Notice2024-22468
Proposed Exemption From Certain Prohibited Transaction Restrictions Involving United Brotherhood of Carpenters and Joiners of America (the Applicant) Located in Washington, DC
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 1, 2024
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This document provides notice of the pendency before the Department of Labor (the Department) of a proposed individual exemption from certain prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (the Code). This proposed exemption would provide an exemption for the Trustees of the United Brotherhood of Carpenters Pension Fund (the Plan) to sell 19.25 acres of improved real property (the Property) on behalf of the Plan to the United Brotherhood of Carpenters and Joiners of America (UBC) for cash (the Sale). The exemption, if granted, requires adherence to a number of conditions, including that an independent fiduciary will represent the Plan for all purposes with respect to the Sale. The amount of benefits that Plan participants are due under the Plan will not be affected by the exemption.
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 190 (Tuesday, October 1, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 190 (Tuesday, October 1, 2024)]
[Notices]
[Pages 79953-79961]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-22468]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Exemption Application No. D-12084]
Proposed Exemption From Certain Prohibited Transaction
Restrictions Involving United Brotherhood of Carpenters and Joiners of
America (the Applicant) Located in Washington, DC
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed exemption.
-----------------------------------------------------------------------
SUMMARY: This document provides notice of the pendency before the
Department of Labor (the Department) of a proposed individual exemption
from certain prohibited transaction restrictions of the Employee
Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue
Code of 1986 (the Code). This proposed exemption would provide an
exemption for the Trustees of the United Brotherhood of Carpenters
Pension Fund (the Plan) to sell 19.25 acres of improved real property
(the Property) on behalf of the Plan to the United Brotherhood of
Carpenters and Joiners of America (UBC) for cash (the Sale). The
exemption, if granted, requires adherence to a number of conditions,
including that an independent fiduciary will represent the Plan for all
purposes with respect to the Sale. The amount of benefits that Plan
participants are due under the Plan will not be affected by the
exemption.
DATES:
Exemption date: If granted, the exemption would be in effect on the
date that the grant notice is published in the Federal Register.
Comments due: Written comments and requests for a public hearing on
the proposed exemption should be submitted to the Department by
November 15, 2024.
ADDRESSES: All written comments and requests for a hearing should be
submitted to the Employee Benefits Security Administration (EBSA),
Office of Exemption Determinations, Attention: Application No. D-12084
via email to <a href="/cdn-cgi/l/email-protection#a4c189ebe1e0e4c0cbc88ac3cbd2"><span class="__cf_email__" data-cfemail="dcb9f19399989cb8b3b0f2bbb3aa">[email protected]</span></a> or online through <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Any such comments or requests should be sent 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 Disclosure Room of the Employee Benefits Security
Administration, U.S. Department of Labor, Room N-1515, 200 Constitution
Avenue NW, Washington, DC 20210, reachable by telephone at (202) 693-
8673. See SUPPLEMENTARY INFORMATION below for additional information
regarding comments.
FOR FURTHER INFORMATION CONTACT: Anna Mpras Vaughan of the Department,
telephone (202) 693-8567. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION:
Comments: Persons are encouraged to submit all comments
electronically without submitting paper versions. Comments should state
the nature of the person's interest in the proposed exemption and how
the person would be adversely affected by the exemption, if granted.
Any person who may be adversely affected by an exemption can request a
hearing on the exemption. A request for a hearing must state: (1) The
name, address, telephone number, and email address of the person making
the request; (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; and (3) a statement of the issues to be addressed and a
general description of the evidence to be presented at the hearing. The
Department will grant a request for a hearing made in accordance with
the requirements above where a hearing is necessary to fully explore
material factual issues identified by the person requesting the
hearing. The Department would publish a notice announcing such hearing
in the Federal Register. The Department may decline to hold a hearing
if: (1) the request for the hearing does not meet the requirements
above; (2) the only issues identified for exploration at the hearing
are matters of law; or (3) the factual issues identified can be fully
explored through the submission of evidence in written (including
electronic) form.
Warning: All comments received will be included in the public
record without change and may be made available online at <a href="http://www.regulations.gov">http://www.regulations.gov</a>, including any personal information provided,
unless the comment includes information claimed to be confidential or
other information whose disclosure is restricted by statute. If you
submit a comment, EBSA recommends that you include your name and other
contact information in the body of your comment, but DO NOT submit
information that you consider to be confidential, or otherwise
protected (such as a Social Security number or an unlisted phone
number) or confidential business information that you do not want
publicly disclosed. However, if EBSA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EBSA
might not be able to consider your comment.
Additionally, the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website is an
``anonymous access'' system, which means EBSA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an email directly to EBSA without going
through <a href="https://www.regulations.gov">https://www.regulations.gov</a>, your email address will be
automatically captured and included as part of the comment that is
placed in the public record and made available on the internet.
Proposed Exemption
The Department is considering granting the exemption pursuant to
its authority under ERISA section 408(a), and in accordance with the
Department's exemption procedures.\1\ This proposed exemption, if
granted, does not provide relief from the requirements of, or specific
sections of, any other law. Accordingly, the Applicant is responsible
for ensuring compliance with any other laws applicable to the
transactions covered by this proposed exemption.
---------------------------------------------------------------------------
\1\ 29 CFR part 2570, subpart B (75 FR 66637, 66644, October 27,
2011). For purposes of this proposed exemption, references to
specific provisions of title I of ERISA unless otherwise specified,
should be read to refer as well to the corresponding provisions of
Code section 4975.
---------------------------------------------------------------------------
Benefits of the Exemption: As described in more detail below, the
Department is proposing relief based, in part, on the Applicant's
representations that the Sale will permit the Plan, and its
participants and beneficiaries, to earn approximately $4,317,500 to
$4,620,000 more in net value than it would otherwise in a sale to an
unrelated third party. Other benefits to the Plan are described below.
[[Page 79954]]
Summary of Facts and Representations <SUP>2</SUP>
---------------------------------------------------------------------------
\2\ The Summary of Facts and Representations is based on the
Applicant's representations and does not reflect factual findings or
opinions of the Department at all times, unless indicated otherwise.
The Department notes that the availability of this exemption, if
granted, is subject to the express condition that the material facts
and representations contained in application D-12084 (the
Application) are true and complete, and accurately describe all
material terms of the transactions covered by this exemption. If
there is any material change in a transaction covered by this
exemption, or in a material fact or representation described in the
Application, the exemption will cease to apply as of the date of
such change.
