Notice2023-21732
Exemption From Certain Prohibited Transaction Restrictions Involving the Occidental Petroleum Corporation Savings Plan and the Anadarko Employee Savings Plan Located in Houston, TX
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 2, 2023
Effective
August 3, 2020
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This document contains a notice of exemption issued by the Department of Labor (the Department) from certain prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974. The exemption permits: (1) the acquisition, on August 3, 2020, by the Occidental Petroleum Corporation Savings Plan (the Oxy Plan) and the Anadarko Employee Savings Plan (the Anadarko Plan; together, the Plans), of stock warrants (the Warrants) issued by Occidental Petroleum Company, a party in interest with respect to the Plans; and (2) the holding of the Warrants.
Full Text
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<title>Federal Register, Volume 88 Issue 189 (Monday, October 2, 2023)</title>
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[Federal Register Volume 88, Number 189 (Monday, October 2, 2023)]
[Notices]
[Pages 67815-67817]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-21732]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2023-20; Exemption Application Nos.
D-12032 and D-12033]
Exemption From Certain Prohibited Transaction Restrictions
Involving the Occidental Petroleum Corporation Savings Plan and the
Anadarko Employee Savings Plan Located in Houston, TX
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of exemption.
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SUMMARY: This document contains a notice of exemption issued by the
Department of Labor (the Department) from certain prohibited
transaction restrictions of the Employee Retirement Income Security Act
of 1974. The exemption permits: (1) the acquisition, on August 3, 2020,
by the Occidental Petroleum Corporation Savings Plan (the Oxy Plan) and
the Anadarko Employee Savings Plan (the Anadarko Plan; together, the
Plans), of stock warrants (the Warrants) issued by Occidental Petroleum
Company, a party in interest with respect to the Plans; and (2) the
holding of the Warrants.
DATES: This exemption will be in effect for the period beginning August
3, 2020, through August 12, 2027.
FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the
Department at (202) 693-8567. (This is not a toll-free number).
SUPPLEMENTARY INFORMATION: The Plans requested an exemption pursuant to
ERISA Section 408(a) and supplemented the request with certain
additional information that has been made a part of the public
record.\1\ On February 9, 2023, the Department published a notice of
proposed exemption in the Federal Register at 88 FR 8472.
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\1\ The procedures for requesting an exemption are set forth in
29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).
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Based on the record, the Department has determined to grant the
proposed exemption. This exemption provides only the relief specified
herein. It provides no relief from violations of any law other than the
prohibited transaction provisions of ERISA, as expressly stated herein.
The Department makes the requisite findings under ERISA Section
408(a) based on the Applicants' adherence to all the conditions of the
exemption. Accordingly, affected parties should be aware that the
conditions incorporated in this exemption are, taken individually and
as a whole, necessary for the Department to grant the relief requested
by the Applicants. Absent these conditions, the Department would not
have granted this exemption.
Background
As discussed in greater detail in the proposed exemption, the
Applicants are: (a) the Occidental Petroleum Corporation (Occidental or
Oxy); (b) the Anadarko Petroleum Corporation (Anadarko), a wholly owned
subsidiary of Oxy; and (c) the Plans, which are sponsored by Oxy and
Anadarko, respectively.
On June 26, 2020, Oxy announced that its Board of Directors had
declared a distribution of Warrants to holders of Oxy common stock on
the record date (Record Date) of July 6, 2020. The Warrants have a
seven-year term and expire on August 3, 2027. Recipients may exercise
the Warrants to purchase additional shares of Oxy common stock at the
exercise price of $22 per share or sell the Warrants at the prevailing
market price on the NYSE.\2\
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\2\ As of the Record Date, July 6, 2020, the closing price for
Oxy common stock on the NYSE was $18.18 per share.
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On August 3, 2020, Oxy distributed the Warrants. Stockholders of
record, including the Plans, received 1/8th (12.5%) of a Warrant for
each share of Oxy common stock they held as of July 6, 2020. Each Oxy
common stockholder, including the Plans, received the same
proportionate number of Warrants based on the number of shares of Oxy
common stock held as of July 6, 2020. The Plans and the other
stockholders received the Warrants automatically, without any action on
their part, because of Oxy's unilateral and independent corporate act.
The Oxy Plan received 1,476,172 Warrants based on its holding of
11,809,376 shares of Oxy common stock. The Anadarko Plan received
26,601 Warrants based on its holding of 212,813 shares of Oxy common
stock. Each Plan established a Warrant account to reflect their
respective participants' proportionate interest in the Warrants. All
stockholders, including each Plan participant, received 1/8th of a
Warrant for every share of common stock of
[[Page 67816]]
which they were the record holder as of July 6, 2020.
The Applicants represent that all decisions regarding whether to
hold, sell, or exercise the Warrants by the Plans were made by
Fiduciary Counselors Inc. (FCI), a qualified independent fiduciary
within the meaning of 29 CFR 2570.31(j), while acting solely in the
interests of the Plans and their participants and beneficiaries and in
accordance with the Plans' provisions.
