By providing broader and more flexible pay ranges for setting entry pay, pay banding will provide hiring officials with an important tool for attracting high-quality candidates and thus contribute to the objective of increasing the quality of new hires. By providing more flexible pay progression based on performance, pay banding will give managers the ability to increase the pay of good performers to higher and more competitive levels, thus improving the retention of good performers. At the same time, the potential for higher pay increases for good performance, supported by the broader pay ranges of a pay banding system, will contribute to the objective of improving organizational and individual performance. 2. Staffing Additional staffing tools will include such elements as flexible entry salaries, staffing supplements for employees in the applicable special rate categories, developmental pay increases, and more flexible pay increases associated with promotion. These changes are intended to attract high-quality candidates and increase the retention of good performers. Flexible pay-setting for new hires is a recruiting tool that gives hiring officials greater flexibility to offer more competitive salaries to high-quality candidates, addressing the objective of improving the quality of new hires. This will be used in conjunction with existing recruitment and retention incentives under title 5. 3. Pay The most important change in pay administration is the introduction of a pay-for-performance system. The pay-for-performance system will support several objectives. It will strengthen the organization's performance culture. It will promote fairness through the results-based, competency-linked, performance rating process. It will provide a motivational tool as well as a retention tool. As a motivational tool, the promise of higher pay increases for good performance encourages high achievement. As a retention tool, a pay-for-performance system allows the organization to quickly move the salaries of good performers to levels that are more competitive in the labor market. The promise of higher pay increases for good performance will encourage achievement and promote the objective of improved individual and organizational performance. Under the proposed pay-for-performance system, employee performance ratings will govern individual pay progression within pay bands. Any general increase in GS rates of basic pay approved by Congress and the President will be applied only to the FSIS band ranges ( *i.e.* , band minimums and maximums). Demonstration project employees will receive pay increases based on their rating of record. Funds currently applied to within-grade increases, quality step increases, and the annual GS pay adjustment will be used to grant these performance-based pay increases. Employees rated below Fully Successful will not receive any basic pay increase, nor will they receive pay increases when locality pay percentages are increased. (See section III.C.) In addition, employees in developmental positions may receive additional pay increases. Funds used for career ladder promotions from one grade to a higher grade will initially be used to fund these developmental pay increases. These pay increases may be granted to an employee to recognize the faster progression that can occur in a developmental position. This pay flexibility addresses the objective of improving retention by raising the pay of high-performing employees while also supporting the objective of preserving merit system principles (e.g., equal pay for work of equal value). (See section III.D.) 4. Performance Appraisal The demonstration project will continue to use the current FSIS appraisal program including the current five-level rating process, which incorporates competencies into the performance standards. (The five-level rating system has the following levels: 1—Unacceptable, 2—Marginal, 3—Fully Successful, 4—Superior, and 5—Outstanding.) The performance appraisal process is intended to
(1)promote good performance;
(2)encourage a continuing dialogue between supervisors and employees on organizational objectives, supervisory expectations, employee performance, employee needs for assistance and guidance, and employee development; and
(3)provide a basis for performance-related decisions in employee development, pay, rewards, assignment, promotion, and retention. The program will more effectively communicate to employees how they are performing, the rewards of good performance, and the consequences of poor performance. 5. Pay for Performance The most important feature of the demonstration project is that it links the employee's rating of record to shares of a performance pay pool. Performance-based pay increases give an operating unit the ability to raise the pay of good performers more rapidly, thus improving retention of good performers. Performance pay is distributed to employees either in the form of increases in base pay or, when the employee reaches a band maximum (or is on retained pay), in the form of a performance bonus. The number and type of performance pay pools will be described in implementing guidance, but performance ratings will be linked to performance pay shares so that employees who earn a level five rating (the highest) will earn the greatest number of performance pay shares, employees who earn a level four rating will earn a smaller number of shares, and employees who earn a level three rating will earn the fewest number of performance shares. Employees rated below level three will not be eligible for performance pay increases. 6. Performance Awards Existing programs for both non-monetary and monetary recognition will remain under the plan in accordance with chapter 45 of title 5, United States Code. Awards address two objectives. First, rewarding achievement will make high achievers more likely to remain, thus improving retention of the best performers. Second, the potential for awards for achievement will encourage improved individual performance. Although FSIS is not testing any new procedures under the demonstration project authority in chapter 47 of title 5, awards are a key part of a performance pay system and therefore noted here to clarify their use and provide a full picture of the project plan. 7. Line Management Authority The program areas will delegate greater authority and accountability to line managers. This delegation is intended to improve the effectiveness of human resources management by strengthening the role of line managers as the human resources managers of their units. The project will be managed by the FSIS Demonstration Project Management Board (DPMB), composed of representatives from each operating unit (program area) and chaired by the Assistant Administrator for the Office of Management. D. Participating Organizations The Department proposes that FSIS be the only agency participating in this project. The Department and FSIS have determined that employees in all program areas in the agency, including headquarters and field employees, will participate, except that all bargaining-unit members will be excluded. Including all bargaining unit members would cause the project to exceed the 5,000 limit on the number of participating employees. Included in the project are all non bargaining-unit employees located in meat and poultry plants throughout the United States (excluding intermittent food inspection personnel (GS-1863) appointed under Schedule A 213.3113(1)(3) and Schedule C employees), 15 District Offices, 3 Field Laboratories, a Technical Service Center in Omaha NE, a Financial Processing Center in Des Moines IA, a Human Resources Field Office in Minneapolis MN, as well as all Headquarters program offices. Each of these units is committed to operating a credible, robust performance appraisal program aligned to the organization's strategic goals and objectives. These organizations have demonstrated this commitment the past two years, as FSIS implemented a comprehensive performance management training program within the agency. E. Participating Employees The demonstration project covers all General Schedule employees (with pay plan codes GS and GM) in non-bargaining unit positions. The excluded bargaining unit positions are nonsupervisory positions in the food technology (GS-1382), food inspection (GS-1863), and consumer safety inspection (GS-1862) series and non-bargaining food inspection (GS-1863) employees appointed under Schedule A 213.3113(1)(3). Also *excluded* from coverage of this project are *all* Senior Executive Service (SES), Senior Level (SL), and Federal Wage System
(WG)employees, and all Schedule C employees. Table 1 shows the number of employees subject to coverage under this project by occupational series and grade. The OPM occupational series will be retained for all covered positions. Table 1.—Covered Employees, by Series and Grade (as of 01/08/08) Series 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total 0018 4 1 5 0080 1 1 0099 1 1 0101 1 1 0110 1 4 5 0199 1 1 0201 10 4 26 41 21 4 106 0203 6 5 17 28 0260 3 1 1 8 4 1 18 0299 1 2 3 0301 1 46 1 1 23 20 19 11 122 0303 3 3 14 9 4 12 1 46 0305 1 5 1 7 0318 4 16 37 8 4 69 0326 1 14 9 24 0335 1 5 1 7 0340 35 28 63 0341 1 1 2 0342 1 1 1 3 0343 1 16 15 34 52 32 14 164 0344 1 4 35 40 0361 1 1 2 0391 1 1 2 0399 1 1 0401 4 1 2 7 0403 6 2 30 35 16 2 91 0404 5 2 1 1 8 11 2 30 0414 1 1 0415 2 1 3 0499 1 1 1 1 4 0501 2 5 4 2 6 6 3 28 0503 2 22 6 5 3 38 0510 8 10 3 21 0544 3 3 0560 1 5 3 3 1 13 0561 1 1 0599 1 1 0601 6 6 1 13 0602 1 1 0690 1 1 2 0696 2 3 14 161 83 2 265 0699 2 2 0701 74 678 184 25 6 967 0799 19 1 20 0896 1 1 2 1035 1 1 3 5 7 1 18 1071 2 2 1084 1 1 1101 3 1 1 5 1102 1 3 3 2 9 1301 2 2 4 1311 1 1 1 6 2 11 1320 2 5 33 20 6 66 1382 8 3 11 1412 1 7 1 1 10 1501 3 2 5 1515 1 1 2 1529 2 1 3 1654 1 1 1 3 1701 1 1 1702 1 1 2 1801 1 1 41 71 30 16 2 162 1810 6 2 1 9 1862 15 115 130 1863 1 4 5 1899 1 1 2 2001 3 2 5 2005 1 1 2210 2 2 34 30 18 3 89 2299 1 1 Total 3 2 10 47 56 44 148 27 238 2 180 1,137 581 236 80 2,791 F. Labor Participation No bargaining-unit employees are covered in this project. G. Project Design The project methodology is to introduce into all FSIS program areas (for covered positions) certain innovations in human resources management, and to evaluate over time the effects of those innovations on the ability of the program areas to manage their human resources. The methodology includes the following steps: 1. *Selection of Innovations:* The Department and FSIS have determined that particular pay banding and performance-based pay progression innovations that are linked to a framework of core competencies should be included in the proposed project. These innovations, and the procedures associated with them, are described below under *Pay Banding Classification and Pay System, Performance Appraisal System, Performance-based Pay Increases and Awards, Developmental Pay Increases, Staffing and Reduction-in-Force* (See Section III, A through F). 