---------------------------------------------------------------------------
The UBC
1. The United Brotherhood of Carpenters and Joiners of America
(UBC) is an international labor organization with 725 local unions (UBC
Local Unions) and 37 councils (the UBC Councils). As of June 20, 2023,
the UBC had total assets of $694,351,926. According to the Applicant, a
UBC Local Union is chartered by and affiliated with the UBC and
represents the individual members of the UBC in its geographic area. In
addition, the Applicant states that each UBC Council is affiliated with
a UBC Local Union and the various UBC Councils are affiliated to the
UBC by the UBC Constitution. However, the Applicant states that the UBC
Councils are separate legal entities from the UBC and the UBC does not
control the UBC Councils affiliated with it. Further, the Applicant
states that none of the trustees appointed by the UBC Councils are
officers of the UBC, and no agency relationship exists between the UBC
and the UBC Councils.
The Plan
2. The United Brotherhood of Carpenters Pension Fund (the Plan) is
a defined benefit multiemployer pension plan, located in Las Vegas,
Nevada.\3\ The Plan provides defined benefit pension retirement
benefits to full-time officers or representatives employed by a UBC
Local Union, UBC Council, other designated representatives of a UBC
Local Union or UBC Council, or persons who are United States residents
and determined to be representative of or professional, management, or
confidential employees of the UBC.\4\ As of December 31, 2022, the Plan
had 4,627 participants; and as of June 30, 2023, the Plan had
approximately $931,860,235 in assets. According to the Plan's annual
funding notice issued in April 2022, the Plan had a funded percentage
of 99.3% as of January 1, 2021.
---------------------------------------------------------------------------
\3\ The Applicant states that the Plan elected to become a
multiemployer plan in accordance with section 3(37)(G) of ERISA and
meets the legislative definition of a multiemployer plan under
3(37)(G)(vi). That section reads, ``(vi) A plan is described in this
clause if it is a plan sponsored by an organization which is
described in section 501(c)(5) of the Internal Revenue Code of 1986
and exempt from tax under section 501(a) of such Code 1986 and which
was established in Chicago, Illinois, on August 12, 1881.'' The
United Brotherhood of Carpenters Pension Fund is sponsored by the
UBC, which is a 501(c)(5) organization, tax exempt under Section
501(a) of the Code, and was established in Chicago, Illinois, on
August 12, 1881.
\4\ Employees of the Carpenters International Training Fund, The
International Labor-Management Committee for the Floor and Wall
Covering Industry, the UBC National Job Corps Training Fund, The
United Brotherhood of Carpenters Pension Fund, and the Carpenters
Legislative Improvement Committee may also be eligible for
participation in the Fund.
---------------------------------------------------------------------------
3. The Plan is sponsored and administered by a Board of Trustees
(the Board). The Board is made up of six (6) trustees who are current
and former members of the UBC Executive Board (the UBC Trustees) and
five (5) trustees who are appointed by officers of UBC Local Unions or
UBC Councils (the Council Trustees).\5\ The UBC Trustees and the
Council Trustees may be referred to collectively as the ``Trustees.''
The Applicant represents that the UBC is an employee organization whose
members are covered by the Plan, as well as an employer of employees
who are covered by the Plan, and as such is a party in interest with
respect to the Plan pursuant to ERISA section 3(14)(C) and (D).
---------------------------------------------------------------------------
\5\ The Applicant represents that, unlike other multiemployer
plans, the Plan is not maintained by a collective bargaining
agreement and, therefore, is not a ``Taft-Hartley'' plan, pursuant
to section 305(c)(5) of the Labor Management Relations Act. Because
the Trustees of the Plan are appointed by either the UBC or UBC
Local Unions and UBC Councils, none of the Trustees could be
considered ``employer representatives,'' which would be required for
the plan to constitute a Taft-Hartley multiemployer plan.
---------------------------------------------------------------------------
The Property
4. The Plan owns the Property through its wholly-owned LLC, Bermuda
Hidden Well, LLC (Bermuda LLC), a limited liability corporation
incorporated by the Plan on April 19, 2001 in the State of Delaware.
Bermuda LLC was originally formed to hold real property on behalf of
the Plan and is managed on behalf of the Plan by Washington Capital
Management, Inc. (WCM), who serves as the Plan's independent fiduciary
and an ``Investment Manager'' under ERISA section 3(38) with respect to
the holdings of Bermuda LLC.
5. The Property consists of 19.25 acres located at 6855 Bermuda
Road, Las Vegas, Clark County, Nevada 89119. The Property has been
specifically developed for car rental operations and is currently
improved with various structures, including an office, a car wash
building with fuel area, and a shop building, along with surface and
covered parking spaces and a few kiosk guard shack buildings. The total
building area comprises 45,321 square feet.
6. The Property was originally a portion of a larger 30.14 acre
parcel (the Original Parcel) that was acquired by the Plan on June 11,
2011, from LV-Airport Investors, LLC, an unrelated party, for a total
cash price of $10,464,126. The Original Parcel was subdivided and a
10.89 acre portion (the Adjacent Parcel) was sold to the Southwest
Regional Council of Carpenters (the Southwest Council) in 2011 pursuant
to PTE 2011-15.\6\
---------------------------------------------------------------------------
\6\ 76 FR 49789 (August 11, 2011).
---------------------------------------------------------------------------
7. The UBC then acquired the Adjacent Parcel from the Southwest
Council in 2017. The Applicant represents that the Adjacent Parcel
abuts the Carpenters International Training Center (on the side
opposite the Property), which is a UBC member-owned training facility.
8. When the Property was acquired by the Plan, it was subject to
and encumbered by a lease between lessee Alamo Rent-A-Car, LLC and
Lessor LV-Airport Investors, LLC, effective April 12, 2001, for an
initial term of twenty (20) years, with two (2) renewal terms of five
(5) years each (the 2001 Lease). The monthly basic rent under the 2001
Lease was $75,708.33 for an annual basic rent of $908,500.00. Since
2001, the lessee has changed over the years. Vanguard Car Rental USA,
Inc. became the successor in interest to Alamo Rental (US) Inc., which
was the successor in interest to Alamo Rent-A-Car, LLC. The current
lessee, Enterprise Leasing Company-West, LLC (Enterprise), eventually
became the successor-in-interest to Vanguard Car Rental USA, Inc. The
Plan (through Bermuda LLC) became the lessor in 2011 following the
purchase of the Original Parcel that included the Property.
9. The 2001 Lease was scheduled to expire in April 2021. In
preparation for discussions with the current lessee over a possible
renewal term, WCM engaged Valuation Consultants, Inc. to complete an
appraisal and rental study of the Property (the June 2020 Appraisal).
The June 2020 Appraisal demonstrated that rent escalations in
Enterprise's 20-year lease had lagged far behind market rental rates.
