Notice2025-17391
Proposed Exemption for Certain Prohibited Transactions Involving the International Union of Operating Engineers Local Union 627 Training Fund of Oklahoma (the Plan or the Applicant) Located in Oklahoma City, OK
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
September 10, 2025
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This proposed exemption would permit certain loans from the International Union of Operating Engineers Local Union 627 (Local 627) to the Plan, so the Plan can purchase heavy machinery to fulfill its mission. As described below, absent an exemption, the loans would violate certain prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Full Text
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<title>Federal Register, Volume 90 Issue 173 (Wednesday, September 10, 2025)</title>
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[Federal Register Volume 90, Number 173 (Wednesday, September 10, 2025)]
[Notices]
[Pages 43635-43640]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-17391]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Exemption Application No. L-12004]
Proposed Exemption for Certain Prohibited Transactions Involving
the International Union of Operating Engineers Local Union 627 Training
Fund of Oklahoma (the Plan or the Applicant) Located in Oklahoma City,
OK
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed exemption.
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SUMMARY: This proposed exemption would permit certain loans from the
International Union of Operating Engineers Local Union 627 (Local 627)
to the Plan, so the Plan can purchase heavy machinery to fulfill its
mission. As described below, absent an exemption, the loans would
violate certain prohibited transaction provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
DATES:
Exemption date: If granted, the exemption will be in effect as of
the date the grant notice is published in the Federal Register.
Comments due: Written comments and requests for a public hearing on
the proposed exemption must be received by the Department of Labor by
October 27, 2025.
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. L-12004:
<bullet> via email to <a href="/cdn-cgi/l/email-protection#e085cdafa5a4a0848f8cce878f96"><span class="__cf_email__" data-cfemail="41246c0e040501252e2d6f262e37">[email protected]</span></a>; or
<bullet> Electronically at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the
``Submit a comment'' instructions.
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: Mr. Nicholas Schroth of the Department
of Labor at (202) 693-8571 (This is not a toll-free number).
SUPPLEMENTARY INFORMATION:
Comments: Persons are encouraged to submit all comments
electronically and not to follow with paper copies. 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 if their request includes: (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 of Labor (hereinafter, the Department) will grant a hearing
request made in accordance with the requirements above when the
Department finds that a hearing is necessary to fully explore material
factual issues identified by the requestor, and the Department will
publish a hearing notice in the Federal Register. The Department may
decline to hold a hearing if it finds that: (1) the request for the
hearing does not meet the requirements stated above; (2) the only
issues identified for exploration at the hearing are matters of law; or
(3) the factual issues identified in the request can be fully explored
through the submission of evidence in written (including electronic)
form.
Warning: The Department will include all comments received in the
public record without change and will make them available online at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. The Department notes that it will include
any personal
[[Page 43636]]
information provided in the public record and online, unless the
commenter claims that any of the information included is confidential
or the disclosure of such information 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) and
confidential business information that you do not want publicly
disclosed. 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.
Benefits of the Exemption: This exemption would permit the Plan to
receive Loans at a lower cost and on better terms than would be
available from third party lenders.
Summary of Facts and Representations <SUP>1</SUP>
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\1\ The Summary of Facts and Representations is based on the
Applicant's representations provided in its exemption application
and does not reflect factual findings or opinions of the Department,
unless indicated otherwise. The Department notes that availability
of this exemption is subject to the express condition that the
material facts and representations made by the Applicant in
Application L-12004 are true, complete, and accurately describe all
material terms of the transaction(s) 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 may cease to be effective, with such
determination made at Department's sole discretion. See 29 CFR
2570.49.
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Background
1. The Plan is an apprenticeship welfare plan that provides
training to apprentices and operating engineers who are members of
Local 627, a labor union located in Oklahoma. The Plan had $3,099,767
in total assets and $2,943,458 in net assets, as of August 31, 2022.
2. The Plan has six trustees (the Plan Trustees): three appointed
by Local 627 (the Union Trustees); and three appointed by signatory
employers to the collective bargaining agreement (the Employer
Trustees). The Employer Trustees are not affiliated in any way with
Local 627.
3. The Plan's mission is to develop highly skilled heavy machinery
equipment operators and stationary/facilities engineers for the
construction, pipeline, stationary, and environmental industries. To
achieve this, the Plan needs heavy equipment, such as large cranes,
bulldozers, tractors, trucks, graders, and forklifts.
The Plan's Need To Acquire New Equipment
4. Historically, the Plan has leased the majority of its equipment
through a partnership with the Department of Labor's Employment and
Training Administration (ETA).\2\ That partnership ended on September
30, 2021.\3\ Since then, the Plan has not leased or purchased
additional equipment.