2. *Selection of Program Areas:* The Department and FSIS have selected all program areas of the agency for inclusion in the project since the total number of non-bargaining unit employees is approximately 2,900 (part-time, full-time, and intermittent) and falls within the maximum of 5,000 allowed for a demonstration project. 3. *Goals and Objectives:* The specific project objectives are listed under SUPPLEMENTARY INFORMATION and *Executive Summary* and are directly related to the issues identified under Section II.B, *Problems with the Present System.* 4. *Partnership:* The Department and FSIS have limited the covered workforce to non-bargaining unit positions. Therefore, input from labor representatives is not required. However, consistent with the policy of the agency Administrator, FSIS will seek input from two employee associations whose membership overlaps with the covered workforce. 5. *Baseline Evaluation:* To provide a basis of comparison between employee opinions of the current system and their future opinions of the project system, each employee in the covered program areas will be asked to complete an opinion questionnaire comparable to the Federal Human Capital Survey prior to implementation of the project. To establish a baseline for cost analysis, each operating unit will be required to analyze its personnel costs during fiscal years 2005, 2006, and 2007. 6. *Training:* The agency and the program areas will provide training to managers, employees, and human resources staff prior to implementation of the project and will provide additional training to managers on the pay-for-performance system prior to the end of the first performance cycle. (See Section IV, *Training* .) 7. *Implementation:* To ensure a smooth implementation, the agency will emphasize top management support; the development of detailed operating procedures and implementing directives prior to implementation; thorough training of managers, employees and human resources staff; step-by-step implementation planning; adequate backup systems, particularly in automated personnel and payroll systems; and sufficient operating resources. 8. *Program Evaluation:* The Department and FSIS will arrange for periodic evaluation of the project under an OPM-approved evaluation plan. (See Section VIII, *Project Evaluation.* ) The evaluation will be designed to determine whether the innovations are achieving project goals and objectives and are operating within acceptable cost limits. (See Section IX, *Costs.* ) III. Personnel System Changes A. Pay Banding Classification and Pay System 1. Establishment of Career Paths and Pay Bands In coordination with OPM, FSIS may establish, and adjust over time, career paths that group one or more occupational categories together and provide a common pay banding structure ( i.e., a set of work levels and rate ranges) for occupations within a given career path. Initially, FSIS intends to establish four career paths as follows:
(a)*Professional, Scientific, and Administrative [AP]:* Policy, staff, line, supervisory, and managerial positions in science, veterinary medicine, consumer safety, food technology, mathematics, accounting, and other comparable occupations with a positive education requirement. Examples of occupational series are 0403-Microbiology, 0510-Accounting, 0696-Consumer Safety, 0701-Veterinary Medical Science, and 1301-General Physical Science. In addition, this career path will include policy, staff, line, supervisory, and managerial positions in such fields as finance, procurement, human resources management, public information, management and program analysis, compliance investigation, and other two-grade interval occupations that do not maintain a positive education requirement. Examples of these occupational series are 0201-Human Resources Management, 0343-Management and Program Analysis, 1035-Public Affairs.
(b)*Supervisory Inspection [AI]:* Supervisory positions that direct the work of inspectors at an import warehouse, a plant, or in a circuit of plants within a geographic area. These positions are 1862-Supervisory Consumer Safety Inspectors.
(c)*Scientific and Technical Support [AS]:* Line positions, predominantly in agency laboratories, which support professional and scientific operations. Examples include 0404-Biological Science Technician, 1311-Physical Science Technician and similar traditional one-grade interval technician support occupations in agency laboratories.
(d)*Management Support [AO]:* Nonsupervisory and supervisory clerical and assistant positions that support positions not fitting the definition of any other career paths. Examples include 203-Human Resources Assistant, 318-Secretary, 326-Office Automation Assistant, 344-Management Assistant and similar traditional one-grade interval technician and administrative support occupations. Each career path will be subdivided into pay bands. Each pay band will correspond to one or more GS grades. Pay bands provide larger classification targets that can be defined by shorter, simpler and more understandable classification standards. In coordination with OPM, FSIS may establish, and adjust over time, a career path's pay band structure. Initially, the pay bands within each career path and their relationship to GS grades will be as follows: Table 2.—Sample Pay Bands Under PHHRS Career path Pay band 1 Pay band 2 Pay band 3 Pay band 4 Pay band 5 Pay band 6 Administrative, Professional, and Scientific
(AP)GS-1/4 (Student Trainee) GS-5/7 Trainee GS-9/11 Intermediate GS-12/13 * Full Performance GS-14 Expert Pay Band 5S GS-13/14 Supervisor GS-15 Senior Expert Pay Band 6S GS-15 Manager Supervisory Inspection
(AI)GS-8/9 Supervisory Inspectors GS-10/11 Senior Supervisors Scientific & Technical
(AS)GS-1/4
(Aide)GS-5/6/7 Entry GS-8/9 Independent GS-10/11 Expert & Supervisory Management Support
(AO)GS-1/4 Clerical (Entry) GS-5/6/7 Assistant or Clerical Supervisor GS-8/9/10 Senior or Lead Assistant, and Supervisor * Also includes supervisory positions where the band-controlling work is actually personally performed non-supervisory work. The final pay banding architecture will be described in implementing guidance. FSIS will coordinate changes in career paths or pay banding structures with OPM. After coordination with OPM, FSIS will give affected employees advance notice and an opportunity to comment before effecting a change with respect to career paths or pay banding structure. 2. Position Classification Occupational groups will be placed in career paths, pay bands will replace grades, and FSIS pay band standards will replace OPM position classification standards. The General Schedule occupational series will be retained. Each classification standard will describe the threshold of work encompassed by each pay band based on general duties and responsibilities, knowledge, skills, and abilities. FSIS will establish classification standards in consultation with OPM. Positions must meet or exceed the threshold to be classified into a pay band. These bases complement each other at each pay band in a career path and may not be separated in classifying a position. OPM classification standards will not be used directly, but may be used indirectly to establish competency criteria that distinguish pay bands or pay levels within a key career path. 3. Delegation of Classification Authority The agency has delegated classification authority to SES and GS-15 executives and managers since July 2004. The delegated classification authority
(DCA)provisions of this project continue this initiative and increase the number of managers who receive classification authority. Managers must successfully complete DCA training before classification authority may be exercised. The delegation of classification authority will be facilitated by the expansion of an intranet-based Position Description Library, which will include standard descriptions of all key positions in all career paths and pay bands. Line managers will utilize this intranet-based Position Description Library to select or classify most positions. These changes are intended to simplify and speed up the classification process, make the process more serviceable and understandable, improve the effectiveness of classification decision-making and accountability, and facilitate pay for performance. Implementing guidance will describe the modified DCA policies and procedures. 4. Classification Appeals An employee covered by the FSIS Demonstration Project may appeal the occupational series, official title, or pay band of his or her position at any time to the agency, Department or directly to the Office of Personnel Management consistent with procedures currently prescribed under 5 CFR part 511, subpart F. Implementing guidance will describe the classification appeals process. 5. Elimination of Fixed Steps Employees will be converted from existing 15-grade GS position classification and pay system established under 5 U.S.C. chapter 51 and chapter 53, subchapter III, to the new pay banding system. The 10 fixed steps of each GS grade will not apply to employees participating in the demonstration project. The fixed-step system operates primarily to reward longevity. A pay banding pay system is an important element of any effort to make pay more performance-sensitive. No employee's pay will be reduced as a result of becoming covered by the demonstration project. (See section V.A.) However, demonstration project employees will no longer receive longevity-based, within-grade pay increases at prescribed intervals. Instead, they will be granted annual performance increases and bonuses as described in section III.C below. 6. Rate Range The normal minimum and maximum rates of the rate range for each pay band will equal the applicable step 1 rate and step 10 rate, respectively, for the lowest and highest grades, respectively, in the GS that are included in the pay band. The normal minimum and maximum rates of each band will be increased at the time of a general pay increase under 5 U.S.C. 5303 so they equal the new minimum and maximum rates of the grades corresponding to the band. The minimum rate of the pay band is extended 5 percent below the normal minimum for employees with a rating of record below Fully Successful. Such an employee's rate may fall below the normal pay band minimum when that minimum increases as a result of a pay band adjustment, but the employee cannot receive a pay increase because the employee's rating of record is below Fully Successful, as described in section III.C.4. The maximum rate of each pay band is extended 5 percent above the normal maximum for all employees with a rating of record at the highest level (currently called “Outstanding” in FSIS). This feature will help to ensure that the range of available pay rates will be adequate to recognize truly outstanding performance. The upper range extension is reserved for employees with an Outstanding rating. If an employee in the upper range extension is rated below the Outstanding level, special provisions apply, as described in section III.A.11. 