Notice2025-00405
Exemption From Certain Prohibited Transaction Restrictions Involving United Brotherhood of Carpenters and Joiners of America (UBC or 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
January 13, 2025
Effective
January 13, 2025
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This document gives notice of an individual exemption from certain prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974, as amended (ERISA) and the Internal Revenue Code of 1986 (the Code). This exemption permits 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 UBC for cash (the Sale).
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 7 (Monday, January 13, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 7 (Monday, January 13, 2025)]
[Notices]
[Pages 2748-2756]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-00405]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2025-01; Exemption Application No. D-
12084]
Exemption From Certain Prohibited Transaction Restrictions
Involving United Brotherhood of Carpenters and Joiners of America (UBC
or the Applicant) Located in Washington, DC
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of exemption.
-----------------------------------------------------------------------
SUMMARY: This document gives notice of an individual exemption from
certain prohibited transaction restrictions of the Employee Retirement
Income Security Act of 1974, as amended (ERISA) and the Internal
Revenue Code of 1986 (the Code). This exemption permits 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 UBC for cash (the Sale).
DATES: The exemption will be in effect on January 13, 2025.
FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan, Office of
Exemption Determinations, Employee Benefits Security Administration,
U.S. Department of Labor, (202) 693-8565 (this is not a toll-free
number).
SUPPLEMENTARY INFORMATION: UBC requested an exemption pursuant to ERISA
section 408(a) and Code section 4975(c)(2) and supplemented the request
with certain additional information (that is collectively, referred to
as the ``Application'').\1\ On October 1, 2024, the Department
published a notice of proposed exemption in the Federal Register (the
Proposed Exemption).\2\
---------------------------------------------------------------------------
\1\ The procedures that govern the Applicant's request for an
exemption (the Exemption Procedures) are set forth in 29 CFR part
2570, subpart B at 76 FR 66637, 66644 (October 27, 2011). Although
the Applicant's submission is being processed under the Exemption
Procedures in effect as of December 27, 2011, the Exemption
Procedures were recently amended at 89 FR 4662, 4691 (January 24,
2024). Effective December 31, 1978, section 102 of the
Reorganization Plan No. 4 of 1978, 5 U.S.C. app. 1 (1996),
transferred the authority of the Secretary of the Treasury to issue
administrative exemptions under the Code section 4975(c)(2) to the
Secretary of Labor. Accordingly, the Department grants this
exemption under its sole authority. Furthermore, references herein
to provisions of Title I of ERISA shall be deemed to refer to their
applicable corresponding provision in Code section 4975, unless
specified otherwise.
\2\ 89 FR 79953.
---------------------------------------------------------------------------
Based on UBC's representations in its Application and the
administrative record, the Department has determined to grant the
Proposed Exemption. This exemption provides only the relief specified
herein and does not provide relief from violations of any law other
than the prohibited transaction provisions of ERISA and the Code.
Benefits of the Exemption: The Department is granting relief based,
in part, on UBC's representations that the Plan will receive
approximately $4,317,500 to $4,620,000 more in net proceeds by selling
the property to UBC than it would receive in a sale to an unrelated
third party. Other expected benefits to the Plan are described below.
As discussed below, the Department makes the requisite findings
under ERISA section 408(a) based on the Applicant's adherence to all
the exemption's conditions at all times. Accordingly, affected parties
should be aware that the conditions incorporated in this exemption are
necessary for the Department to grant the relief requested by the
Applicant, and that the Department would not have granted this
exemption without these conditions.
Background
1. The UBC is an international labor organization with 725 local
unions (UBC Local Unions) and 37 councils (the UBC Councils). The UBC
Local Unions are chartered by and affiliated with the UBC and represent
the individual members of the UBC in their respective geographic area.
Each UBC Council is affiliated with a UBC Local Union and the various
UBC Councils are affiliated to the UBC by the UBC Constitution.
According to the Applicant, the UBC Councils are separate legal
entities from the UBC and the UBC does not control the UBC Councils
that are 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.
2. The Plan is a multiemployer defined benefit pension plan located
in Las Vegas, Nevada.\3\ The Plan provides pension 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 are 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 ERISA section 3(37)(G) 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
[26 U.S.C. 501(c)(5)] and exempt from tax under section 501(a) of
such Code 1986 [26 U.S.C. 501(a)] 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 Code section 501(a), 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 Plan.
---------------------------------------------------------------------------
3. The Plan is sponsored and administered by a Board of Trustees
(the Board) comprised of 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 are referred to collectively as the ``Trustees.'' The
Applicant represents that the UBC is an employee organization whose
members are covered by the Plan and an employer of employees who are
covered by the Plan; therefore, it is a party in interest 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 Labor Management Relations Act section 305(c)(5). 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 limited
liability company, Bermuda Hidden Well, LLC (Bermuda LLC), that was
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.
[[Page 2749]]
(WCM), which serves as the Plan's Qualified Professional Asset Manager
for real estate and ERISA 3(38) fiduciary investment manager.
5. The Property is comprised on 19.25 acres and located at 6855
Bermuda Road, Las Vegas, Clark County, Nevada. It was specifically
developed for car rental operations and includes a passenger terminal,
car wash, car repair facility with a service bay, and covered parking.