The Applicant states that considering the June 2020 Appraisal findings,
any rental rate agreed to
[[Page 79955]]
between WCM and the current lessee should be significantly higher than
the rent the lessee had been paying under the 2001 Lease. Based on the
rate increase, impact of the Covid pandemic on the Las Vegas economy,
and its internal needs, Enterprise decided not to renew the 2001 Lease
and to negotiate its gradual exit from the 2001 Lease. To this end, the
Plan entered into several short-term lease extensions with Enterprise
that included early right of termination clauses in favor of the Plan.
Most recently, the Plan and Enterprise entered into an amendment of the
2001 Lease extending the expiration date for a portion of the Property
through December 31, 2024. The Plan is permitted to terminate the 2001
Lease before December 31, 2024, upon 90 days' written notice.
Decision To Sell the Property
10. The Plan's immediate goal was to receive fair market value
rental rate for the lease of the Property upon the termination of
Enterprise's lease. Based on analyses by Valuation Consultants, Inc.
and guidance from WCM, a new tenant was not likely to enter a long-term
lease at the Property's current fair market rental value. Furthermore,
the Property had been modified to specifications that suited
Enterprise's operations (rental car business with attached storage and
maintenance facilities). Following an evaluation process in the fourth
quarter of 2020, WCM reported that it appeared unlikely that the Plan
could secure another long-term lease without significantly redeveloping
the Property to reposition it for a new tenant that was not in the car
rental business.\7\ WCM identified that the highest and best use of the
Property would be to redevelop it with light industrial buildings.
---------------------------------------------------------------------------
\7\ The Applicant represents further that other car rental
companies would be unlikely to enter into a long-term lease for the
Property due to the land's increasing value for this limited
purpose.
---------------------------------------------------------------------------
11. WCM determined that, in order to receive the most value in
connection with the Plan's investment in the Property, and to avoid
additional redevelopment costs and maintenance expenses, the Plan could
sell the Property to the UBC.\8\ As discussed below, the UBC owns a
parcel of property that is adjacent to the Property, and the Property
is in close proximity to the Carpenters International Training Center.
The Applicant states that no third party has inquired about purchasing
the Property, and the UBC does not intend to sell the Property to a
third party after its acquisition from the Plan. The Applicant
represents that the UBC plans to develop the Property into two light
industrial buildings to accommodate the UBC's expansion of its
International Training Center.
---------------------------------------------------------------------------
\8\ As described in more detail below, the Applicant states the
sale to the UBC would generate an additional profit of $3,410,000 to
the Plan as compared to a sale to an unrelated third party.
---------------------------------------------------------------------------
12. The Applicant represents that the UBC Trustees recused
themselves and abstained from any and all discussions concerning the
potential Sale of the Property to the UBC, and that only the Council
Trustees participated in the decision to sell the Property to the
UBC.\9\ The Council Trustees decided that the Sale to the UBC was the
most appropriate approach given the Plan's goals. The Council Trustees
ultimately determined that it would be appropriate to engage an
independent fiduciary other than WCM to oversee and ultimately
determine whether the Plan will complete the proposed Sale.
---------------------------------------------------------------------------
\9\ A discussion of the whether the purported recusal may be
effective to negate a violation of ERISA section 406(b) is found
below. Further, the Department notes that the Council Trustees
themselves may have an interest in the UBC that could affect their
decision making as fiduciaries of the Plan.
---------------------------------------------------------------------------
The Independent Fiduciary
13. The Plan engaged Shumaker, Loop & Kendrick LLP (Shumaker or the
Independent Fiduciary) as the Plan's Independent Fiduciary with respect
to the proposed Sale pursuant to an engagement agreement dated December
5, 2022. The Applicant represents that the Council Trustees engaged in
a prudent process on behalf of the Plan to select Shumaker as the
independent fiduciary.\10\
---------------------------------------------------------------------------
\10\ The Council Trustees prepared a request for proposal for an
independent fiduciary to oversee the sale of the Property pursuant
to which candidates were asked, among other things, to provide:
examples of similar independent fiduciary services to other clients;
their knowledge and experience of the Las Vegas real estate market;
their process for selecting appraisers, reviewing appraisals, and
analyzing the adequacy of the appraisal methodologies; and their
experience with appraisers and understanding how to oversee the
appraisal process. The Department is not expressing a view whether
the process followed by the Council Trustees was prudent, as such
matter is outside the scope of this application.
---------------------------------------------------------------------------
14. Scott D. Newsom and Beth M. Eckel of Shumaker were retained to
carry out the independent fiduciary duties of Shumaker to the Plan.\11\
Mr. Newsom represents that he has over 20 years of experience in
employee benefits law and ERISA, primarily representing multiemployer
benefit plans in all aspects of their maintenance and fulfillment of
the Board of Trustees' fiduciary obligations. Ms. Eckel represents that
she has 13 years of experience as a real estate attorney focused on
commercial real estate and financing matters. Ms. Eckel states she has
broad experience in representing developers, owners, lenders, borrowers
and large and small businesses in a wide range of transactions,
including the acquisition, disposition, leasing, financing,
construction and development of real property.
---------------------------------------------------------------------------
\11\ Unless otherwise provided, Mr. Newsom and Ms. Eckel are
referred to herein collectively as ``Shumaker.''
---------------------------------------------------------------------------
15. Shumaker represents that the revenue received from its
engagement as Independent Fiduciary for the Plan is less than two
percent of its gross revenue for the 2021 federal income tax year, and
less than 3.3 percent of its gross revenue for the 2022 federal income
tax year. Shumaker does not have any interest in the proposed
transaction other than the compensation it will earn by serving as
Independent Fiduciary for the proposed Sale. Furthermore, Shumaker
represents that it (1) has not entered into, and under the terms of the
proposed exemption would not at any time enter into, any agreement,
arrangement, or understanding that includes any provision providing for
it to be directly or indirectly indemnified or reimbursed by the Plan
or any other party if Shumaker fails to adhere to its contractual
obligations or those imposed by any state or Federal laws applicable to
the Independent Fiduciary's work; (2) the Plan has not waived and will
not waive any rights, claims, or remedies of the Plan under ERISA,
state, or Federal law against Shumaker with respect to the proposed
Sale.
16. Shumaker acknowledges its responsibilities under ERISA as an
Independent Fiduciary acting on behalf of the Plan with respect to the
Proposed Sale. The Applicant and Shumaker confirm that Shumaker will
determine whether the Plan proceeds with the Sale. Further, Shumaker
states that it: does not have a past or ongoing relationship with the
UBC except for the services provided to the Plan as Independent
Fiduciary with respect to the proposed Sale; has not had and currently
does not have any relationship with any UBC Locals or any individual
trustees on the board of the Plan.