7. Locality Pay Locality-based comparability payments under 5 U.S.C. 5304 will be paid on top of the rate of basic pay in the same manner as those payments apply to GS employees (except as otherwise provided in this plan). Staffing supplements may apply as described in section III.A.12. When a locality-based comparability payment established under 5 U.S.C. 5304 is increased, a demonstration project employee whose most recent rating of record is Fully Successful or higher is entitled to the increased locality payment. A demonstration project employee whose most recent rating of record is below Fully Successful is entitled to the increased locality payment, but his or her underlying rate of basic pay will be reduced in a manner that ensures the employee's total rate of pay does not increase. This reduction is necessary to ensure, in an administratively feasible way, that an employee rated less than Fully Successful will not receive a pay increase. It does not constitute a reduction in pay for purposes of applying the adverse action procedures in chapter 75 of title 5, United States Code. (Exception: An employee's rate of basic pay may not be reduced under this paragraph to the extent that the reduction would cause an employee's rate to fall more than 5 percent below the normal range minimum.) A locality rate cap 5 percent higher than the normal EX-IV cap is established to accommodate those Outstanding performers in the 5 percent upper rate range extension. This higher cap will apply only to employees receiving a rate within the upper range extension. If the locality rate for an employee at the normal band maximum is affected by the EX-IV cap, resulting in an “effective locality pay percentage” that is less than the regular locality pay percentage, the locality rate for an employee in the upper rate range extension of the same band will be computed using that same effective locality pay percentage. (For example, if the regular locality pay percentage is 30 percent, but the EX-IV cap causes the amount of locality pay actually received by an employee at the normal band maximum to be 20 percent, that effective locality pay percentage of 20 percent would be used to compute locality pay for an employee in the upper range extension of the same band.) 8. Rate of Basic Pay Upon Initial Appointment Upon appointment to a demonstration project position under Delegated Examining, Direct-Hire Authorization or other authority primarily designed for initial entry into the Federal service ( *e.g.* , Veterans Employment Opportunity Act, 30% Disabled Veteran Appointment), an appointee's rate of basic pay may be set at any rate within the normal pay band range. In exercising this flexibility, FSIS will consider the appointee's qualifications, competing job offers, FSIS's need for the appointee's talents, the appointee's potential contributions to FSIS mission accomplishment, and the rates received by on-board employees. This flexibility will allow FSIS to compete more effectively with private industry for the best talent available. Implementing guidance will provide managers with assistance in setting pay to assure fair and equitable treatment of a diverse workforce. 9. Rate of Basic Pay Upon Promotion Upon promotion to a higher pay band within a career path or to a pay band in another career path with a higher maximum rate, an employee's rate of basic pay will be set at a rate within the higher pay band that provides a pay increase of 8 percent, unless a greater increase is necessary to set pay at the normal range minimum. (See section III.E.3 for definition of “promotion.”) In consultation with OPM, FSIS may establish exceptions to this policy to deal with employees receiving a retained rate, employees who are re-promoted shortly after demotion, employees with exceptional performance warranting a larger increase with higher-management approval, etc. FSIS may adopt, in consultation with OPM, policies providing a promotion-equivalent increase in appropriate circumstances to a Federal employee outside the demonstration project who accepts a position covered by the demonstration project. 10. Rate of Basic Pay in Noncompetitive Lateral Actions Upon non-competitive lateral movement ( *e.g.* , via transfer or reassignment, not conversion of position) to a demonstration project position from another Federal position, an employee's pay rate (including any locality payment or staffing supplement) will be set at an amount that is equal (after any geographic pay conversion) to the employee's existing pay rate (including any locality payment or equivalent basic pay supplement), subject to the applicable normal range maximum. For such an employee moving from a position outside the demonstration project, FSIS may provide an increase in the rate of basic pay immediately after movement to reflect the prorated value of the employee's next scheduled within-grade increase under the former pay system, consistent with the requirements in section V.A. 11. Other Pay Administration Provisions Annual performance-based pay increases described in section III.C.3 will be made to the rate of basic pay. These increases are scheduled to be made on the same date that the annual rate range adjustments normally take effect— *i.e.* , the first day of the first pay period beginning on or after January 1. To be eligible for an annual performance pay increase an employee must have a rating of record of Fully Successful or higher. Annual performance awards described in section III.C.5. provide for lump-sum cash payments recognizing performance and will be made at the same time as the annual performance pay increase. To be eligible for a performance award, an employee must have a rating of record of Fully Successful or higher. Developmental pay increases described in Section III.D may be paid no more than once during any 52-week period, following the mid-year progress review. The grade retention provisions in 5 U.S.C. 5362 and 5 CFR part 536 are not applicable ( *i.e.* , no pay band retention). The pay retention rules in 5 U.S.C. 5363 and 5 CFR part 536 apply to demonstration project employees, subject to the following exceptions:
(1)An employee with a rating of record below Fully Successful may not receive an increase in his or her retained rate under the 50-percent adjustment rule in 5 U.S.C. 5363(b)(2)(B);
(2)The cap on retained rates is equal to the rate for level IV of the Executive Schedule plus 5 percent (instead of the EX-IV cap established in 5 CFR 536.306) in order to accommodate the upper range extension;
(3)An employee in the upper range extension who is rated below Outstanding will be converted to a retained rate before processing any other pay action; and
(4)The range maximum rate used in computing retained rate adjustments under the 50-percent adjustment rule will be the maximum rate of the highest applicable rate range (including any applicable locality payment or staffing supplement) taking into consideration an employee's rating of record. For retained rate employees rated Outstanding, the increase is 50 percent of the dollar change in the applicable adjusted rate for the upper range extension maximum. (Note that an employee rated Outstanding must have a retained rate in excess of the upper range extension maximum adjusted rate, since he or she would otherwise be converted to a rate within that range extension.) For retained rate employees rated below Outstanding, the increase is 50 percent of the dollar change in the applicable adjusted rate for the normal band maximum. If an employee is receiving a retained rate that is less than the applicable adjusted maximum rate (including any applicable locality payment or staffing supplement) for the upper range extension for the employee's band, and if that employee receives a rating of record of Outstanding, the employee's retained rate will be terminated and converted to an equal adjusted rate (base rate in upper range extension plus applicable locality payment or staffing supplement). This conversion must be processed before any other pay adjustment. For a retained rate employee with a rating of record of Outstanding, if a retained rate increase provided at the time of a range adjustment results in the retained rate falling below the applicable adjusted rate for the upper range extension maximum, the employee's retained rate will be terminated, and the employee's pay will be set at the maximum rate of the upper range extension. For a retained rate employee with a rating of record of Fully Successful or Superior, if a retained rate adjustment provided at the time of a range adjustment results in the retained rate falling below the applicable adjusted rate for the normal band maximum, the employee's retained rate will be terminated, and the employee's pay will be set at the normal band maximum rate. For a retained rate employee with a rating of record below Fully Successful, the retained rate is frozen and not subject to adjustment. When such an employee's retained rate falls below the applicable adjusted rate for the normal band maximum, the employee's retained rate will be terminated, and the employee's pay will be set at an adjusted rate equal to the retained rate (i.e., the rate is not set at the range maximum). As required by 5 CFR 536.304(a)(2) and 536.305(a)(2), any general pay adjustment, including a retained rate adjustment as described in the preceding paragraphs, must be processed before any other simultaneous pay action (such as a geographic pay conversion). When applicable, the saved pay rules in 5 U.S.C. 3594 and 5 CFR 359.705 for former SES members continue to apply to demonstration project employees, except that
(1)an employee with a rating of record below Fully Successful may not receive an increase in his or her saved rate under 5 U.S.C. 3594(c)(2); and