As described in the proposed exemption, FCI sold the Oxy Plan's
1,476,172 Warrants in ``blind transactions'' on the NYSE over the
course of five trading dates (August 6, 7, 10, 11, and 12, 2020) for
gross proceeds of $6,332,184.28 which were proportionately allocated to
the Plan accounts of the affected participants in the Oxy Stock Fund
(and reinvested in such participants' accounts in the Oxy Stock Fund).
FCI sold the Anadarko Plan's 26,601 Warrants in ``blind transactions''
on the NYSE on August 10, 2020, for proceeds of $115,538.88. Because
the Anadarko Plan was frozen to new investments, the proceeds from the
sale were proportionately credited to the affected participants through
the Anadarko Plan's qualified designated investment alternative. At the
time of the sales of the Warrants by FCI, a share of Oxy Stock ranged
from $15.23 on August 6, 2020 to $14.71 on August 12, 2020. The
Warrants had an exercise price of $22.00 per share.
The Applicants requested an exemption to permit the acquisition and
holding by the Plans of the Warrants that were issued by Oxy, a party
in interest with respect to the Plans. An exemption is necessary
because the acquisition and holding of the Warrants by the Plans is
prohibited under ERISA and the Code.
On February 9, 2023, the Department published a notice of proposed
exemption in the Federal Register that would permit the Plans'
acquisition and holding of the Warrants. The exemption's protective
conditions include a requirement that FCI represent the Plans'
interests for all purposes with respect to the acquisition and holding
of the Warrants, and that no brokerage fees, commissions, subscription
fees, or other charges were paid by the Plans with respect to the
acquisition and holding of the Warrants. In addition, FCI's
responsibilities included determining whether and when to exercise or
sell each Warrant held by the Plans.
As discussed below, the Department finds that the favorable terms
of the acquisition and holding of the Warrants by the Plans, combined
with the protective conditions included in this exemption, are
appropriately protective and in the interest of the Plans and their
participants to support the granting of this exemption.
Comments Received Regarding the Proposed Exemption
In the proposed exemption, the Department invited all interested
persons to submit written comments and/or requests for a public hearing
with respect to the proposed exemption by March 27, 2023. During the
comment period, the Department received nine written comments from
seven Plan participants (and a comment from FCI that is part of an
email exchange between FCI and one of the aforementioned commenters, a
retired Plan participant). The Department did not receive a request for
a public hearing from any Plan participant.
Comments
1. Commenter Requests That the Oxy Warrants Be Returned to His Account
One Plan participant submitted three of the nine comments, in which
they expressed their opposition to the sale of the Warrants from the
participant's 401(k) account. The Plan participant insisted that they
``had no intention of selling these [W]arrants as they had a 7-year
time value,'' and demanded that the Warrants be returned to his
account. After it received this comment, the Department requested that
the Plans' representative submit a response to these three comments to
the Department. The Department also requested that FCI contact the Plan
participant directly to address his concerns.
Applicant's Response: The Plans' representative, an attorney for
the Plan, reported to the Department that the participant's concerns
were related to FCI's decision to sell the Warrants. The representative
stated that she believes the commenter's concerns were appropriately
addressed in the exemption application and FCI's report. Specifically,
as explained in the application, the Oxy Stock Fund in each of the
Plans is a unitized fund in which contributions allocated to
participants' Oxy Stock Fund accounts reflect their unit interest in
the Oxy common stock held by the Oxy Plan; i.e., the Plans own the
stock and the participants receive an allocated interest in the value
of the Fund. According to the representative the Plans were amended to
provide that participants invested in the Stock Fund were to receive an
allocated proportionate interest in the warrants received by the Plans
based on the participant's Oxy Stock Fund units on July 6, 2020, the
record date. The Plans were also amended to provide that an independent
fiduciary would make decisions with respect to whether to sell or
exercise the warrants and if the decision were to sell, the proceeds
would be allocated to the participant's account and invested in the
Stock Fund (for the Oxy Plan) or invested in the then-designated
qualified default investment alternative applicable for such
Participants (for the Anadarko Plan in light of its termination).'' The
representative also stated that FCI's report, which was summarized in
the proposed exemption and discussed with the Department before the
proposal was published, explains FCI's decision-making process with
respect to its decision to sell the warrants.
FCI's Response: FCI contacted the Plan participant directly by
sending a letter explaining that the Plans' decision to require FCI to
make decisions concerning the Warrants rather than passing-through that
decision to each of the participants is supported by administrative and
cost reasons. The letter also explained FCI's decision-making process
with respect to the decision to sell the Warrants and acknowledged that
while the participant may have made a different decision regarding the
Warrants received as a result of its holdings in the Oxy Stock Fund in
the Oxy Plan, FCI's fiduciary responsibility was to make a prudent
decision in the interest of all participants with respect to the
Warrants received as a result of their holdings in the Oxy Stock Fund
through the Plan. FCI said that it made a prudent decision that
considered all of the factors involved, including the terms of the
Plans, the fact that the Warrants were more volatile than Oxy stock and
thus less appropriate as a plan investment, and the fact that the
proceeds of the sale of the Warrants held by the Oxy Plan were to be
reinvested in the Oxy Stock Fund.