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\2\ ETA previously sponsored the National Training Fund Excess
Property Program (the NTF Program), which generally facilitated the
lease of pre-used government-owned property to private non-profit
parties.
\3\ The Department understands that, in winding up the NTF
Program, ownership of the equipment that the Plan had been using was
formally transferred to the Plan.
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The Requested Exemption
5. The Applicant represents that at some point the Plan will need
to acquire additional equipment to meet the training needs of the Plan.
The requested exemption would permit the Plan to receive one or more
Loans from Local 627, so the Plan can purchase such equipment. As
discussed further below, each Loan must be approved in advance by the
Plan's Independent Fiduciary, following the Independent Fiduciary's
review of the Plan's needs and the Loan's terms. Nothing in this
exemption would preclude the Plan Trustees from causing the Plan to
enter into a loan that is not prohibited under ERISA, with an unrelated
third party.
6. Each Loan must be consistent with the Plan's written ``Operating
Procedures for [the] Equipment Loan Program'' (the Loan Procedures),
and the Loan Procedures must govern the operation of the Plan's Loan
program (the Loan Program). The Union Trustees must not have any role
in the operation of the Loan Program and must not participate in any
discussion or vote regarding the Loan Program.
7. If the exemption is granted, each Loan will have fixed terms
regarding payments, interest rate, and duration. The interest rate for
each Loan must be set at two (2) percentage points below the U.S. Prime
lending rate,\4\ except that the interest rate may not be lower than 1%
or higher than 3%.\5\ The Department understands that a commercial loan
transaction conducted at arm's-length among unrelated parties would
rely on the U.S. Prime lending rate as an objective measurement of the
market's loan rates.
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\4\ The Department understands that the U.S. Prime lending rate
is a key base interest rate used by banks to set the rates for
loans. The U.S. Prime lending rate is generally set at 3% above the
Fed Funds Rate which determined by the Federal Reserve Board and
used for overnight loans between banks. For reference, the U.S.
Prime lending rate as of August 12, 2025, is 7.5%.
\5\ The following example is illustrative of the Department's
understanding of the mechanics of how the interest rate for a Loan
is calculated: if the U.S. Prime Lending Rate (Prime) is 4.0%, then
the rate of a Loan will be 2.0% since the Loan Procedures require
the rate to be 2% below Prime. However, if Prime is 2.0%, then the
rate of a Loan must be 1.0%, since the Loan Procedures provide that
the lowest it can be is 1.0%. However, the Independent Fiduciary may
not cause the Plan to enter into the Loan if better terms are
available from unrelated lenders. If Prime is 5.0% or higher, then
the rate of a Loan must be 3.0%, since that is the highest it can be
under the Loan Procedures.
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The Independent Fiduciary
8. On March 12, 2025, the Employer Trustees, acting on behalf of
the Plan, entered into an ``Independent Fiduciary Services Agreement''
(the QIF Agreement) with Judith P. Broach, Esq. (Ms. Broach).\6\ The
QIF Agreement does not: contain any provisions that violate ERISA
section 410; include 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; or waive any rights, claims, or remedies of the Plan
under ERISA, state, or Federal law against the Independent Fiduciary
with respect to any transaction described in this exemption.\7\
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\6\ The Applicant represents that the Employer Trustees outlined
the critical and necessary qualifications for the selection of the
Independent Fiduciary, screened multiple candidates based on the
individual's qualifications, rated all qualified candidates, and
finally selected Ms. Broach for the position.
\7\ This restriction also applies to the independent appraiser
discussed below. However, the restriction does not limit the ability
of the Independent Fiduciary or the independent appraiser to acquire
liability insurance and does not limit the terms of that insurance.
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9. Ms. Broach represents that she has regularly advised boards of
trustees regarding their fiduciary responsibilities and the prohibited
transactions rules of ERISA, has experience in hiring qualified
appraisers and in analyzing appraisal reports, and has served as an
[[Page 43637]]
independent fiduciary of numerous employee benefit plans both by
contractual arrangement and court appointment. Ms. Broach represents
that neither she nor any entity related to her has a prior or current
relationship with any party in interest involved in the proposed
transaction, including the Plan, Local 627, and any individual
performing services for the Plan. Ms. Broach represents that her fee
for acting as the QIF will amount to no more than 5% of her gross
income in any year.\8\
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\8\ The Department notes that, in connection with an exemption
application, if a prospective independent fiduciary is projected to
receive revenues from parties in interest to the transaction (and
their affiliates), and the plan, that is greater than 2% of such
fiduciary's annual revenues based upon its prior income tax year,
such fiduciary will not be presumed to be independent based solely
on the revenue it receives, but it may nonetheless be considered to
be independent ``based upon other facts and circumstances provided
that it receives or is projected to receive revenues that are not
more than 5% within the current federal income tax year from parties
in interest (and their affiliates) to the transaction based upon its
prior income tax year.'' See 29 CFR 2570.31(j), 76 FR 66646 (October
27, 2011).