6. The Plan currently leases the Property to Enterprise Leasing
Company-West, LLC (Enterprise) pursuant to a long-term lease that has
been extended via several short-term extensions since 2021. Most
recently, the Plan and Enterprise amended the lease to extend the
expiration date for a portion of the Property through March 31, 2025.
UBC represents that the Plan has the ability to terminate the amended
lease early. Enterprise's footprint of the premises (and the rent it
owes the Plan) has decreased significantly since March 2023 as
Enterprise gradually transitions its operational components to other
locations.
7. The Property is adjacent to a 10.89-acre parcel owned by UBC
(the Adjacent Property) and both parcels abut the Carpenters
International Training Center (ITC), which also is owned by UBC. The
ITC is designed to provide apprenticeship and training programs to the
Plan's participants. The Property, Adjacent Property, and ITC all sit
upon an integrated block of land that also houses the UBC offices and
several hotels that are owned by UBC and used to host visitors to the
UBC Campus.
Decision To Sell the Property
8. As described in the Proposed Exemption, the Plan fiduciaries,
with the assistance of WCM, determined that the most prudent course of
action for the Plan upon the termination of the lease is to sell the
Property to UBC for the following reasons:
<bullet> a new tenant was unlikely to enter a long-term lease at
the Property's current fair market rental value;
<bullet> the Property had been modified to specifications that
suited Enterprise's operations;
<bullet> it was unlikely that the Plan could secure another long-
term lease without significantly redeveloping the Property; and
<bullet> the highest and best use of the Property would be to
redevelop it with light industrial buildings.
9. Shumaker, Loop & Kendrick LLP (Shumaker, the Independent
Fiduciary, or QIF) was engaged by the Plan to act as its independent
fiduciary with respect to the Sale, and is required to ultimately
determine whether the Plan proceeds with the Sale.\6\ Shumaker engaged
the appraisal firm Cushman (the QIA) to conduct an appraisal of the
Property in December of 2022 (the 2022 Appraisal).\7\ The 2022
Appraisal valued the Property at $33,930,000, which includes an
``assemblage increase'' (the Assemblage Increase) \8\ resulting from
UBC's ownership of the Adjacent Property and certain ``contributory
costs'' (the Contributory Costs) spent by the Plan for the proposed re-
development of the Property.\9\
---------------------------------------------------------------------------
\6\ As described in the Proposed Exemption, Shumaker, as the
Plan's independent fiduciary with respect to the Sale, must
prudently and loyally: (i) represent the interests of the Plan in
the Sale; (ii) determine that the Sale and the Sale price is in the
interest and protective of the rights of the Plan and its
participants and beneficiaries; (iii) review and approve the terms
and conditions of the Sale and further negotiate any conditions they
consider to be in the interest of the Plan; (iv) independently and
prudently engage the qualified independent appraiser for the Sale;
(v) review and approve the methodology used by the appraiser and
ensure that such methodology is properly applied in determining the
Property's fair market value on the date of the Sale; (vi) monitor
the Sale throughout its duration consistent with its duties as a
prudent plan fiduciary; (vii) ensure that Cushman & Wakefield of
Nevada, Inc. in its role as qualified independent appraiser (Cushman
or the QIA) renders an updated fair market valuation of the Property
as of the date of the Sale; (viii) determine whether it is prudent
to proceed with the Sale; (ix) refrain from entering into any
agreement, arrangement or understanding that violates ERISA section
410; (x) ensure compliance with the general terms of the transaction
and with the conditions of the exemption; (xi) take any appropriate
actions to safeguard the interests of the Plan and its participants
and beneficiaries; and (xii) 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.
\7\ 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.
\8\ 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). The 2022
Appraisal increased the $30,325,000 ``as is'' fair market value of
the Property by $3,410,000 (i.e., the Assemblage Increase) to
$33,930,000 to account for the special value that the Property has
to the UBC because it is adjacent to the UBC-owned Adjacent Parcel.
\9\ At the request of the Independent Fiduciary, the QIA valued
the architect, engineer, and development studies and other
activities paid for by the Plan in connection with the potential
development of the Property, referred to in the Proposed Exemption
as the ``Contributory Costs.'' The 2022 Appraisal determined these
costs to be approximately $270,000. The QIA stated in the 2022
Appraisal that these costs represent the value of costs spent by the
Plan to date for the benefit of the adjacent property to the
proposed buyer (i.e., the UBC) and not the value to the general
market. The Contributory Costs further increased the value of the
Property if purchased by the UBC to a total of $34,090,000.
---------------------------------------------------------------------------
Exemptive Relief
10. In the proposal, the Department proposed exemptive relief from
ERISA sections 406(a)(1)(A) and (D) and 406(b)(1) and (2) for the Sale
of the Property by the Plan to the UBC in exchange for an amount of
cash equal to the greater of (1) $34,090,000, or (2) the fair market
value of the Property (which includes the Assemblage Increase and
Contributory Costs) as established in an updated appraisal of the
Property's fair market value on the date of the Sale (the Sale
Proceeds).\10\
---------------------------------------------------------------------------
\10\ The legal analysis regarding the requested exemptive relief
is provided in the Proposed Exemption and can be found in the
Federal Register at 89 FR 79958 (October 1, 2024).