Department's Response: After reviewing the Commenter's request and
the Applicant's response, the Department concurs that the application
and FCI's Report addresses the issues raised by the commenter. The
Department also notes that it considered the information contained in
the application and FCI's Report, in their totality, in order to make
the Department's requisite findings under ERISA Section 408(a). This
includes a finding that the acquisition and holding by the Plans of the
Warrants was in the interest of, and protective of, the Plans. However,
the relief in this exemption
[[Page 67817]]
does not extend to ERISA Section 404, and no inference should be drawn
from the fact that the Department is not opining on FCI's statement
that it acted prudently on behalf of the Plans.
2. Plan Participants Seek Clarification or Express Their Opinions
Regarding the Proposed Exemption
Four comments were submitted anonymously. Six commenters, including
the four anonymous commenters, either expressed their opinions about
whether the proposed exemption should be granted, or they sought
clarification regarding how the exemption would affect their benefits.
Department's Response: The Department explained the proposed
exemption to each of the non-anonymous commenters, via phone or email.
However, the Department was unable to directly respond to the four Plan
participants who submitted their comments anonymously.
The complete application files (D-12032 and D-12033) are available
for public inspection in the Public Disclosure Room of the Employee
Benefits Security Administration, Room N-1515, U.S. Department of
Labor, 200 Constitution Avenue NW, Washington, DC 20210. For a more
complete statement of the facts and representations supporting the
Department's decision to grant this exemption, refer to the proposed
exemption.\3\
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\3\ 88 FR 8472 (2/9/2023).
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Accordingly, after considering the entire record developed in
connection with the Applicants' exemption application, the Department
has determined to grant the exemption described below.
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 ERISA Section 408(a) does not relieve a fiduciary or other party
in interest from certain requirements of other ERISA provisions,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
ERISA Section 404, which, among other things, require a fiduciary to
discharge his or her duties respecting the plan solely in the interest
of the plan's participants and beneficiaries and in a prudent fashion
in accordance with ERISA Section 404(a)(1)(B).
(2) As required by ERISA Section 408(a), the Department hereby
finds that the exemption is: (a) administratively feasible; (b) in the
interests of affected plans and of their participants and
beneficiaries; and (c) protective of the rights of participants and
beneficiaries of the plans.
(3) This exemption is supplemental to and not in derogation of any
other ERISA provisions, 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 to determining whether the transaction is in fact a
prohibited transaction.
(4) The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describe all material terms of the transactions
that are the subject of the exemption.
Accordingly, the Department grants the following exemption under
the authority of ERISA Section 408(a)in accordance with the procedures
set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October
27, 2011):
Exemption
Section I. Covered Transactions
The restrictions of ERISA Sections 406(a)(1)(E), 406(a)(2) and
407(a)(1)(A), does not apply to the acquisition and holding by the
Plans of Warrants, issued by Oxy, provided the conditions set forth in
Section II below have been met.
Section II. Conditions
(a) The Warrants were issued by Oxy to all Oxy common stockholders,
including the Plans;
(b) All Oxy common stockholders, including the Plans, were treated
in the same manner with respect to the acquisition and holding of the
Warrants;
(c) All Oxy common stockholders, including the Plans, were issued
the same proportionate number of Warrants based on the number of shares
of Oxy common stock held by such stockholder;
(d) The Plans' acquisition of the Warrants was a result of a
unilateral and independent corporate act of Oxy without any
participation by the Plans;
(e) All decisions regarding whether to hold, sell, or exercise the
Warrants by the Plans were made by FCI while acting solely in the
interests of the Plans and their participants and beneficiaries and in
accordance with the Plan's provisions;
(f) FCI determined that it was protective and in the interests of
the Plans and their participants and beneficiaries to sell all of the
Warrants received by the Plans in blind transactions on the NYSE;
(g) FCI will provide a written statement to the Department
demonstrating that the covered transactions have met all of the
exemption conditions within 90 days after the exemption is granted;
(h) No brokerage fees, commissions, subscription fees, or other
charges were paid by the Plans to Oxy with respect to the acquisition
and holding of the Warrants, nor were they paid to any affiliate of Oxy
or FCI with respect to the sale of the Warrants;
(i) No party related to this exemption application has or will
indemnify FCI, in whole or in part, for negligence and/or any violation
of state or federal law that may be attributable to FCI in performing
its duties overseeing the transaction. In addition, no contract or
instrument may purport to waive FCI's liability under state or federal
law for any such violations; and
(j) Each Plan participant received the entire amount they were due
with respect to the acquisition of the Warrants and the sale of the
Warrants.
Effective Date: This exemption will be in effect for the period
beginning August 3, 2020, through August 12, 2027.
George Christopher Cosby,
Director Office of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2023-21732 Filed 9-29-23; 8:45 am]
BILLING CODE 4510-29-P
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</html>Indexed from Federal Register on October 2, 2023.
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