17. In accordance with ERISA sections 404(a)(1)(A) and (B),
Shumaker, as the Plan's Independent Fiduciary, must prudently and
loyally perform the following in connection with the proposed Sale and
the exemption, if granted: (i) represent the interests of the Plan in
the Sale; (ii) determine that the Sale is in the interest of, and
protective of the rights of, the Plan and its participants and
beneficiaries; (iii) determine that the Sale price is in the
[[Page 79956]]
interest of, and protective of the rights of, the Plan and its
participants and beneficiaries; (iv) review and approve the terms and
conditions of the Sale in the Independent Fiduciary's sole discretion
and further negotiate any conditions they consider to be in the
interest of the Plan, in accordance with their fiduciary duties; (v)
independently and prudently engage the qualified independent appraiser,
Cushman & Wakefield of Nevada, Inc. (Cushman or the QIA), for the Sale;
(vi) review and approve the methodology used by the QIA and ensure that
such methodology is properly applied in determining the Property's fair
market value on the date of the Sale; (vii) monitor the Sale throughout
its duration consistent with its duties as a prudent plan fiduciary;
(viii) ensure that the QIA renders an updated fair market valuation of
the Property as of the date of the Sale; (ix) determine whether it is
prudent to proceed with the Sale; (x) refrain from entering into any
agreement, arrangement or understanding that violates ERISA section
410; \12\ (xi) ensure compliance with the general terms of the proposed
transaction and with the conditions of the proposed exemption; (xii)
take any appropriate actions to safeguard the interests of the Plan and
its participants and beneficiaries; and (xiii) submit a written report
to the Department not later than 90 days after the Sale has been
completed demonstrating that each exemption condition has been met.
---------------------------------------------------------------------------
\12\ ERISA section 410 generally provides that any provision in
an agreement or instrument that purports to relieve a fiduciary for
responsibility or liability for any responsibility, obligation, or
duty under Part I of Title I of ERISA is void against public policy.
---------------------------------------------------------------------------
The QIA
18. Shumaker engaged the appraisal firm Cushman to conduct an
appraisal of the Property in connection with the application in
December of 2022 (the 2022 Appraisal).\13\ Shumaker states that it
selected Cushman after a prudent process that considered the
appraiser's reputation, expertise, and experience, and well as its
familiarity with the Property and requirements of appraisals that would
be utilized in connection with applications for a prohibited
transaction exemption. Shumaker also evaluated Cushman's independence
from the parties in interest involved in the proposed transaction and
determined that Cushman had no interest in the proposed Sale of the
Property or the parties to the transaction that could affect its
independence.\14\
---------------------------------------------------------------------------
\13\ Shumaker and Cushman are parties to an engagement agreement
dated and executed on December 26, 2022.
\14\ The Applicant notes that the QIA also performed an
appraisal in January 2022 on behalf of the Plan in order to assist
WCM in determining the ``highest and best use'' of the Property.
---------------------------------------------------------------------------
19. Cushman's employee, Petra Latch (MAI) conducted the 2022
Appraisal. Ms. Latch is a certified general appraiser in Nevada. In
addition to providing appraisal services, Ms. Latch serves in various
positions on local Appraisal Institute and real estate industry boards.
20. Cushman represents that it has no relationship to any parties
in interest or their affiliates engaging in the proposed transaction.
Further, Cushman represents that it has no interest in the Property or
the outcome of the transaction and certifies that the gross revenue
from the Plan or any party in interest (and any of their affiliates)
for 2022 is less than two (2) percent of its annual revenue based upon
its income for the prior federal income tax year.
21. The QIA has not entered into, and must not at any time enter
into, any agreement, arrangement, or understanding that includes any
provision that provides for the direct or indirect indemnification or
reimbursement of the QIA by the Plan or any other party for any failure
by the QIA to adhere to its contractual obligations or those imposed by
state or Federal laws applicable to the QIA's work. Additionally, the
Plan has not waived and will not waive any rights, claims or remedies
of the Plan or its participants and beneficiaries under ERISA, the
Code, or other Federal and state laws against the QIA with respect to
the subject matter of the exemption.
The Appraisal
22. The 2022 Appraisal gave an ``as is'' fair market value of the
Property of $30,325,000.\15\ In addition, the 2022 Appraisal concluded
that the Property was particularly valuable to the UBC because the UBC
owned land that was adjacent to the Property. The 2022 Appraisal
therefore increased the ``as is'' value of the Property by $3,410,000
(the ``assemblage increase'').\16\ The 2022 Appraisal also quantified
the contributory value of costs spent to date by the Plan for the
proposed re-development of the Property, as $270,000 (the
``contributory costs''), and further increased the value of the
Property by that additional amount.\17\
---------------------------------------------------------------------------
\15\ The 2022 Appraisal contains detailed analysis which is
available by contacting the Public Disclosure Room of the Employee
Benefits Security Administration, U.S. Department of Labor, Room N-
1515, 200 Constitution Avenue NW, Washington, DC 20210. Please
reference D-12084.
\16\ As described above, the Original Parcel (30.14 acres
previously owned by the Plan in its entirety) was subdivided into
the Property (19.25 acres currently owned by the Plan) and the
Adjacent Parcel (10.89 acres currently owned by the UBC).
\17\ The 2022 Appraisal provides that the total value of
architect, engineer, and development studies and other activities
paid for by the Plan, which add to the value of the Property if
purchased by the UBC is $270,000 (rounded).
---------------------------------------------------------------------------
23. Shumaker reviewed the 2022 Appraisal and found that the QIA's
analysis was reasonable and consistent with the type of substantive
professional report that Shumaker expected when it engaged the QIA,
which is an appraisal firm with a national reputation. Shumaker states
that it does not have any concerns that the report was deficient,
inaccurate, or not performed in accordance with the QIA's professional
standards.
Relevant Sale Terms
24. The Plan's counsel negotiated the terms of the proposed
Purchase and Sale Agreement and Joint Escrow Instructions (the Sale
Agreement), which were reviewed and approved by the Independent
Fiduciary. According to the terms of the Sale Agreement, the UBC will
pay the Plan the greater of: (a) $33,930,000, which is the sum of the
Property's ``as is'' price ($30,250,000), plus the ``assemblage
increase'' ($3,410,000), plus the Plan's ``contributory costs''
($270,000)); or (b) the fair market value of the Property as
established by a qualified independent appraiser in an updated
appraisal of such Property on the date of the Sale.\18\ Further, the
Plan will pay no fees, commissions or other expenses associated with
the Property's Sale.
---------------------------------------------------------------------------
\18\ The 2022 Appraisal will be updated prior to closing with a
subsequent appraisal.