(2)the 50-percent adjustment rule must be applied in the same manner as it is applied for a retained rate under 5 U.S.C. 5363, subject to the modifications described in the preceding paragraphs. The rules regarding termination of a saved rate when it falls below the applicable adjusted maximum rate must be parallel to those governing termination of a retained rate under 5 U.S.C. 5363, subject to the modifications described in the preceding paragraphs. FSIS may adopt supplemental pay administration policies governing matters not specifically addressed in this plan, subject to any OPM guidance. In addressing geographic conversions and simultaneous pay actions, such rules must be consistent with 5 CFR 531.205 and 5 CFR 531.206, respectively. 12. Staffing Supplements An employee who is assigned to an occupational series and geographic area covered by an OPM-established special rates schedule, and who meets any other applicable coverage requirements, will be entitled to a staffing supplement if the maximum adjusted rate for a covered position in the GS grades corresponding to the employee's band is a special rate that exceeds the applicable maximum GS locality rate. The staffing supplement is added on top of the rate of basic pay in the same manner as locality pay. An employee will receive the higher of the applicable locality payment or staffing supplement. For employees being converted into the demonstration project, the employee's total pay immediately after conversion will be the same as immediately before, but a portion of the total will be in the form of a staffing supplement. Adverse action and pay retention provisions will not apply to the conversion process as there will be no change in the total salary rate. The staffing supplement is calculated as described below. Upon conversion, the demonstration base rate will be established by dividing the employee's former GS adjusted rate (the higher of special rate or locality rate) by the staffing factor. The staffing factor will be determined by dividing the maximum special rate for the banded grades by the GS base rate corresponding to that special rate (step 10 GS base rate for the same grade as the special rate). The employee's demonstration staffing supplement is derived by multiplying the demonstration base rate by the staffing factor minus one. Therefore, the employee's final demonstration special staffing rate equals the demonstration base rate plus the special staffing supplement; this amount will equal the employee's former GS adjusted rate. Simplified, the formula is this: Staffing factor=(Maximum special rate for banded grades)/(GS base rate corresponding to that special rate) Demonstration base rate=(Former GS adjusted rate [special or locality rate])/ (Staffing factor) Staffing supplement=demonstration base rate × (staffing factor−1) Salary upon conversion=demonstration base rate + staffing supplement [sum will equal existing rate] If a special rate employee is converted to a band where the maximum GS adjusted rate for the banded grades is a locality rate, when the employee is converted into the demonstration project, the demonstration base rate is derived by dividing the employee's former special rate by the applicable locality pay factor (for example, in the Washington-Baltimore area, the locality pay factor is 1.2089 in 2008). The employee's demonstration locality-adjusted rate will equal the employee's former GS adjusted rate. Any GS or special rate schedule adjustment will require recomputation of the staffing supplement. Employees receiving a staffing supplement remain entitled to an underlying locality rate, which may over time supersede the need for a staffing supplement. If OPM discontinues or decreases a special rate schedule, pay retention provisions will be applied, as appropriate. Upon geographic movement, an employee who receives the special staffing supplement will have his or her entitlement to a staffing supplement redetermined; any resulting reduction in the supplement will not be considered an adverse action or a basis for pay retention. When a staffing supplement is increased, a demonstration project employee whose rating of record is below Fully Successful is entitled to the increased supplement, but his or her underlying rate of basic pay will be reduced in a manner that ensures the employee's total rate of pay does not increase. Such a reduction does not constitute a reduction in pay for purposes of applying the adverse action procedures in chapter 75 of title 5, United States Code. ( *Exception:* An employee's rate of basic pay may not be reduced under this paragraph to the extent that the reduction would cause an employee's rate to fall more than 5 percent below the normal range minimum.) Established salary including the staffing supplement will be considered basic pay for the same purposes as a special rate under 5 CFR 530.308— *e.g.* , for purposes of retirement, life insurance, premium pay, severance pay, and advances in pay. It will also be used to compute workers' compensation payments and lump-sum payments for accrued and accumulated annual leave. Adjusted rates that include a staffing supplement are subject to an Executive Schedule Level IV (EX-IV) cap, except that an adjusted rate cap 5 percent higher than the EX-IV rate is established exclusively for Outstanding-rated employees in the upper range extension. If the adjusted rate for an employee at the normal band maximum is affected by the EX-IV cap, resulting in an “effective staffing supplement percentage” that is less than the regular staffing supplement percentage, the adjusted rate for an employee in the upper rate range extension of the same band and in the same staffing supplement category will be computed using that same effective staffing supplement percentage. (For example, if the regular staffing supplement percentage is 35 percent, but the EX-IV cap causes the amount of the staffing supplement actually received by an employee at the normal band maximum to be 20 percent, that effective staffing supplement percentage of 20 percent would be used to compute the staffing supplement for an employee in the upper range extension of the same band.) OPM may approve staffing supplements for categories of employees within the demonstration project who are not in approved special rate categories for GS employees, consistent with the provisions in 5 U.S.C. 5305(a) and (b). 13. Status as GS Employees Notwithstanding the waiver of laws governing the GS classification and pay system, demonstration project employees will be considered to be GS employees in applying other laws, regulations, and policies, except as otherwise provided in this plan. For example, demonstration project employees will remain eligible for locality pay under 5 U.S.C. 5304 (subject to exceptions described in this plan), hazardous duty differentials under 5 U.S.C. 5545(d), and recruitment, relocation, and retention incentives under 5 U.S.C. 5753-5754. Demonstration project employees will be covered by the regulations in 5 CFR part 300, subpart F, except that “grade” will be replaced with “pay band.” (See section III.E.3. for a 52-week time-in-band requirement.) However, project employees will not be covered by the supervisory differential provision in 5 U.S.C. 5755. A demonstration project employee who converts from the project position to a GS position without a break in service will be considered a GS employee for the purpose of applying the GS promotion rule under 5 U.S.C. 5334(b). (See section V.B.) B. Performance Appraisal System FSIS will use its current performance management program under the Department of Agriculture appraisal system that has been approved by OPM, consistent with chapter 43 of title 5, United States Code. Throughout the duration of the demonstration project, the effectiveness of performance management within the project will be monitored by examining metrics and assessments that will be included in the demonstration project evaluation plan. 1. Program Requirements The FSIS performance appraisal program requires written performance plans for each covered employee containing the employee's performance elements and standards. The performance plan links the performance elements and standards for individual employees to the organization's strategic goals and objectives. Ongoing feedback and dialogue between employees and their supervisors regarding performance is required. In addition, the program provides for, at a minimum, one midyear progress review. The FSIS appraisal program, including its performance levels and standards, provides for making meaningful distinctions in performance. The program currently uses a five-level summary rating pattern to summarize performance and three levels to appraise performance at the element level. Its summary level pattern under 5 CFR 430.208(d) uses Pattern H with Levels 1, 2, 3, 4, and 5, which FSIS has labeled Unacceptable, Marginal, Fully Successful, Superior, and Outstanding, respectively. Employees must be covered by their performance plan for at least 90 days before they can be assigned a rating of record. Supervisors and managers apply the appraisal program in a way that makes appropriate differentiations in performance. These differentiations reflect overall organizational performance. Employees receive a written performance appraisal (i.e., a rating of record) annually. Forced distributions of ratings are prohibited. Each annual appraisal period will begin on October 1 and end on the following September 30. Performance appraisals will be completed in a timely manner to support pay decisions in accordance with section III.C. Additional guidance on the performance appraisal program is provided in current FSIS directives. Performance appraisal is an evolutionary process, and changes may be made during the course of the demonstration project based on findings from our ongoing evaluations and reviews. Any changes will be communicated to affected employees, and they will be given a chance to comment before FSIS implements the changes. 2. Supervisory Accountability Supervisors are responsible for providing appropriate consequences for employee performance by addressing poor performance and recognizing exceptional performance. The performance plans for supervisors and managers include the degree to which supervisors and managers plan, assess, monitor, develop, correct, rate, and reward subordinate employees' performance. It is recognized that specific training must be provided to prepare supervisors and managers to exercise these responsibilities. FSIS understands that this demonstration project will heighten the need for continuing supervisory training to support the accurate and realistic appraisal of performance. 3. Reconsideration of Ratings To support fairness and transparency for the program and its consequences, employees have an opportunity to request reconsideration of a rating of record by a management official other than the rating official. Such reconsiderations must be initiated no more than 15 days after the official rating of record is assigned, consistent with the applicable administrative grievance policy. If the reconsideration of the appraisal results in a different rating of record, the revised rating of record will become the basis for the employee's pay increase(s) in accordance with section III.C. If the adjustment occurs after all pay deliberations have been finalized, it does not result in a recalculation of other employees' pay increases. If, after an opportunity to improve, an employee's performance is still not satisfactory, the Rating Official will give the employee a rating of Level 1, Unacceptable, and must take action to reassign or remove the employee, or place the employee in a lower pay band, in accordance with performance action provisions in law and regulation. C. Performance-based Pay Increases and Awards 1. Performance Shares FSIS will establish rating/share patterns for each pay pool—that is, the relationship between ratings of record and numbers of shares. A share mechanism will be used