---------------------------------------------------------------------------
Plan Benefits
11. The Department finds that the exemption would be in the Plan's
interest, based on the Plan's receipt of additional compensation due to
the Assemblage Increase and Contribution Costs, and the QIF's
representations that it would not be prudent for the Plan to expend the
time and resources that would be necessary to prepare the Property for
sale to a third party. According to the QIF, a sale of the Property by
the Plan to an unrelated third-party at its ``As Is'' fair market value
would be anticipated to result in approximately $4,317,500 to
$4,620,000 less in net proceeds than the proposed Sale to UBC, because
the Assemblage Increase and Contributory Costs would not be recouped,
and brokerage fees and additional transaction costs would be incurred.
According to UBC and the QIF, selling the property to UBC would be in
the best interest of the Plan and its participants and beneficiaries,
because it would provide the Plan with the opportunity to sell an asset
for a significant gain due to the Assemblage Increase, eliminate the
risk of losing an investment opportunity associated with the
redevelopment of the Property (and the time associated with that
process), and diversify the Plan's investments by reinvesting the sale
proceeds in accordance with the Plan's investment policy statement.\11\
---------------------------------------------------------------------------
\11\ A description of the Independent Fiduciary's analysis and
conclusions can be found in the Proposed Exemption in paragraphs 28-
35 at 89 FR 79957 through 58.
---------------------------------------------------------------------------
12. Nevertheless, in its initial review of the application, the
Department was concerned about the possibility that the transaction was
designed to transfer a valuable asset to a party in interest (UBC)
solely for UBC's benefit.\12\ In
[[Page 2750]]
particular, the Department was concerned about the possible sale of the
Property to UBC on terms that would enable UBC to later sell the
Property at a higher price than its appraised fair market value. The
Department's concerns were allayed by the Applicant's representations
in its comment letter that the UBC has no intentions of purchasing the
property and immediately selling it for gain. Based on these
representations, the Department added a condition providing that if UBC
sold the Property during the 10-year period that commences immediately
following the date it purchased the Property from the Plan, UBC would
have to contribute the amount of any profit it receives to the Plan
(the Sale Proceeds Clawback Condition).\13\
---------------------------------------------------------------------------
\12\ The Department notes that the prohibited transaction
provisions of ERISA are designed to prevent a fiduciary of plan from
using the assets of the plan in a way that is inconsistent with the
best exercise of that fiduciary's responsibilities under ERISA. For
example, the prohibited transaction provisions prevent a fiduciary
from causing a plan to transfer property to a party in interest for
the purpose of benefitting that party in interest.
\13\ In such event, the UBC must contribute an amount of cash
generally equal to the profit on the subsequent sale to the Plan as
of the end of the Plan year following the date of such subsequent
sale. The Revenue-Sharing Condition would apply if UBC sells the
whole Property or subdivides and sells a portion of the Property.
See 89 FR 79956, 79957 and section III(h)(1) of the Proposed
Exemption.
---------------------------------------------------------------------------
13. The Proposed Exemption also included a condition requiring the
UBC to contribute to the Plan an amount in cash equal to 51 percent of
any gross revenue it earns in any calendar year from using the
Property, including in connection with leasing the Property to a third
party in a manner or for a purpose that is inconsistent with UBC's
stated intention articulated in the proposal to expand its
International Training Center and/or the provision of union-related
services permitted under the UBC's governing documents (the Revenue-
Sharing Clawback Condition).\14\ The Department proposed to include
this condition in the exemption because it was concerned that UBC's
intention might have been to purchase the Property to develop it to
take advantage of its proximity to the Las Vegas Strip.
---------------------------------------------------------------------------
\14\ The condition as proposed required the UBC to contribute
cash to the Plan equal to 51 percent of the gross revenue received
from UBC's use of the Property (including the leasing of the
Property) for a purpose or in a manner inconsistent with what was
represented to the Department. See 89 FR 79957. See also section
III(h)(2) of the Proposed Exemption.
---------------------------------------------------------------------------
14. The proposed Revenue-Sharing Condition was based on a
representation the Department received from UBC's representative
stating the UBC's development of the Property ``is primarily [emphasis
added] meant to accommodate the Union's expansion of its International
Training Center (ITC).'' \15\ The requirement, as described in the
preamble to the proposal, would be effective for 10 years from the date
the revenue was earned by UBC.
---------------------------------------------------------------------------
\15\ Email from Diana Cohn, O'Donoghue & O'Donoghue LLP, counsel
for Applicant, to the Department on July 19, 2024. A copy of this
email and others can be found in the record for this exemption.
---------------------------------------------------------------------------
Plan Protections
15. To ensure that the Plan, and its participants and
beneficiaries, are adequately protected, Shumaker 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 of the Sale. Shumaker reviewed and
approved the terms and conditions of the Sale in Shumaker's sole
discretion and will further negotiate any conditions Shumaker concludes
are in the interests of the Plan, in accordance with Shumaker's
fiduciary duties. Shumaker, acting on behalf of the Plan in Shumaker's
fiduciary capacity, determined that the proposed terms and conditions
of the Sale Agreement are at least as favorable to the Plan as those
obtainable in an arm's length transaction with an unrelated third
party, and will make the final determination regarding whether to
proceed with the transaction. Subject to the terms of the exemption,
UBC has borne and will continue to bear the costs of the Application,
and the Plan will bear the costs of the Independent Fiduciary and the
QIA.