---------------------------------------------------------------------------
Clawback for Subsequent Sales by the UBC
25. In determining whether to propose the relief requested by the
Applicant, the Applicant's representations that the UBC was an
appropriate purchaser of the Property (as opposed to other third
parties) due to its ownership of adjacent property and the UBC's
payment of a premium in the form of an assemblage increase was an
important consideration to the Department. In addition, the Applicant's
representation that it did not plan to resell the Property to a third
party--instead, it planned to expand its International Training Center,
located adjacent to the Property--was material to the Department's
consideration of whether to propose relief.
26. However, due to uncertainties about the present and future
value of the Property, the Department is concerned that UBC could
subsequently sell the Property for an additional profit that
[[Page 79957]]
could have been captured by the Plan. To address this concern, the
Department has included a ``clawback'' provision in Section III(h) of
the proposed exemption that would become effective if the UBC sells the
Property within 10 years after the date of the Sale for a price that is
greater than the proceeds received in the Sale by the Plan. In such
event, the excess of such sale price over the amount received by the
Plan will be contributed in cash by the UBC to the Plan as of the end
of the Plan year following the date of such subsequent sale. The
clawback provision would apply if UBC sells the whole Property or
subdivides and sells a portion of the Property.
27. The Department is also concerned, due to the potential future
value of the Property and its location in a prime area near the Las
Vegas airport and the Las Vegas Strip, that the UBC may decide in the
future to monetize the Property, via lease or other means, in a manner
inconsistent with its stated rationale for purchasing the Property. As
described above, this proposed exemption is predicated, in part, on the
representations of the parties that the UBC intends to use the Property
to expand its International Training Center, and not as a means of
obtaining a profit that could otherwise have redounded to the benefit
of the Plan. Therefore, the exemption would require the UBC to
contribute to the Plan an amount in cash equal to 51 percent of the
gross revenue received from the UBC's use of the Property in a manner
or for a purpose that is inconsistent with the UBC's stated intention
to expand its International Training Center and/or provide union-
related services to members of the UBC. This obligation would apply to
any such revenue earned during the 10 years following the date of Sale
and such amounts must be contributed by the UBC to the Plan by the end
of the Plan year following the year in which such revenue is earned.
Independent Fiduciary Analysis and Conclusion
28. Benefit to the Plan. Shumaker states that the proposed Sale to
the UBC would allow the Plan to realize a previously unrealized gain
that UBC could re-invest without delay. Specifically, the Plan would
receive approximately $33,930,000 for the Property, representing a
significant gain of approximately 407.43% on the $6,686,576.50 portion
of the original $10,387,619.55 acquisition cost attributable to the
Property. The Plan's investment managers could invest the sales
proceeds immediately in accordance with the Plan's overall investment
policy statement and asset allocation strategy.
29. Shumaker also represents that the proposed Sale allows the Plan
to sell the Property at a premium due to the assemblage value through
the Property's combination with the Adjacent Parcel owned by the UBC.
This assemblage value adds an additional 11.27% ($3,410,000) to the
purchase price. If the Plan desired to market the Property to third
parties, the 2022 Appraisal indicates that a resulting purchase price
of $30,250,000 would be anticipated. Further, the Plan would incur a
commission on a sale to a third party of at least 3-4%. Assuming a sale
price of $30,250,000, the Plan would be expected to pay an additional
amount of $907,500 to $1,210,000 in sales commissions. The proposed
Sale would not require a commission to be paid to any listing or
commercial real estate agent. Therefore, a sale of the Property by the
Plan to an unrelated third-party at ``As Is'' fair market value would
be anticipated to result in approximately $4,317,500 to $4,620,000 less
than the proposed Sale (the lost assemblage value plus the otherwise
avoided commissions).
30. In addition, Shumaker states that the proposed Sale to the UBC
offers the Plan an opportunity to resolve its issues with the Property
in an efficient and timely manner. Shumaker states that the planned
expiration of the 2001 Lease means that the Plan needs to address its
future plans for the Property effectively at this time to avoid the
loss of income from the rental payments and the added expense of
maintenance costs from an unproductive piece of property.\19\
---------------------------------------------------------------------------
\19\ As described above, the Applicant represents that it is
unlikely other car rental companies would enter into a long-term
lease due to the high rental rate that would be required for that
purpose, and it was also unlikely that the UBC Pension Fund could
secure a long-term lease with a tenant in another industry without
significantly redeveloping the Property.
---------------------------------------------------------------------------
31. Shumaker also states that the proposed Sale allows the Plan to
avoid the expense of redeveloping the Property for sale to a third
party. As determined by the 2022 Appraisal, the highest and best use of
the Property would be achieved through the demolition of the buildings
following the expiration of the 2001 Lease and the redevelopment of the
Property with industrial use, or mixed use that includes industrial,
office and supporting commercial uses. However, redevelopment to
achieve such highest and best use would present risks and challenges to
transition the Property. In the 2022 Appraisal, Cushman warned that
``Construction costs are escalating, and a redevelopment plan of this
size might require a three-year time period during which time there is
risk related to costs.''
32. Further, Shumaker states that the proposed Sale would relieve
the Plan of the risks inherent in preparing the Property for market or
attempting to redevelop the Property itself. According to Shumaker, the
potential lack of income or investment gain from the Property over a
several year development period (compared to an assumed 7.5% return on
Plan investments), the up-front cost of any development (including risk
of escalating costs), and the risk of selecting the right type of
redevelopment to increase the value of the Property above what would be
realized by the proposed Sale, all seem unnecessary and speculative
risks for the Plan to take on when compared to the availability of a
one-time sale. Similarly, Shumaker suggests that the development of the
Property by the Plan in accordance with the desires of the UBC or a
related party for a build-to-lease type arrangement would require an
ongoing business relationship between the Plan and the UBC over an
extended period-of-time and compliance with an administrative
exemption, which involves additional ongoing compliance and
administrative burdens.\20\
---------------------------------------------------------------------------
\20\ The Department expresses no opinion herein on whether,
under these facts, any build to use leasing arrangement between the
Plan and UBC would meet the requirements of Prohibited Transaction
Exemption 76-1 (41 FR 12740, March 26, 1976, as corrected by 41 FR
16620, April 20, 1976), or any other administrative exemption, to
qualify for exemptive relief from the prohibited transaction
provisions of ERISA sections 406(a) and 407(a).
---------------------------------------------------------------------------
33. Conclusion of the Independent Fiduciary. Shumaker concludes
that the proposed Sale would: provide the Plan with the opportunity to
sell the Property for a significant gain above and beyond that which it
would receive in a sale with an unrelated third party buyer; avoid
leaving the Plan with an unproductive, passive investment asset; and
eliminate the risk of loss and loss of investment opportunity
associated with the necessary redevelopment of the Property and the
time associated with that process if the Plan opted to lease the
Property to a new lessee.
34. Shumaker states that the terms and conditions of the proposed
Sale Agreement are at least as favorable to the Plan as those
obtainable in an arm's length transaction with an unrelated party.