(1)to ensure that employees with higher ratings of record receive greater pay increases than employees with relatively lower ratings, and
(2)to control costs without resorting to a forced distribution of ratings, which is prohibited. FSIS may adjust rating/share patterns over time after coordination with OPM, and after giving affected employees advance notice. A change in the rating/share pattern may be applied in computing performance increases based on an appraisal period only if it takes effect at least 120 days before the end of that appraisal period. Each employee will be assigned a certain number of shares, based on his or her rating or record. Initially, the number of shares for each rating level will be as follows: 9 shares are assigned to the Outstanding rating; 6 shares to the Superior rating; and 4 shares to the Fully Successful rating. No shares may be assigned to any rating of record below Fully Successful, since no pay increase is payable to employees with such a rating of record. After the ratings of record and shares are assigned to employees the value of a single share can be calculated. The value of each performance share will be expressed as a percentage of the rate of basic pay. The agency will provide training to all project participants to assure fair, accurate performance ratings and equitable performance payouts. 2. Performance Pay Pools Funds that otherwise would be spent on the annual GS pay adjustment, within-grade increases (WGI's), and quality step increases (QSI's) for demonstration project employees will instead be placed into a pay pool, which will be used to fund annual performance increases. Unlike GS employees, participating employees whose most recent rating of record is below Fully Successful will not receive any increase in their rate of basic pay. Participating programs will establish pay pools for allocating performance-based pay increases. FSIS will determine which participating employees are covered by any pay pool and determine the dollar value of each pay pool. In setting the value of the pay pool, FSIS will initially allocate an amount for performance-based pay increases equal to the estimated value of the WGI's, QSI's and the annual GS pay adjustments that otherwise would have been paid to participating employees. In computing the estimated value of WGI's, and QSI's, FSIS may use Governmentwide or agency historical averages. 3. Performance-based Pay Increases FSIS will determine the value of one performance share, expressed as a percentage of the employee's rate of basic pay, based on the value of the pay pool and the distribution of shares among pay pool employees. An individual employee's performance payout is determined by multiplying the determined percentage value of a performance share by the number of shares assigned to the employee. On the first day of the first pay period beginning on or after January 1 of each year, this amount will be paid as an increase in the employee's rate of basic pay, but only to the extent that it does not cause the employee's rate to exceed the applicable maximum of the employee's rate range. Notwithstanding the preceding sentence, employees in the upper range extension rated below the highest rating level are subject to special rules as described in sections III.A.6 and III.A.11. Any portion of an employee's performance pay increase amount that cannot be delivered as a basic pay increase will be paid out as a lump-sum performance bonus (with no charge to the pay pool). Such a lump-sum payment is not basic pay for any purpose and is not a cash award under chapter 45 of title 5, United States Code. An employee with a rating of record of Fully Successful or higher may not receive a performance payout that is less than the percentage value of any simultaneous rate range adjustment, except for
(1)an employee receiving a retained rate and
(2)an employee in the upper range extension with a rating of record below Outstanding (Level 5) who is converted to a retained rate (as provided in section III.A.11.). This guaranteed amount will be used in place of any lower performance payout resulting from the share methodology. Any additional costs of using the guaranteed amount will be funded outside the pay pool. Otherwise, the guaranteed amount is applied in the same manner as the regular performance payout. An employee who does not have a rating of record for the appraisal period most recently completed will be treated the same as employees in the same pay pool who received the modal rating for that period, subject to FSIS proration policies. FSIS may establish policies on prorating the performance-based pay increases and/or lump-sum payments for an employee who, during the period between annual pay adjustments, was
(1)hired or promoted,
(2)in leave-without-pay status,
(3)on a part-time work schedule, or
(4)in other circumstances that make proration appropriate. Such proration policies will provide each eligible employee with the full percentage adjustment used to adjust base rate ranges (if any) and will prorate any additional amount of performance pay increase that would be applicable to the employee but for the proration requirement. If any employee's rating of record that is the basis for a performance payout is retroactively revised (after the regular effective date of performance payouts) through a reconsideration or grievance process, the employee's performance payout must be retroactively recomputed using the share value as originally determined. Any such retroactive corrections are not funded out of the pay pool and do not affect the performance payouts provided to other employees in the pay pool. In setting the size of a future pay pool, management will take into account past and projected corrections. *Special provision for employees receiving a retained rate:* An employee receiving a retained rate under 5 U.S.C. 5363 or 5 U.S.C. 3594 is not eligible for a basic pay increase except in conjunction with
(1)a rate range adjustment as described in section III.A.11 or
(2)a geographic conversion under 5 CFR.359.705(e) or 536.303(b), as applicable. At the discretion of an authorized agency official, a retained rate employee may receive the same lump-sum payment payable to an employee in the same pay pool who is at the applicable range maximum and who has the same rating of record and number of shares. *Special provisions for employees returning to duty after a period of service in the uniformed services or in receipt of workers' compensation benefits:* Special pay-setting provisions apply to employees who do not have a rating of record to support a pay adjustment but who are returning to duty status after a period of leave-without-pay or separation during which the employee
(1)was serving in the uniformed services (as defined in 38 U.S.C. 4303 and 5 CFR 353.102) with legal restoration rights (e.g., 38 U.S.C. 4316), or
(2)was receiving workers' compensation benefits under 5 U.S.C. chapter 81, subchapter I. In these cases, FSIS will determine the employee's prospective rate of basic pay upon return to duty by making performance-based pay increases for the intervening period based on the modal rating of record for employees in the same pay pool. The performance pay increases during the intervening period may not be prorated based on periods covered by this provision. In addition, a performance pay increase that is effective after the employee's return to duty may not be prorated based on periods covered by this provision. A lump-sum payment for a period including actual service performed after the employee's return to duty must be prorated (based on service covered by this provision) under the same agency proration policies that apply generally to periods of leave without pay. 4. Employees Who Cannot Receive a Performance Pay Increase Employees with a rating of record below Fully Successful are prohibited from receiving a performance payout. When an employee does not receive a performance pay increase because of performance below Fully Successful, his or her pay rate may fall below the normal minimum rate of the pay band, since that range minimum may be increasing. However, in no case may an employee's rate of basic pay be set more than 5 percent below the normal range minimum. If FSIS later chooses to give such an employee a new rating of record of Fully Successful or higher before the end of the next appraisal period, the employee is entitled to an increase effective on the first day of the first pay period beginning on or after the date the new rating of record is final. The increase must be the same dollar amount as the increase the employee would have received if he or she had been rated Fully Successful at the time the increase was initially denied. Each employee who does not receive an increase in basic pay because his or her performance is less than Fully Successful will be entitled to be notified promptly in writing of that fact. At the same time, the employee must be informed in writing of the right to request that the agency reconsider its determination, under the same procedures prescribed by OPM regarding the determination not to provide a within-grade increase under 5 U.S.C. 5335(c). The Merit Systems Protection Board will process any appeals under this section in the same manner that it processes appeals under 5 U.S.C. 5335(c). See section III.A.7 and section III.A.12 regarding the recomputation of an employee's rate of basic pay to prevent a pay increase resulting from an increase in the applicable locality payment or staffing supplement. 