Comments Received Regarding the Proposed Exemption <SUP>16</SUP>
---------------------------------------------------------------------------
\16\ All information submitted to the Department in connection
with this exemption, including the written comments, is available
through the Department's Public Disclosure Room by referencing
Exemption Application D-12084.
---------------------------------------------------------------------------
16. In the Proposed Exemption, the Department invited all
interested persons to submit written comments on the proposal and/or
requests for a public hearing by November 15, 2024.
17. During the comment period, the Department received 51 phone
calls from Plan participants and beneficiaries. Forty-nine of the calls
were general inquiries. The other two calls involved substantive
comments on the Proposed Exemption. One caller stated their support for
the protections afforded to the Plan by the proposed Sales ``Clawback''
condition and Revenue Sharing ``Clawback'' condition in section
III(h)(1) and (2) of the Proposed Exemption, because they did not want
the Plan to sell the Property without benefitting from the Sale, based
on their belief that the Property is valuable and will increase in
value. The other caller stated their support for the Sale if it would
help the UBC expand the ITC, as that would be beneficial to the Plan
participants who use the ITC.
18. The Department received four written comments. Three of these
comments were from the UBC and are considered together (the Applicant's
Comment) and one comment was from a Plan participant. UBC's comment (1)
requested a clarification of the Summary of Facts and Representations
(the Summary) in the Proposed Exemption to better explain the UBC's
motivations to purchase the Property; (2) provided further
justification for the Plan's sale of the Property to the UBC; (3)
objected to the proposed Revenue-Sharing Condition; (4) expressed
agreement with respect to proposed Sale Proceeds Clawback Condition;
and (5) requested the Department to correct two ministerial errors in
the preamble of the Proposed Exemption with respect to the gross
revenue percentages received by Shumaker from the Plan for the years
2021 and 2022.
19. The written comment from the Plan participant requested a
hearing on the issue of selling plan assets to a party in interest. The
commenter also maintained that the Department only could approve the
Sale if the Property were put out for a public request for proposal to
ensure the Plan maximizes its revenue.
20. The Department responds to the material issues and the material
information provided in the comments below.
The Applicant's Comments and the Department's Responses
Comment 1--Clarification of the UBC's Motivations for the Purchase
21. UBC states that the Department's Summary in the Proposed
Exemption misstates UBC's intent in acquiring and developing the
Property. In this regard, representation 11 of the Summary provides
that ``[T]he UBC plans to develop the Property into two light
industrial buildings to accommodate the UBC's expansion of its
International Training Center [ITC].''
22. In its comment, the Applicant clarifies that the UBC's intended
future use of the Property is to combine its 10.89-acres Adjacent
Property with the 19.25-acre subject Property into a consolidated
30.14-acre block (the Consolidated Property). In its comment letter,
UBC states that combining these properties would allow the UBC to
redevelop the Consolidated Property by building two industrial
warehouses that
[[Page 2751]]
will be leased to third-party tenants. UBC represents that its intended
use of the Property is consistent with the QIA's determination that the
``highest and best use'' of the Property is for it to be redeveloped
for industrial or mixed use that includes industrial, office and
supporting commercial uses. According to UBC's comment, its intended
use of the Property is also consistent with the current zoning
restrictions on the Property. Referring to the Qualified Independent
Appraiser's Report, UBC represents that the Property is zoned ``M-1,
Light Manufacturing,'' which may be used for ``office, distribution
centers, warehouse/flex space, technology and light industry.'' The UBC
also maintains that its intention to use the Consolidated Property
conforms with the QIA's determination of the Property's highest and
best use and applicable land use laws.
23. Moreover, UBC states that, in the event the ITC should need
additional training space in the future, the UBC would be in a position
to convert the Property for such purposes at that time. In its comment
letter, UBC reports that, over the past 24 years, the ITC has added
approximately 189,000 square feet of industrial-type space on its
campus, and that the ITC's 25-acre campus is now fully built out except
for one vacant lot reserved for a hotel to accommodate an overflow of
attendees at the ITC campus. Thus, the Applicant represents that it is
quite possible that the ITC will require further expansion in the
future. The Applicant states that, although the ITC does not have an
immediate need for expansion, it is prudent for UBC to purchase the
Property while it is available, because there is no guarantee UBC would
be able to purchase or lease the Property if the Plan sold it to an
unrelated third party.
24. The Department notes the UBC's requested clarifications to the
Summary regarding UBC's intended use of the property.\17\ The
Department notes further, however, that as stated previously in this
preamble, the Summary was based on representations made by UBC's legal
counsel (the Representative) in a July 19, 2024 email sent to the
Department. In the email, the Representative stated that, ``[a]s
further explained in its December 28, 2022 exemption application and
throughout its responses to the [Department's] information requests,
the [UBC] will develop the [P]roperty into two light industrial
buildings, each spanning 300,000 square feet across the two lots. The
development is primarily meant to accommodate the [UBC's] expansion of
its International Training Center (ITC) [emphasis added]. Apart from
the subject property, which is adjacent to the ITC, the [UBC] has no
other land to expand its campus further.'' \18\
---------------------------------------------------------------------------
\17\ The Department notes that section III(n) requires that all
the material facts and representations made by the Applicant that
are set forth in the Summary are true and accurate at all times. The
Department views the Applicant's prompt clarification of portions of
the Summary as satisfying this requirement.