Subject to the terms of the exemption, if granted by the Department,
the UBC has borne and will continue to bear the costs of the
[[Page 79958]]
exemption application, and the Plan will bear costs for the Independent
Fiduciary and the QIA. The proposed Sale would be a one-time cash
transaction and would not require any additional continued oversight by
the Department.
35. Lastly, to further ensure the protection of the Plan and its
members, Shumaker states it will continue to monitor the Sale, enforce
the final terms, and take whatever actions are necessary to protect the
interests of the Plan's participants and beneficiaries through closing.
Finally, as described above, Shumaker has reviewed and approved the
terms and conditions of the Sale in its sole discretion and will
further negotiate any conditions Shumaker concludes are in the interest
of the Plan in accordance with Shumaker's fiduciary duties.
Legal Analysis of the Exemptive Relief Requested
36. The Applicant has requested an administrative exemption from
the Department because the proposed Sale would violate several ERISA
provisions. ERISA section 406(a)(1)(A) provides that a plan fiduciary
shall not cause a plan to engage in a transaction if the fiduciary
knows or should know that the transaction constitutes a direct or
indirect sale or exchange, or leasing, of any property between a plan
and a party in interest. Further, ERISA section 406(a)(1)(D) prohibits
a plan fiduciary from causing a plan to engage in a transaction if the
fiduciary knows or should know that such transaction constitutes a
direct or indirect transfer to or use of any plan assets for the
benefit of a party in interest. ERISA section 3(14)(D) defines the term
``party in interest'' to include an employee organization any of whose
members are covered by such plan.\21\ ERISA section 3(14)(A) defines
the term ``party in interest'' to include any fiduciary of such
plan.\22\ Thus, the Trustees, as fiduciaries to the Plan and the UBC as
an employee organization whose members are covered by the Plan are
parties in interest with respect to the Plan, pursuant to ERISA
sections 3(14)(A) and 3(14)(D), respectively. Accordingly, the proposed
Sale would constitute a violation of ERISA Section 406(a)(1)(A) and
(D).
---------------------------------------------------------------------------
\21\ ERISA section 3(4) provides, in pertinent part, that the
term ``employee organization'' means any labor union or organization
of any kind in which employees participate and which exists for the
purpose, in whole or in part, of dealing with employers concerning
an employee benefit plan or other matters incidental to employment
relationships; or any employees' beneficiary association organized
for the purposes in whole or in part, of establishing such a plan.
\22\ ERISA section 3(21)(A) provides, in pertinent part, that a
person is a ``fiduciary'' with respect to a plan to the extent (i)
he exercises any discretionary authority or discretionary control
respecting management of such plan or exercises any authority or
control respecting management or disposition of its assets, (ii) he
renders investment advice for a fee or other compensation, direct or
indirect, with respect to any moneys or other property of such plan,
or has any authority or responsibility to do so, or (iii) or he has
any discretionary authority or discretionary responsibility in the
administration of such plan.
---------------------------------------------------------------------------
37. ERISA section 406(b)(1) provides that a fiduciary with respect
to a plan shall not deal with the assets of the plan in his own
interest or for his own account. Further, ERISA section 406(b)(2)
provides that a fiduciary with respect to a plan shall not in his
individual or in any other capacity act in any transaction involving
the plan on behalf of a party (or represent a party) whose interests
are adverse to the interests of the plan or the interests of its
participants or beneficiaries.
38. The Applicant states that the decisions regarding the Sale and
the Independent Fiduciary were made by Trustees that were appointed by
the UBC Councils, because the UBC Trustees recused themselves from any
such decisions.\23\ The Applicant suggests that the recusal of the UBC
Trustees from any decisions with respect to the proposed Sale or the
hiring of the Independent Fiduciary obviates any violation for
fiduciary self-dealing under ERISA section 406(b)(1) or (2), because
such decisions were made by the Council Trustees.\24\ However, the
Department does not agree that the Council Trustees' decision making
regarding the Sale and the Independent Fiduciary did not involve a
violation of ERISA section 406(b)(1) or (2). In this regard, the record
does not demonstrate that the Council Trustees are independent of the
UBC or that the Council Trustees do not have an interest in the UBC
that would affect the exercise of their best fiduciaries.\25\ As
described above, each UBC Council is affiliated with a UBC Local Union
and the various UBC Councils are affiliated to the UBC by the UBC
Constitution. Further, the Council Trustees are members of the UBC and
represent other members of the UBC. Accordingly, exemptive relief from
ERISA sections 406(b)(1) and 406(b)(2) is being proposed because the
Council Trustees' actions on behalf of the Plan in connection with the
Sale, including by selecting the Independent Fiduciary, may constitute
prohibited transactions, and because whether the UBC Trustees
effectively recused themselves from all decision-making regarding the
Sale is a factual matter outside the scope of this exemption.\26\
---------------------------------------------------------------------------
\23\ The Applicant represents above that the UBC Councils are
not controlled by the UBC, none of the Trustees appointed by the UBC
Councils are officers of the UBC, and no agency relationship exists
between the UBC and the UBC Councils.
\24\ The Department cautions that the determination as to
whether the UBC Trustees' recusal from certain aspects of the
proposed Sale negates a violation of ERISA section 406(b)(1) or (2)
is inherently factual in nature and beyond the scope of this
proposed exemption.
\25\ The Department notes that ``[the] prohibitions [of ERISA
section 406(b)] are imposed upon fiduciaries to deter them from
exercising the authority, control, or responsibility which makes
such persons fiduciaries when they have interests which may conflict
with the interests of the plans for which they act. In such cases,
the fiduciaries have interests in the transaction which may affect
the exercise of their best judgment as fiduciaries.'' See DOL Reg
2550.408b-2(e)(1).
\26\ The Department is not taking a view whether a violation of
ERISA section 406 has occurred or will occur due to the actions of
the Council Trustees or the UBC Trustees, as such conclusions are
inherently factual in nature and are outside the scope of this
proposed exemption. Exemptive relief is being provided only in the
event that the actions of the Trustees constituted a violation of
ERISA section 406(b).
---------------------------------------------------------------------------
39. In accordance with the above, the Department is proposing an
exemption from ERISA sections 406(a)(1)(A), 406(a)(1)(D), 406(b)(1),
and 406(b)(2), for the Sale by the Trustees on behalf of the Plan to
the UBC, only if the Independent Fiduciary is responsible for the
ultimate decision to complete the Sale on behalf of the Plan, reviews
and approves the terms and conditions of the Sale, and represents the
interests of the Plan for all purposes in connection with the Sale; and
the parties adhere to all the conditions for the exemption.