5. Performance Awards Performance awards may be granted to any employee with a rating of record at Level 3 (Fully Successful) or higher and are given at the end of the performance year in conjunction with decisions on performance pay increases. FSIS will adopt supplemental award administration policies not specifically covered under the plan to improve implementation of existing authorities prescribed under chapter 45, title 5, United States Code. These performance awards are separate from performance pay increases. D. Developmental Pay Increases Employees in developmental positions (i.e., positions with promotion potential to a higher pay band) may receive additional pay increases (in addition to the annual performance pay increase) as they acquire the competencies, skills and knowledge necessary to advance to the full performance level of their position. An employee in a developmental position may be awarded a pay increase within his or her pay band that ranges up to 7 percent of basic pay to recognize the faster progression that can occur in a developmental position. Employees must be performing at the Fully Successful level or higher to be eligible for a developmental pay increase. Developmental pay increases may be paid no more than once during a 52-week period and following the mid-year progress review in accordance with implementing guidance. Developmental pay increases must be approved by the program's Assistant Administrator or his or her designee to ensure equity and accountability. The funds previously used for career promotions for the GS grade levels will initially be used to fund the developmental pay increases in the first fiscal year of the program's implementation. In all future fiscal years, FSIS will allocate a fixed amount of funds within the annual appropriation, and these funds will go into a pool for distribution to each FSIS program area to cover developmental pay increases. E. Staffing 1. Minimum Qualification Requirements *Application of the OPM Operating Manual:* Qualification Standards for General Schedule Positions is simplified by allowing a candidate to qualify for a specific pay band if the candidate meets (or exceeds) the requirements for the lowest grade included in that specific pay band. For example, a candidate for a 403-Microbiologist position assigned to Pay Band 2 (GS-5 through GS-7) need only meet the qualification requirements for a GS-0403 Microbiologist position at the GS-5 level. For FSIS demonstration project employees and employees of other Federal agencies who are in sufficiently similar pay banding systems (as described in FSIS implementing policies), the common OPM requirement of 1 year of experience “at the next lower grade in the normal line of progression for the occupation” is changed to “at the next lower pay band in the normal line of progression for the occupation.” 2. Flexible Pay Setting for New Hires Upon appointment to a demonstration project position under Delegated Examining, Direct-Hire Authorization or other authority primarily designed for initial entry into the Federal service (e.g., Veterans Employment Opportunity Act, 30% Disabled Veteran Appointment), an appointee's pay rate may be set at any rate within the normal pay band range. In exercising this flexibility, FSIS will consider the appointee's qualifications, competing job offers, the agency's need for the appointee's talents, the availability of other candidates, the appointee's potential contributions to FSIS mission accomplishment, and the rates received by on-board employees. This flexibility will allow FSIS to compete more effectively with private industry for the best talent available. Implementing guidance will provide managers with assistance in setting pay to assure fair and equitable treatment of a diverse workforce. 3. Promotions A promotion is a change to
(1)a higher pay band in the same career path or
(2)a pay band in another career path with a higher maximum rate of basic pay. To be eligible for promotion, an employee must have a current performance rating of Fully Successful or higher. The time-in-band requirement for promotion eligibility is 52 weeks, with one exception: An employee may be promoted from Pay Band 1 to Pay Band 2 in the Management Support Career Path or in the Scientific and Technical Support Career Path without time restriction. (See section III.A.9. for pay setting upon promotion.) When employees are competitively selected for a position with promotion potential, and are subsequently moved to a higher pay band in their career path, the action is processed as a non-competitive pay band promotion until the full performance level of the position is reached. F. Reduction in Force If, during the life of the demonstration project, FSIS enters into a reduction in force (RIF), the RIF will be conducted in accordance with 5 U.S.C. 1302 and 3502 and 5 CFR part 351, except as follows:
(a)Each of the career paths in each FSIS local commuting area will constitute separate competitive areas (i.e., separate from the other career paths, and separate from the competitive areas of other FSIS employees);
(b)FSIS will establish competitive levels consisting of all positions in a competitive area which are in the same pay band and classification series, and which are similar enough in duties, qualification requirements, pay schedules, and working conditions so that the incumbent of one position may be reassigned to any of the other positions in the level without undue interruption. Each demonstration project competitive level will become a Retention List for purposes of competition when employees are released from their competitive levels, displaced by higher-standing employees, or placed during the exercise of assignment rights.
(c)Assignment rights will be modified by substituting “one pay band” for “three grades” and “two pay bands” for “five grades.”
(d)FSIS will use retention standing when it chooses to offer vacant positions within the meaning of 5 CFR 351.704. Prior to conducting a RIF, FSIS will issue and implement a policy in accordance with 5 CFR part 330, subpart B, except that the establishment and operation of a reemployment priority list
(RPL)will be designed to assist current FSIS competitive service demonstration project employees who will be separated as a result of a RIF and, subsequently, former FSIS competitive service demonstration project employees who have been separated as a result of a RIF, or who have fully recovered from a compensable injury after more than 1 year, in their efforts to be reemployed at FSIS, by affording them reemployment priority over certain outside job applicants for FSIS competitive service demonstration project vacancies. FSIS will develop and adopt supplemental RIF administration procedures to augment the RIF policies stipulated by this plan. IV. Training Training will be provided to all participating employees, supervisors, and managers before the project is launched and throughout the life of the project. It is important that employees perceive the performance management program as fair and transparent; therefore, supervisors and managers will be trained extensively in setting and communicating performance expectations; monitoring performance and providing timely feedback; developing employee performance and addressing poor performance; rating employees' performance based on expectations; and involving employees in the development and implementation of the performance appraisal program. Supervisors and managers will be held accountable for the effective management of the performance of employees they supervise through performance expectations set for and appraisals made of their own performance in this regard. All employees will be trained in the performance appraisal process and the pay adjustment mechanism. Various types of training are being considered, including video conferencing, on-line tutorials, simulation, and train-the-trainer concepts. V. Conversion A. Conversion to the Demonstration Project 1. Only General Schedule (pay plan codes GS and GM) employees who are not in a bargaining unit will be converted to this project (excludes non-bargaining unit food inspection (GS-1863) employees appointed under Schedule A 213.3113(1)(3) and Schedule C employees). Employees whose positions become covered by the demonstration project will convert into the career path and pay band covering the occupational series and grade of their position of record. Employees will convert to the demonstration project with no change in their total rate of pay (including basic pay, plus any applicable locality payment, special rate supplement or staffing supplement). Special conversion rules apply to special rate employees as described in section III.A.12, Staffing Supplements. Any simultaneous pay action that is scheduled to take effect under the GS pay system on the date of conversion must be processed before processing the conversion to the pay banding system. FSIS implementing policies will provide procedures for converting an employee on grade retention under 5 U.S.C. 5362 or receiving a retained rate under 5 U.S.C. 5363 or a saved rate under 5 U.S.C. 3594 to the demonstration project. 2. Immediately after conversion, eligible employees will receive an increase in basic pay reflecting the prorated value of the next scheduled within-grade increase (WGI). The prorated value is determined by calculating the portion of the time in step employees have completed towards the waiting period for their next WGI. This WGI “buy-in” adjustment will not be paid to
(1)employees who are at the step 10 rate for their grade immediately before conversion to the demonstration project,
(2)employees who are receiving a retained rate of pay under 5 U.S.C. 5363 or saved rate under 5 U.S.C. 3594 immediately before conversion to the demonstration project, or