\18\ The Applicant provided the July 19, 2024 representation in
response to a request by the Department that the Applicant clarify
the UBC's intended use of the Property.
---------------------------------------------------------------------------
Department's Response: The Department accepts UBC's clarifications
as described above.
Comment 2. Justification for the Plan's Sale of the Property to the UBC
25. UBC's second comment addresses why it is in the Plan's interest
to sell the Property, rather than to redevelop and lease it. The
Department solicited this explanation from UBC, in order to address the
Department's concern that the Sale may be designed to transfer a
valuable development opportunity from the Plan to its party in
interest.
26. According to the UBC, the Plan's only source of income from the
Property is the rental income it generates, and no other potential
tenants have expressed interest in leasing the Property once
Enterprise's lease expires. Moreover, UBC points out that it is highly
unlikely the Plan will secure a long-term lease with another tenant
without significant redevelopment of the Property.\19\ Thus, according
to UBC, once Enterprise left the Property, the Plan would be left
owning an illiquid, unprofitable investment with no potential new
tenants on the horizon.
---------------------------------------------------------------------------
\19\ According to the UBC, the Property was modified to
specifications that suited Enterprise's operations (rental car
business with attached storage and maintenance facilities).
Furthermore, the high fair market value rental rate made a lease for
use by a different car rental agency unlikely. See Proposed
Exemption at 89 FR 79955.
---------------------------------------------------------------------------
27. UBC maintains that the Plan is not seeking to devote the
significant time and plan assets it would take to redevelop the
Property itself because of the high cost and time required for
redevelopment, the associated risks, and the Plan's significant real
estate portfolio. In this regard, the Plan's Independent Fiduciary
stated, among other things, that the potential lack of income or
investment gain from the Property over a several year development
period (compared to an assumed 7.5 percent return on Fund 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 Transaction, all seem unnecessary and speculative risks for
the Plan to take on when compared to the availability of a one-time
Sale to a willing buyer. In addition to avoiding the above costs and
risks, according to UBC, the Sale allows the Plan to secure significant
profits and diversify its plan assets into more liquid investments.\20\
UBC notes again that if its Application is granted, UBC will pay the
Plan at least $34,090,000, which includes $3,410,000 in additional
proceeds due to the Assemblage Increase, which would not be received by
the Plan in a third-party sale.
---------------------------------------------------------------------------
\20\ See the Proposed Exemption at 89 FR 79957 through 58 for an
extended discussion of the Independent Fiduciary's analysis and
determinations.
---------------------------------------------------------------------------
28. UBC's comment provides further that the Plan does not have
sufficient resources to purchase the Adjacent Property from UBC and
develop and manage the entirety of the Consolidated Property (which is
the UBC's intended use of the Property), which would be costly, risky,
and result in an overweighting of real estate for the Plan's investment
allocations. Noting the Appraisal Report, the UBC states in its comment
that the estimated cost to redevelop the 19.25-acre Property with just
one building alone could exceed $60 million. The UBC currently
estimates that the cost of purchasing the Property and building two
warehouses on the Consolidated Property will exceed $120 million and
could take more than three years. According to the UBC, if the Plan
attempted to redevelop the Consolidated Property, these high
redevelopment costs would impose a tremendous amount of risk on the
Plan's ability to maintain a sufficient amount of liquid investments
for the payment of benefits to its participants and beneficiaries.
29. The UBC also states that the Plan would lose the opportunity to
reinvest sales proceeds into more liquid and diversified investments,
which may have negative consequences for its participants and
beneficiaries. In short, if the Plan were to purchase the UBC's parcel
and develop the Consolidated Block, it would face an overconcentration
of more than $120 million in a single real estate asset, along with the
associated construction risks and lengthy development period. For all
of these reasons, the Plan has decided not to redevelop and market the
Property itself in the hopes of finding another buyer, or purchase the
Adjacent Property and redevelop it, when there is
[[Page 2752]]
a motivated, ready and willing buyer for the Property: the UBC.
Department's Response: The Department notes the Plan's rationale
for its decision to sell the Property to the UBC.
Comment 3--Removal of the Revenue-Sharing Condition in Section
III(h)(2) of the Proposed Exemption
30. As previously discussed in this preamble, section III(h)(2) of
the Proposed Exemption states that ``[i]f 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.'' In its Comment,
the UBC asserts that the Revenue-Sharing Condition would render the
exemption useless to the Applicant for the following reasons:
(I) The condition misapprehends the UBC's immediate intended use of
the Property, inasmuch as there is no intention or need to immediately
expand the ITC.
(II) The condition would create a ``perpetual entanglement''
between the Plan and the UBC, because it would require revenue sharing
in any calendar year in which the Property is not used to expand the
ITC; the Sale would no longer be a one-time sale for cash (contrary to
the condition in section III(a)); the exemption would require
continuous monitoring by the Independent Fiduciary and expenditure of
additional resources by the Plan; and the exemption would require
continuous oversight by the Department. The Applicant also notes that
while the preamble to the Proposed Exemption states that the revenue
sharing obligation would only apply to revenue earned during the 10
years following the date of the sale, the 10-year limit is not in the
condition itself.