Statutory Findings
40. The proposed exemption is ``Administratively Feasible.'' The
Department has tentatively determined that the proposed exemption is
administratively feasible for the Department because, among other
things, the Sale would be a one-time cash transaction. Furthermore, the
conditions for the exemption require the Independent Fiduciary to
monitor the parties' adherence to the terms of the Sale and the
conditions of the exemption throughout the transaction and submit a
report to the Department Plan not later than 90 days after the Sale has
been completed demonstrating that each exemption condition has been
met.
41. The proposed exemption is ``In the Interests of the Plan.'' The
Department has tentatively determined that the proposed exemption is in
the interests of the Plan because the proposed Sale would: (i) provide
the Plan with a Sale price that significantly exceeds the Property's
fair market value compared to what the Plan would
[[Page 79959]]
receive in a transaction with an unrelated third party buyer due to the
assemblage value; (ii) avoid the Plan's holding of an unproductive
passive investment asset, and the time and expense the Plan would incur
to make the Property suitable to lease or sell to a new, third party
buyer or lessee that is not in the rental car business. In addition,
the Plan would not pay any commissions, expenses or fees in connection
with the proposed Sale nor bear the costs associated with the exemption
application or notifying interested persons.
42. The proposed exemption is ``Protective of the Plan.'' The
Department has tentatively determined that the proposed exemption is
protective of the rights of the Plan's participants and beneficiaries
because, among other things, an Independent Fiduciary has reviewed the
proposed Sale, the financial status of the Plan, the appraised value of
the Property, and the terms of the Sale, and determined that the terms
and conditions are protective of the rights of the Plan and its
participants and beneficiaries. Further, among other things, the
Independent Fiduciary would be required to provide a written report to
the Department demonstrating that all of the exemption's conditions
have been met within 90 days after of the proposed Sale. To further
protect the rights of the participants and beneficiaries of the Plan,
the exemption includes a ``clawback'' provision the Department designed
to ensure that the Plan would recapture any profit on a subsequent sale
of the Property or use of the Property by the UBC within 10 years of
the date of the Sale.
Summary
43. Based on the conditions that are included in this proposed
exemption, the Department has tentatively determined that the relief
sought by the Applicant would satisfy the statutory requirements for an
individual exemption under ERISA section 408(a).
Notice to Interested Persons
Notice of the proposed exemption will be provided to all interested
persons within fifteen (15) days of the publication of the notice of
proposed exemption in the Federal Register. The notice will be provided
to all interested persons in the manner approved by the Department and
will contain the documents described therein and a supplemental
statement required by 29 CFR 2570.43(a)(2). The supplemental statement
will inform interested persons of their right to comment on and to
request a hearing with respect to the pending exemption. All written
comments and/or requests for a hearing must be received by the
Department within forty-five (45) days of the date of publication of
this proposed exemption in the Federal Register. All comments will be
made available to the public.
Warning: If you submit a comment, EBSA recommends that you include
your name and other contact information in the body of your comment,
but DO NOT submit information that you consider to be confidential, or
otherwise protected (such as Social Security number or an unlisted
phone number) or confidential business information that you do not want
publicly disclosed. All comments may be posted on the internet and can
be retrieved by most internet search engines.
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) and/or Code section 4975(c)(2) does not
relieve a fiduciary or other party in interest or disqualified person
from certain other provisions of ERISA and/or the Code, 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 their
duties respecting the plan solely in the interest of the plan and its
participants and beneficiaries and in a prudent manner in accordance
with ERISA section 404(a)(1)(B); nor does it affect the requirement of
Code section 401(a) 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 ERISA section 408(a)
and/or Code section 4975(c)(2), 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, would be supplemental to,
and not in derogation of, any other provisions of ERISA 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, would be subject to the
express condition that the material facts and representations contained
in the application are true and complete at all times and that the
application accurately describes all material terms of the transactions
which are the subject of the exemption.
Proposed Exemption
Based on the facts and representations set forth in the
application, the Department is proposing to grant an exemption under
the authority of ERISA section 408(a) and Code section 4975(c)(2) in
accordance with the procedures set forth in 29 CFR part 2570, subpart B
(76 FR 66637, 66644, October 27, 2011). 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.
Section I. Definitions
(a) The term ``Bermuda LLC'' means Bermuda Hidden Well, LLC.
(b) The term ``Board'' means a board of trustees made pursuant to
the Plan's Declaration of Trust, consisting of six (6) trustees who are
current and former members of the UBC Executive Board and five (5)
trustees who are appointed from officers of UBC local unions or UBC
councils.
(c) The term ``Independent Fiduciary'' means Shumaker, Loop &
Kendrick LLP;
(d) The term ``Plan'' means United Brotherhood of Carpenters
Pension Fund;
(e) The term ``Property'' means the 19.25-acre parcel of improved
real property owned by the Plan and located at 6855 Bermuda Road, Las
Vegas, Clark County, Nevada;
(f) The term ``QIA'' means Cushman & Wakefield of Nevada, Inc.;
(g) The ``Sale'' means the one-time sale for cash of the Property
by the Trustees on behalf of the Plan through its subsidiary entity,
Bermuda LLC, to the UBC; and
(h) The term ``UBC'' means United Brotherhood of Carpenters and
Joiners of America.
(i) The term ``Trustees'' means the six (6) trustees on the Plan's
Board of Trustees who are current and former members of the UBC
Executive Board and five (5) trustees who are appointed by officers of
UBC Local Unions or UBC Councils.
Section II. Covered Transactions
If the proposed exemption is granted, the restrictions of ERISA
sections
[[Page 79960]]
406(a)(1)(A) and 406(a)(1)(D), and 406(b)(1) and (b)(2), shall not
apply to the Sale, effective as of the date a final exemption is
published in the Federal Register, provided that the parties adhere to
the conditions in Section III, below.
Section III. Conditions
(a) The Sale is a one-time transaction for cash that must be
completed within 90 days of the effective date of the exemption;
(b) At the time of the Sale, the Plan receives the greater of (1)
$34,090,000; or (2) the fair market value of the Property as
established by the QIA in an updated appraisal of such Property on the
date of the Sale (the Sale Proceeds);
(c) The Plan pays no commissions, expenses, or fees associated with
the Sale, and the Plan does not bear the costs of: (1) the exemption
application; nor (2) notifying interested persons;
(d) The Plan fiduciaries prudently determined that the Sale of the
Property is in the Plan's best interest and for no less than fair
market value.