(3)employees whose rating of record is below Fully Successful. 3. Adverse action provisions under 5 U.S.C. chapter 75, subchapter II, do not apply to reductions in pay upon conversion into the demonstration project as long as the employee's total rate of pay (including basic pay, plus any applicable locality payment, special rate supplement) is not reduced upon conversion. 4. The first performance-based pay increase under the project's pay adjustment mechanism will be effective on the first day of the first pay period beginning on or after January 1, 2010. 5. For employees who enter the demonstration project by lateral reassignment or transfer (i.e., not by conversion of position), FSIS may apply parallel pay conversion rules, including rules for providing a prorated adjustment reflecting time accrued toward a GS within-grade increase or similar within-range adjustment under another pay system. If conversion into the demonstration project is accompanied by a geographic move, the employee's pay entitlements under the former pay system in the new geographic area must be determined before performing the pay conversion. B. Conversion to the General Schedule FSIS implementing guidance will provide procedures for converting an employee's pay band and pay rate to a GS-equivalent grade and rate of pay if the employee moves out of the demonstration project to a GS position. The converted GS-equivalent grade and rate of pay will be determined before any geographic move, promotion, or other simultaneous action that occurs simultaneously with conversion back to the GS system. The new employing organization must use the converted GS-equivalent grade and rate of pay in applying various pay administration rules that govern how pay is set in the GS position (e.g., rules for promotion and highest previous rate under 5 CFR part 531, subpart B, and pay retention under 5 CFR part 536). The converted GS rate will not be adjusted to match a step rate before applying those rules. The converted GS grade and rate of pay are deemed to have been in effect at the time the employee left the demonstration project pay banding system. The rules for determining the converted GS grade for pay administration purposes do not apply to the determination of an employee's GS-equivalent grade for other purposes, such as reduction-in-force or adverse action. FSIS will perform the computations for employees who remain within FSIS and USDA. FSIS may perform the computations, as a courtesy, for employees who move to other Federal agencies. At a minimum, FSIS will provide a copy of the conversion procedures to gaining Federal agencies for their use. If an employee moves out of the demonstration project to a non-GS system, the employee's pay will be set under the pay-setting rules governing that system. VI. Project Modification Demonstration projects require modification from time to time as experience is gained, results are analyzed, and conclusions are reached on how the system is working. FSIS may modify and adjust features and elements of this project plan over time. FSIS will coordinate such modifications with OPM and gain its approval prior to implementing the modification. Depending on the nature and extent of the modification, OPM may require that the modification be published as a notice in the **Federal Register** . VII. Project Duration The initial implementation period for the demonstration project will be 5 years. However, with OPM's concurrence, the project may be extended for additional testing or terminated before the expiration of the 5-year period. VIII. Project Evaluation Chapter 47 of title 5, United States Code, requires an evaluation of the results of the demonstration project. FSIS, in coordination with USDA and OPM, will develop a plan to evaluate the demonstration project to determine the extent to which the pay increases paid to participating employees reflect meaningful distinctions among their levels of performance and the extent to which the project is achieving its other stated goals. Workforce data will be analyzed to make this assessment. Key features of successful performance-based pay systems, including leadership commitment, communication, stakeholder involvement, training, planning, mission alignment, and the rewarding of performance, will be assessed to determine the effectiveness of the demonstration project and ensure compliance with stated project goals. The evaluation will address the extent to which the project has incorporated the elements required by section 1126 of Public Law 108-136 (5 U.S.C. 4701 note). In addition, the project will be examined during each phase of the evaluation to assess that costs are being managed effectively. Moreover, cost discipline will be examined during each phase of the evaluation to ensure spending remains within acceptable limits. Finally, employee feedback will be sought through surveys, interviews, and focus groups to assess employee perceptions of the fairness and integrity of the performance appraisal and pay adjustment processes. IX. Costs A. Buy-in Costs Upon conversion to the demonstration system many employees will receive an increase in basic pay for the prorated time in grade towards their next within-grade increase. However, these costs will be offset by the elimination of within-grade step increases that otherwise would have occurred. B. Recurring Costs All funding will be provided through the organization's budget. Each project program area will maintain compensation during the project at the level it would have reached under the current system. No additional funding will be requested specifically for this project; all costs will be charged to available funds through existing appropriations. To ensure appropriate carryover of costs from pre-project to project years, a base assessment will be made using 3 base years: Fiscal Years 2005, 2006, and 2007. For example, data associated with average annual salary, pay increases and promotions, turnover, and other relevant data will be collected to ensure a thorough analysis of costs which are impacted by pay banding. Budget discipline will be required and achieved by imposing specific funding principles. Finally, both longitudinal and site comparisons will be used to ensure that spending remains within acceptable limits. X. Waiver of Laws and Regulations Required A. Title 5, United States Code *Chapter 35, section 3594:* Saved pay for former members of the Senior Executive Service (only to the extent necessary to
(1)bar employees with a rating of record lower than Fully Successful from receiving saved rate increases under 5 U.S.C. 3594(c)(2);
(2)provide a saved rate that is less than the maximum rate (including any locality adjustment or staffing supplement) of the upper range extension for an employee who receives a rating of record of Outstanding will be terminated and converted to an equal adjusted rate;
(3)provide the range maximum rate used to compute saved rate adjustments is the normal range maximum rate (including any locality adjustment or staffing supplement) for employees with a rating of record below Outstanding and the upper range maximum rate (including any locality adjustment or staffing supplement) for an employees with an Outstanding rating of record; and
(4)provide when a frozen saved rate for an employee with a rating of record below Fully Successful falls below the applicable adjusted rate for the normal band maximum, the saved rate will be terminated and the employee's pay will be set at an adjusted rate equal to the saved rate). *Chapter 51:* Classification (except that
(1)sections 5111 and 5112 are retained with “grade” replaced by “pay bands” and
(2)for the purpose of applying any other laws, regulations, or policies that refer to GS employees or to chapter 51 of title 5, United States Code, the modified classification system established under this plan must be considered to be a GS classification system under chapter 51; this includes, but is not limited to, the reference to the General Schedule in section 5545(d) (relating to hazard pay). *Chapter 53, section 5302(1)(A),
(8)and (9):* Definitions (only to the extent necessary to provide that employees under the demonstration project are not considered to be GS employees for the purposes of annual adjustments under section 5303 or similar provision of law governing annual adjustments for employees covered by section 5303). Chapter 53, section 5303: Annual adjustments to pay schedules Chapter 53, section 5304(g)(1): Locality-based comparability payments (only to the extent necessary to
(1)provide a locality rate may not exceed the rate for EX-IV plus 5 percent for employees in the upper range extension) and
(2)apply an “effective” locality pay percentage for employees in the upper range extension under circumstances described in the plan). *Chapter 53, section 5305:* Special pay authority. *Chapter 53, subchapter III:* General Schedule pay rates (except that, for purposes of applying any other laws, regulations, or policies that refer to GS employees or to subchapter III of chapter 53 of title 5, United States Code, the modified pay system established under this plan must be considered to be a GS pay system established under such subchapter III, except as otherwise provided in this plan; this includes, but is not limited to, references to the General Schedule in section 5304 (relating to locality pay), section 5545(d) (relating to hazard pay), and sections 5753-5754 (dealing with recruitment, relocation, and retention incentives). *Chapter 53, section 5362:* Grade retention. *Chapter 53, section 5363:* Pay retention (only to the extent necessary to
(1)replace “grade” with “pay band;”
(2)bar employees with a rating of record lower than Fully Successful from receiving retained rate increases under 5 U.S.C. 5363(b)(2)(B);
(3)provide that pay retention provisions do not apply to conversions into the demonstration project from the General Schedule or other pay system, as long as the employee's total pay rate is not reduced;
(4)provide the pay (including any locality adjustment or staffing supplement) of an employee in the upper range extension who is rated below Outstanding will be converted to a retained rate before processing any other actions;
(5)provide a retained rate that is less than the maximum rate (including any locality adjustment or staffing supplement) of the upper range extension for an employee who receives a rating of record of Outstanding will be terminated and converted to an equal adjusted rate;
(6)provide the range maximum rate used to compute retained rate adjustments is the normal range maximum rate (including any locality adjustment or staffing supplement) for employees with a rating of record below Outstanding and the upper range maximum rate (including any locality adjustment or staffing supplement) for an employees with an Outstanding rating of record; and
(7)provide when a retained rate for an employee with a rating of record below Fully Successful falls below the applicable adjusted rate for the normal band maximum, the retained rate will be terminated and the employee's pay will be set at an adjusted rate equal to the retained rate). *Chapter 55, section 5542(a):* Overtime rates (only to the extent necessary to provide that the GS-10 minimum special rate (if any) for the special rate category that would otherwise apply to an employee (but for the existence of the demonstration project) is deemed to be the “applicable special rate of pay” in determining the overtime hourly rate cap). *Chapter 55, section 5547:* Limitation on premium pay (only to the extent necessary to provide that an applicable staffing supplement is added to the GS-15, step 10, rate in lieu of the applicable locality payment). *Chapter 59, section 5941:* Cost-of-living allowances and post differentials (only to the extent necessary to provide that employees in the demonstration project pay system are eligible for coverage under section 5941). *Chapter 75, section 7512(3):* Adverse actions (only to the extent necessary to replace “grade” with “pay band”). *Chapter 75, section 7512(4):* Adverse actions (only to the extent necessary to provide that adverse action provisions do not apply to
(1)conversions into the demonstration project from the General Schedule or other pay system, as long as the employee's total rate of pay is not reduced and