(III) The valuation of the Property already considers the revenue
that the UBC might generate from redeveloping the Consolidated Property
into light industrial facilities and then leasing the facilities to
third-party tenants. The Applicant states that requiring the UBC to pay
the purchase price and share revenue as part of the Revenue-Sharing
Condition, is illogical and inconsistent with prior exemptions the
Department has granted for similar transactions. In addition, the
Applicant notes that the UBC estimates it will need to invest at least
$120 million to develop the Consolidated Property into industrial
warehouses that it wishes to build. The Applicant states that requiring
the UBC to share 51 percent of gross rental revenues after such an
investment, in addition to the foregoing reasons, renders the
transaction untenable.
Department's Response: In response to the UBC's comment, the
Department has removed the Revenue-Sharing Condition. The Department
notes that, based on the representations of the Independent Fiduciary,
the Sale will provide the Plan with a significantly greater amount of
proceeds than a sale to an unrelated third party, providing a
substantial benefit to the Plan's participants and beneficiaries. Based
on this factor and the points raised by the UBC in its comment, the
Department finds that the exemption is in the interest of the Plan
without including the Revenue Sharing Condition.
Comment 4--Agreement to the Sale Proceeds Clawback Condition at Section
III(h)(1) of the Proposed Exemption
31. As previously discussed in this preamble, section III(h)(1) of
the proposed exemption states that ``[i]f 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#26430b6963626642494a08414950"><span class="__cf_email__" data-cfemail="33561e7c767773575c5f1d545c45">[email protected]</span></a> within 90 days after the date of such sale.''
32. UBC states its agreement with this condition in its comment
letter, because it has no intention of selling the Property within the
next 10 years. Therefore, the Department has finalized this provision
as proposed, and renumbered section III(h)(1) as section III(h), in
order to reflect the Department's removal of section III(h)(2).
Comment 5--Correction of Ministerial Errors
33. Representation 15 of the Proposed Exemption states, in
pertinent part, that ``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.''
34. UBC states that the foregoing figures are erroneous, and UBC
represents that Shumaker received less than 0.02 percent of its gross
revenue for federal income tax year 2021 from its engagement as the
Plan's independent fiduciary with respect to the proposed Sale (and the
Independent Fiduciary has not received any additional compensation
since). The Applicant asserts that this percentage represents the sole
amount of revenue received by the Independent Fiduciary from any party
in interest with respect to its Application.
Department's Response: The Department acknowledges this update to
the Proposed Exemption. Consistent with the Applicant's comment, the
Independent Fiduciary's statement, dated December 27, 2022, provides
that ``revenue received from our engagement as independent fiduciary
for United Brotherhood of Carpenters Pension Fund is less than 0.02
percent of the gross revenue of Shumaker, Loop and Kendrick, LLP for
the prior federal income tax year.'' The Department notes that the
Independent Fiduciary would have met the compensation threshold set
forth in the Department's exemption procedure regulation
notwithstanding the Department's erroneous reference to 3.3
percent.\21\
---------------------------------------------------------------------------
\21\ 29 CFR 2570.31(h)(1). The procedures that govern the
Applicant's request for an exemption (the Exemption Procedures) are
set forth in 29 CFR part 2570, subpart B at 76 FR 66637, 66644
(October 27, 2011).
---------------------------------------------------------------------------
Comment From the General Public
35. The Department received a written comment from a Plan
participant who requested a hearing on the issue of selling Plan assets
to a party in interest. The commenter stated that they would only
approve the sale if the Property were put out for a public ``RFP''
(request for proposal) and the UBC were provided a ``right of first
refusal'' at above the appraised price and above any other RFPs. The
commenter stated that this would be the only sure way for the Plan to
maximize its revenue and return
[[Page 2753]]
on investment and to continue on a sound basis. The commenter further
noted that the fiduciary responsibility of the trustees is to the Plan
and not to their employer.
Department's Response: The Department agrees with the commenter
that any sale of the Property by the Plan should maximize the Plan's
revenue and return on investment. To achieve this result, the
Department reviewed multiple appraisals submitted by a QIA, a report
and additional information submitted by a QIF, and performed a robust
analysis of the Plan's rationale for the Sale and the reasons that the
UBC wanted to purchase the Property. Based on this review, the
Department expects that the Plan will receive approximately $4,317,500
to $4,620,000 more in net proceeds by selling the property to UBC than
it would receive in a sale to an unrelated third party. Further
strengthening the Department's expectation, the Department developed a
novel condition, the Sale Proceeds Clawback Condition, which protects
the Plan in the event UBC sells the Property during the 10-year period
that commences immediately following the date it purchased the Property
from the Plan. After careful review of the record attributable to this
exemption, including the commenter's comment, and the exemption's
protective conditions, the Department believes that the exemption for
the Sale provides the Plan with a meaningful benefit that the Plan may
not otherwise receive from a third-party sale, and is protective of the
rights of participants and beneficiaries of the Plan. For clarity, the
Department notes that the fair market value and Sale price, as
determined by the Independent Fiduciary and QIA, must reflect the fair
market value of the Property free and clear of any encumbrances, and
without any reduction based on the existence of the Clawback Condition.