(e) The terms and conditions of the Sale are at least as favorable
to the Plan as those obtainable in an arm's length transactions with an
unrelated third party;
(f) The Independent Fiduciary, in accordance with ERISA sections
404(a)(1)(A) and (B), must prudently and loyally:
(1) represent the Plan's interests with respect to the Sale;
(2) determine that the Sale is in the interests of, and protective
of, the Plan and its participants and beneficiaries;
(3) determine that the Sale price for the Property is in the
interests of, and protective of, the Plan;
(4) review and approve the terms and conditions of the Sale in
their sole discretion and further negotiate any conditions they
consider to be in the best interest of the Plan;
(5) independently engage the QIA for the Sale;
(6) ensure that the appraisal is based on complete, current and
accurate information; review and approve the methodology used by the
QIA that such methodology is properly applied in determining the
Property's fair market value on the date of the Sale; and that it is
appropriate to rely upon the appraisal as accurately reflecting the
fair market value of the Property;
(7) monitor the Sale throughout its duration consistent with its
duties as a prudent plan fiduciary;
(8) ensure that the QIA renders an updated fair market valuation of
the Property as of the date of the Sale in accordance with paragraph
(f)(6) of this Section;
(9) determine whether it is prudent for the Plan to proceed with
the Sale and has the ultimate decision-making authority to approve the
Sale on behalf of the Plan;
(10) ensures compliance with the general terms of the Sale and with
the conditions of the exemption;
(11) takes any appropriate actions to safeguard the interests of
the Plan and its participants and beneficiaries; and
(12) submits a written report to the Department not later than 90
days after the Sale has been completed demonstrating that each
exemption condition has been met;
(g) (1) The Independent Fiduciary must not have entered into, and
must not enter into, any agreement, arrangement, or understanding that
includes any provision that provides for the direct or indirect
indemnification or reimbursement of the Independent Fiduciary by the
Plan or other party for any failure to adhere to its contractual
obligations or to state or Federal laws applicable to the Independent
Fiduciary's work: the Independent Fiduciary may not seek or receive any
waiver of any rights, claims, or remedies of the Plan under ERISA,
state, or Federal law against the Independent Fiduciary with respect to
the subject matter of the exemption; and
(2) The Independent Fiduciary has not and will not enter into any
agreement, arrangement or understanding that violates ;
(h) (1) Subsequent Sale Proceeds Subject to Clawback Provision. If
UBC sells the Property within 10 years after the date of the Sale, for
a sale price that is greater than the Sale Proceeds, then the amount of
the subsequent sale price received by UBC that exceeds the Sale
Proceeds (the Excess Amount) must be contributed by the UBC to the Plan
in cash before the end of the Plan year following the date of such
subsequent sale. If UBC subdivides the Property and a portion of the
Property is subsequently sold by UBC, then the Excess Amount would be
determined by subtracting from the subsequent sale price the amount of
Sale Proceeds attributable to the portion of the Property that was sold
in such subsequent sale as determined by an independent appraiser. The
records applicable to any subsequent sale by UBC covered by this
provision, including any appraisals, must be provided to the Office of
Exemption Determinations at <a href="/cdn-cgi/l/email-protection#c5a0e88a808185a1aaa9eba2aab3"><span class="__cf_email__" data-cfemail="bbde96f4fefffbdfd4d795dcd4cd">[email protected]</span></a> within 90 days after the date
of such sale.
(2) Revenue Share from Use of Property. If UBC earns revenue from
its use of the Property in any calendar year, including in connection
with the lease of the Property to a third party, in a manner or for a
purpose that is inconsistent with the UBC's stated intention to expand
its International Training Center and/or the provision of union-related
services permitted under the UBC's governing documents, then the UBC
must contribute to the Plan an amount in cash equal to 51 percent of
such gross revenue earned in each such calendar year. Such amounts must
be contributed by the UBC to the Plan by the end of the Plan year
following the year in which such revenue is earned. The records
necessary to demonstrate that this paragraph (h)(2) has been met must
be provided to the Office of Exemption Determinations at <a href="/cdn-cgi/l/email-protection#d9bcf4969c9d99bdb6b5f7beb6af"><span class="__cf_email__" data-cfemail="b6d39bf9f3f2f6d2d9da98d1d9c0">[email protected]</span></a>
within 90 days after the end of the calendar year in which the revenue
was received.
(i) Any QIA selected by the Independent Fiduciary must not have
entered into, and must not enter into, any agreement, arrangement, or
understanding that includes any provision that provides for the direct
or indirect indemnification or reimbursement of the QIA by the Plan or
any other party for any failure to adhere to its contractual
obligations or to state or Federal laws applicable to the QIA's work;
the QIA may not seek or obtain any waiver of any rights, claims or
remedies of the Plan or its participants and beneficiaries under ERISA,
the Code, or other Federal and state laws against the QIA with respect
to the subject matter of the exemption; and
(j) The Board and the Independent Fiduciary maintain for a period
of six (6) years from the date of Sale, in a manner that is convenient
and accessible for audit and examination, the records necessary to
enable the persons described in paragraph (k)(1) below to determine
whether conditions of this exemption have been met, except that (i) a
prohibited transaction will not be considered to have occurred if, due
to circumstances beyond the control of the Board and/or the Independent
Fiduciary, the records are lost or destroyed prior to the end of the
six-year period, and (ii) no party in interest other than the Board or
the Independent Fiduciary shall be subject to the civil penalty that
may be assessed under ERISA section 502(i) if the records are not
maintained, or are not available for examination as required by
paragraph (k) below; and
(k)(1) Except as provided in Section (2) of this paragraph and
notwithstanding any provisions of subsections (a)(2) and (b) of ERISA
[[Page 79961]]
section 504, the records referred to in paragraph (j) above shall be
unconditionally available at their customary location during normal
business hours to:
(i) any duly authorized employee or representative of the
Department or the Internal Revenue Service;
(ii) the Board or any duly authorized representative of the Board;
(iii) the Independent Fiduciary or any duly authorized
representative of the Independent Fiduciary;
(iv) any participant or beneficiary of the Plan, or any duly
authorized representative of such participant or beneficiary;
(2) If any party refuses to disclose information to a person on the
basis that such information is exempt from disclosure, such party must
provide a written notice to that person advising them of the reasons
for the refusal and that the Department may request such information on
their behalf by the close of the thirtieth (30th) day following the
request;
(l) The Sale is not part of an agreement, arrangement or
understanding designed to benefit UBC or any of its affiliates;
(m) The Board, the UBC, and/or the Independent Fiduciary must
provide to the Department the records necessary to demonstrate that the
conditions of this exemption, as amended, have been met, within 30 days
from the date the Department requests such records; and
(n) All the material facts and representations made by the
Applicant that are set forth in the Summary of Facts and
Representations are true and accurate at all times.
Exemption Date: If granted, this proposed exemption will be in
effect on the date that the grant notice is published in the Federal
Register.
Signed at Washington, DC.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2024-22468 Filed 9-30-24; 8:45 am]
BILLING CODE 4510-29-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on October 1, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.