(2)reductions in rates of basic pay to offset a locality pay or staffing supplement increase as a result of receiving a rating of record below Fully Successful). Note: If any of the provisions of title 5, United States Code, listed above are amended during the period this demonstration project is in effect, FSIS may choose to terminate the waiver of one or more such provisions with respect to employees participating in the project, without formally modifying the project itself. FSIS must notify OPM when any such waiver is terminated. B. Title 5, Code of Federal Regulations *Part 300, subpart F:* Time-in-grade restrictions (only to the extent necessary to replace “grade” with “pay band”). *Part 330, subpart B, section 330.201:* Establishment and maintenance of Reemployment Priority List
(RPL)(only to the extent necessary to establish and maintain a reemployment priority list exclusively for FSIS competitive service demonstration project employees). *Part 351, subpart D, section 351.402:* Competitive area (only to the extent necessary to permit the use of career paths in conjunction with organizational units and geographic locations when establishing competitive areas). *Part 351, subpart D, section 351.403:* Competitive level (only to the extent necessary to substitute “same pay band” for “same grade”). *Part 351, subpart G, section 351.701:* Assignment involving displacement (only to the extent necessary to substitute “one pay band” for “three grades” and “two pay bands” for “five grades”). *Part 359, subpart G, section 359.705:* Pay (only to the extent necessary to
(1)bar employees with a rating of record lower than Fully Successful from receiving a saved rate increase under 5 CFR 359.705(d)(1));
(2)provide a saved rate that is less than the maximum rate (including any locality adjustment or staffing supplement) of the upper range extension for an employee who receives a rating of record of Outstanding will be terminated and converted to an equal adjusted rate;
(3)provide the range maximum rate used to compute saved rate adjustments is the normal range maximum rate (including any locality adjustment or staffing supplement) for employees with a rating of record below Outstanding and the upper range maximum rate (including any locality adjustment or staffing supplement) for an employees with an Outstanding rating of record; and
(4)provide when a saved rate for an employee with a rating of record below Fully Successful falls below the applicable adjusted rate for the normal band maximum, the saved rate will be terminated and the employee's pay will be set at an adjusted rate equal to the saved rate). *Part 430, subpart B, section 430.203:* Definitions (only to the extent necessary to allow an additional rating of record to support a pay decision under section III.C.3 or 4 of this project plan). *Part 511, subpart B:* Coverage of the General Schedule. *Part 511, section 511.607:* Nonappealable issues. *Part 530, subpart C:* Special Rate Schedules for Recruitment and Retention. *Part 531, subpart B:* Determining Rate of Basic Pay. *Part 531, subpart D:* Within-Grade Increases. *Part 531, subpart E:* Quality Step Increases. *Part 531, section 531.604:* Determining an employee's locality rate (only to the extent necessary to apply an “effective” locality pay percentage for employees in the upper range extension under circumstances described in the plan). *Part 531, section 531.606:* Maximum limits on locality rates (only to the extent necessary to provide a locality rate may not exceed the rate for EX-IV plus 5 percent for employees in the upper range extension). *Part 536, subpart B:* Grade Retention. *Part 536, subpart C:* Pay Retention (only to the exte nt necessary to
(1)replace “grade” with “pay band;”
(2)bar employees with a rating of record lower than Fully Successful from receiving retained rate increases under 5 CFR 536.305;
(3)provide that pay retention provisions do not apply to conversions into the demonstration project from the General Schedule or other pay system, as long as the employee's total pay rate is not reduced);
(4)provide that a retained rate may not exceed the rate for EX-IV plus 5 percent;
(5)provide the pay (including any locality adjustment or staffing supplement) of an employee in the upper range extension who is rated below Outstanding will be converted to a retained rate before processing any other actions;
(6)provide a retained rate that is less than the maximum rate (including any locality adjustment or staffing supplement) of the upper range extension for an employee who receives a rating of record of Outstanding will be terminated and converted to an equal adjusted rate;
(7)provide the range maximum rate used to compute retained rate adjustments is the normal range maximum rate (including any locality adjustment or staffing supplement) for employees with a rating of record below Outstanding and the upper range maximum rate (including any locality adjustment or staffing supplement) for an employees with an Outstanding rating of record; and
(8)provide when a retained rate for an employee with a rating of record below Fully Successful falls below the applicable adjusted rate for the normal band maximum, the retained rate will be terminated and the employee's pay will be set at an adjusted rate equal to the retained rate). *Part 550, sections 550.106-107:* Biweekly and annual maximum earnings limitation (only to the extent necessary to provide that an applicable staffing supplement is added to the GS-15, step 10, rate in lieu of the applicable locality payment). *Part 550, section 550.113(a):* Computation of overtime pay (only to the extent necessary to provide that the GS-10 minimum special rate (if any) for the special rate category that would otherwise apply to an employee (but for the existence of the demonstration project) is deemed to be the “applicable special rate of pay” in determining the overtime hourly rate cap). *Part 550, section 550.703:* Definitions (to the extent necessary to modify paragraph (c)(4) of the definition of “reasonable offer” by replacing “two grade or pay levels” with “one pay band level” and “grade or pay level” with “pay band level”). *Part 591, subpart B, section 591.204:* Cost-of-living allowances and post differentials (only to the extent necessary to provide that the demonstration project pay system is a qualifying pay plan). *Part 752, section 752.401(a)(3):* Adverse actions (only to the extent necessary to replace “grade” with “pay band”). *Part 752, section 752.401(a)(4):* Adverse actions (only to the extent necessary to provide that adverse action provisions do not apply to
(1)conversions into the demonstration project from the General Schedule or other pay system, as long as the employee's total rate of pay is not reduced and
(2)reductions in rates of basic pay to offset a locality pay or staffing supplement rate increase as a result of receiving a rating of record below Fully Successful). Note: If any of the provisions of title 5, Code of Federal Regulations, listed above are revised during the period this demonstration project is in effect, FSIS may choose to terminate the waiver of one or more such provisions with respect to employees participating in the project, without formally modifying the project itself. FSIS must notify OPM when any such waiver is terminated. [FR Doc. E8-10440 Filed 5-8-08; 8:45 am] BILLING CODE 6325-43-P SECURITIES AND EXCHANGE COMMISSION File No. 500-1 In the Matter of: ABS Group, Inc. (n/k/a The Motion Picture Group, Inc.), Accrue Software, Inc., iAsiaworks, Inc., Premier Laser Systems, Inc., Siskon Gold Corp., and Syquest Technology, Inc. (n/k/a SYQT, Inc.); Order of Suspension of Trading May 7, 2008. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of ABS Group, Inc. (n/k/a The Motion Picture Group, Inc.), because it has not filed any periodic reports since the period ended June 30, 1998. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Accrue Software, Inc., because it has not filed any periodic reports since the period ended December 28, 2002. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of iAsiaworks, Inc., because it has not filed any periodic reports since the period ended September 30, 2001. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Premier Laser Systems, Inc., because it has not filed any periodic reports since the period ended December 31, 1999. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Siskon Gold Corp., because it has not filed any periodic reports since the period ended December 31, 1997. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Syquest Technology, Inc. (n/k/a SYQT, Inc.), because it has not filed any periodic reports since the period ended June 30, 1998. The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed companies. Therefore, it is ordered, pursuant to section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed companies is suspended for the period from 9:30 a.m. EDT on May 7, 2008, through 11:59 p.m. EDT on May 20, 2008. By the Commission. Jill M. Peterson, Assistant Secretary. [FR Doc. 08-1241 Filed 5-7-08; 10:47 am]
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U.S. Code
- Comprehensive energy plan§ 781
- Periodical and other reports§ 78m
- Geographic applicability; judicial enforcement; applicability to existing standards; report to Congress on duplication and coordination of Federal laws; workmen’s compensation law or common law or statutory rights, duties, or liabilities of employers and employees unaffected§ 653
- Determination and provision of relief§ 4082
- Annual adjustments to pay schedules§ 5303
- Locality-based comparability payments§ 5304
- Grade retention following a change of positions or reclassification§ 5362
- Pay retention§ 5363
- Guaranteed placement in other personnel systems§ 3594
- Special pay authority§ 5305
- Night, standby, irregular, and hazardous duty differential§ 5545
- Supervisory differentials§ 5755
- Rate on change of position or type of appointment; regulations§ 5334
- Definitions§ 4303
- Rights, benefits, and obligations of persons absent from employment for service in a uniformed service§ 4316
- Periodic step-increases§ 5335
- Regulations§ 1302
- Definitions§ 4701
29 references not yet in our index
- 29 CFR 2570
- 17 CFR 240.10
- 29 CFR 2510.3-21(d)
- 29 CFR 2510.3-21(c)
- Pub. L. 104-13
- 5 CFR 1320.10(a)
- 73 FR 18
- Pub. L. 109-53
- 73 FR 23
- 5 CFR 511
- 5 CFR 536
- 5 CFR 536.306
- 5 CFR 536.304(a)(2)
- 5 CFR 359.705
- 5 CFR 531.205
- 5 CFR 531.206
- 5 CFR 530.308
- 5 USC 5753-5754
- 5 CFR 300
- 5 CFR 430.208(d)
- 5 CFR 359.705(e)
- 5 CFR 353.102
- 5 CFR 351
- 5 CFR 351.704
- 5 CFR 330
- 5 CFR 531
- Pub. L. 108-136
- 5 CFR 359.705(d)(1)
- 5 CFR 536.305
Citation graph
cites case law
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Cite29 CFR 2570
Cite17 CFR 240.10
Cite29 CFR 2510.3-21(d)
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