Regarding the commenter's request for a hearing, the Department
notes that its regulations provide that the Department may decline to
hold a hearing where, among other things, the only issues identified
for exploration at the hearing are matters of law; or the factual
issues identified can be fully explored through the submission of
evidence in written (including electronic) form.'' \22\ The commenter
has not provided a general description of the evidence to be presented
at a hearing as required by the Department's Exemption Procedure
Regulation. Furthermore, the commenter has not identified any factual
issues that have not been fully explored through the submission of
written evidence provided to the Department by UBC. Accordingly, the
Department declines the commenter's request for a hearing.\23\
---------------------------------------------------------------------------
\22\ See 29 CFR 2570.46(a), found at 76 FR 66653 of the
Department's Exemption Procedures Regulation.
\23\ 29 CFR 2570.46(b), found at 76 FR 66653 of the Exemption
Procedures.
---------------------------------------------------------------------------
Other Revisions
36. On its own motion, the Department made the following revisions
to the operative language of the Proposed Exemption.
(i) In order to clarify the elements that comprise the Sale price
of the Property, i.e., at the time of the Sale, the UBC must pay the
greater of: $34,090,000; or the fair market value of the Property, plus
the Assemblage Increase and Contributory Costs, as established on the
date of the Sale, the Department is modifying section III(b) to read,
``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 plus the
Property's Assemblage Increase, as established by the QIA in an updated
appraisal of such Property on the date of the Sale, plus the Plan's
Contributory Costs (together, the Sale Proceeds). The Sale Proceeds, as
determined by the Independent Fiduciary and QIA, must reflect the fair
market value of the Property free and clear of any encumbrances, and
without any reduction based on the existence of the Subsequent Sale
Proceeds Subject to Clawback Condition.''
(ii) The term ``Assemblage Increase'' is now defined in section
I(b) to mean an increase to the Property's ``as is'' fair market value
to account for the special value that the Property has to the UBC
because it is adjacent to a 10.89-acre parcel of property owned by the
UBC that is adjacent to the Property, as determined by a QIA.
(iii) The term ``Contributory Costs'' is now defined in section
I(f) to mean certain costs attributed to architect, engineer, and
development studies and other activities paid for by the Plan to date
for the benefit of the UBC and are not reflective of the value to the
general market. These costs are valued in the 2022 Appraisal at
approximately $270,000.
(iv) In order to provide more flexibility in the event the Plan
needs to substitute the Independent Fiduciary, the Department is
modifying section III(c) defining the term ``Independent Fiduciary'' to
read, ``The term `Independent Fiduciary' means Shumaker, Loop &
Kendrick LLP, or any successor thereto, engaged by the Plan and that
conforms to the qualified independent fiduciary requirements described
in the Department's procedures for requesting an exemption at 29 CFR
2570.34(e) and (f), found at 89 FR 4695 (January 24, 2024). The Plan
fiduciaries must provide the information required by the procedures to
the Department within 30 days after such successor is hired.''
(v) In order to provide more flexibility in the event the Plan
needs to substitute the QIA, the Department is modifying section I(f)
defining the term ``QIA'' to read, ``The term `QIA' means Cushman &
Wakefield of Nevada, Inc., or any successor thereto, engaged by the
Independent Fiduciary and that conforms to the qualified independent
appraiser requirements described in the Department's procedures for
requesting an exemption at 29 CFR 2570.34(c), and (d) found at 89 FR
4694 (January 24, 2024). The Plan fiduciaries must provide the
information required by the procedures to the Department within 30 days
after such successor is hired.''
(vi) The Department is modifying section II to refer as well to
certain corresponding provisions of Code section 4975. Specifically,
section II of the grant notice reads as follows: ``The restrictions of
ERISA sections 406(a)(1)(A) and 406(a)(1)(D), and 406(b)(1) and (b)(2),
and the sanctions resulting from the application of Code section 4975,
by reason of Code sections 4975(c)(1)(A), (D), and (E), 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.''
(vii) The Department is modifying section III(d) to read, ``The
Plan fiduciaries prudently determined that the Sale is in the Plan's
best interest and for no less than the fair market value of the
Property, free and clear of any encumbrances.''
(viii) The Department is modifying section III(g)(2) to read, ``The
Independent Fiduciary has not and will not enter into any agreement,
arrangement or understanding that violates either ERISA section 410 or
the Department's Regulations codified at 29 CFR 2509.75-4.''
The Department also made several minor, non-substantive revisions
that are intended to clarify the exemption and/or correct scrivener's
errors.
Conclusion
37. The Department has carefully considered the issues expressed by
the commenters. After giving full consideration to the entire record,
including the comments and the hearing request, the Department has
determined
[[Page 2754]]
to grant the exemption subject to the modifications and clarifications
described herein. In granting this exemption, the Department has relied
on the representations of the Applicant. If any material statement in
the Application, final exemption or the Applicant's Comment is not, or
may no longer be, completely and factually accurate, the Applicant and
recipient of the exemptive relief provided herein must immediately
alert the Department.\24\
---------------------------------------------------------------------------
\24\ The Representations stated herein are based on UBC's
representations provided in its exemption application, comments, and
supporting submissions, including those of the Independent
Fiduciary, and do not reflect factual findings or opinions of the
Department unless indicated otherwise. The Department notes that the
availability of this exemption is subject to the express condition
that the material facts and representations contained in application
D-12084 are true and complete at all times, and accurately describe
all material terms of the transactions covered by the exemption. If
there is any material change in a transaction covered by the
exemption, or in a material fact or representation described in the
application, the exemption will cease to apply as of the date of the
change.
---------------------------------------------------------------------------
38. For further information regarding the comments and other
matters discussed herein, interested persons are encouraged to obtain
copies of the Application (Exemption Application No. D-12084) the
Department is maintaining in this case from EBSA's Public Disclosure
Room (U.S. Department of Labor, Room N-1515, 200 Constitution Avenue
NW, Washington DC 20210 (202.693.8673)).
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 participants
and beneficiaries of the plan and in a prudent fashion 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) As required by ERISA section 408(a) and/or Code section
4975(c)(2), the Department hereby finds that the exemption is (1)
administratively feasible, (2) in the interests of the plan and of its
participants and beneficiaries, and (3) protective of the rights of the
participants and beneficiaries of the plan;
(3) The exemption is supplemental to and not in derogation of any
other ERISA provisions 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 availability of this exemption is 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 transaction
which is the subject of the exemption.
Accordingly, the following exemption is granted under the authority
of ERISA section 408(a) and/or Code section 4975(c)(2) and in
accordance with the procedures set forth in 29 CFR part 2570, subpart B
at 76 FR 66637, 66644 (October 27, 2011).
Exemption
Section I. Definitions
(a) The term ``Applicant'' or ``UBC'' means United Brotherhood of
Carpenters and Joiners of America.
(b) The term ``Assemblage Increase'' means an increase to the
Property's ``as is'' fair market value, as determined by a QIA, to
account for the special value that the Property has to the UBC because
it owns a 10.89-acre real estate parcel that is adjacent to the
Property.
(c) The term ``Bermuda LLC'' means Bermuda Hidden Well, LLC.
(d) 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.
(e) The term ``Consolidated Property'' means a 30.14-acre combined
block of property composed of the Property and a 10.89-acre parcel of
property owned by the UBC that is adjacent to the Property.
(f) The term ``Contributory Costs'' means certain costs attributed
to architect, engineer, and development studies and other activities
paid for by the Plan to date for the benefit of the UBC and are not
reflective of the value to the general market. These costs are valued
in the 2022 Appraisal at approximately $270,000.
(g) The term ``Independent Fiduciary'' means Shumaker, Loop &
Kendrick LLP, or any successor thereto, engaged by the Plan and that
conforms to the qualified independent fiduciary requirements described
in the Department's procedures for requesting an exemption at 29 CFR
2570.34(e) and (f), found at 89 FR 4695 (January 24, 2024). The Plan
fiduciaries must provide the information required by the procedures to
the Department within 30 days after such successor is hired.
(h) The term ``Plan'' means United Brotherhood of Carpenters
Pension Fund.
(i) 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.
(j) The term ``QIA'' means Cushman & Wakefield of Nevada, Inc., or
any successor thereto, engaged by the Independent Fiduciary and that
conforms to the qualified independent appraiser requirements described
in the Department's procedures for requesting an exemption at 29 CFR
2570.34(c) and (d), found at 89 FR 4694 through 95 (January 24, 2024).
The Plan fiduciaries must provide the information required by the
procedures to the Department within 30 days after such successor is
hired.
(k) The term ``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.
(l) The term ``Trustees'' means the six (6) trustees on the Plan's
Board 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
The restrictions of ERISA sections 406(a)(1)(A) and 406(a)(1)(D),
and 406(b)(1) and (b)(2), and the sanctions resulting from the
application of Code section 4975, by reason of Code sections
4975(c)(1)(A), (D), and (E), 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 plus the
Property's Assemblage
[[Page 2755]]
Increase, as established by the QIA in an updated appraisal of such
Property on the date of the Sale, plus the Plan's Contributory Costs
(together, the Sale Proceeds). The Sale Proceeds, as determined by the
Independent Fiduciary and QIA, must reflect the fair market value of
the Property free and clear of any encumbrances, and without any
reduction based on the existence of the Subsequent Sale Proceeds
Subject to Clawback Condition;
(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 is in
the Plan's best interest and for no less than the fair market value of
the Property, free and clear of any encumbrances.
(e) The terms and conditions of the Sale are at least as favorable
to the Plan as those obtainable in 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) ensure compliance with the general terms of the Sale and with
the conditions of the exemption;
(11) take any appropriate actions to safeguard the interests of the
Plan and its participants and beneficiaries; and
(12) 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;
(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 either ERISA
section 410, or the Department's Regulations codified at 29 CFR
2509.75-4;
(h) Subsequent Sale Proceeds Subject to Clawback Condition. 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
Independent Fiduciary and QIA may not reduce the sale price paid to the
Plan or the fair market value of the Property based on the Clawback
Condition. 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#781d55373d3c381c1714561f170e"><span class="__cf_email__" data-cfemail="afca82e0eaebefcbc0c381c8c0d9">[email protected]</span></a> within 90 days
after the date of such sale.
(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
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
[[Page 2756]]
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: The exemption will be in effect on January 13,
2025.
Signed at Washington, DC.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2025-00405 Filed 1-10-25; 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 January 13, 2025.
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.