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10. Under the QIF Agreement, Ms. Broach agrees, represents, and
certifies that she will perform her fiduciary duties with the care,
skill, prudence, and diligence under the circumstances prevailing that
a prudent person acting in a like fiduciary capacity and familiar with
such matters would use in an enterprise of like character and with like
aims. Ms. Broach certifies through the QIF Agreement that she is
qualified by education, training, experience, and professional
activities to perform the analysis, review, and determinations
necessary to evaluate and maintain the Plan's ongoing heavy equipment
needs as Independent Fiduciary. The Plan may reimburse the Independent
Fiduciary for the reasonable costs of maintaining these coverages. The
QIF Agreement provides that Ms. Broach will be reimbursed for all
reasonable out-of-pocket expenses related to the QIF Services.
Independent Fiduciary Duties <SUP>9</SUP>
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\9\ The following is a summary of the conditions of the proposed
exemption. Please see Section II of the proposed exemption, below,
for a complete description of all the terms and conditions of the
proposed exemption.
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11. As Independent Fiduciary, Ms. Broach must, in advance of each
Loan: (a) review the needs, assets and mission of the Plan, and
determine that it would be prudent for the Plan to enter into the Loan;
(b) negotiate (if appropriate) and approve the terms and conditions of
the Loan; (c) determine that the terms of the Loan are in the interests
and protective of the Plan and its participants and beneficiaries; (d)
have sole discretionary authority to approve the Loan or to retain the
services of a qualified independent appraiser (the Independent
Appraiser) to evaluate a piece of Equipment that either needs to be
purchased or replaced.
12. During the existence of any Loan made under the Loan Program,
the Independent Fiduciary must: (a) monitor the terms of each Loan on a
continuing basis to ensure that the parties adhere to the terms and
conditions of each Loan and enforce the Plan's rights under any Loan
and the Loan Procedures; (b) ensure that the Loan Program remains in
the best interest of the Plan and its participants and beneficiaries;
(c) monitor compliance with the terms of the exemption to ensure that
the conditions are adhered to; and (d) monitor the Equipment to ensure
that its usage is consistent with the mission of the Plan.\10\ Finally,
if the Independent Fiduciary discovers any conduct that violates the
conditions for the exemption, it must notify the Department by email at
<a href="/cdn-cgi/l/email-protection#8eeba3c1cbcaceeae1e2a0e9e1f8"><span class="__cf_email__" data-cfemail="50357d1f151410343f3c7e373f26">[email protected]</span></a> within seven (7) calendar days of the discovery,
describing the conduct involved and steps taken or intended to be taken
by the Independent Fiduciary to remedy the breach.
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\10\ The Department cautions that any use of the Equipment by an
Employer Trustee for its own purpose would constitute a prohibited
transaction that is outside the scope of this exemption, if granted.
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13. Annual Reporting. The Independent Fiduciary must prepare a
written report at the end of each calendar year containing a summary of
any new and outstanding Loans made under the Loan Program, including
but not limited to a description of the Equipment purchased using
proceeds from such Loans; and a certification that the Independent
Fiduciary determined, in accordance with its fiduciary duties under
ERISA, that any new and outstanding Loans: (a) are necessary for the
Plan's operation; (b) are on more favorable terms (including lower
overall cost) to the Plan than those offered by a third-party lender
for a comparable loan; (c) were entered into for the benefit of the
Plan and not Local 627; and (d) meet all the requirements of the Loan
Procedures and this exemption (the Annual Report). The Independent
Fiduciary must deliver the Annual Report to the Department and the Plan
Trustees no later than March 31st of the year that immediately follows
the calendar year to which the report relates. The Annual Report must
also describe any amendment to the Loan Procedures.
Other Conditions
14. The material facts and representations set forth in the Summary
of Facts and Representations must be true and accurate at all times,
and the Plan must retain for six years the records necessary for the
Department to ascertain whether the conditions for relief have been
adhered to. The Plan must not pay any fees or expenses or pre-payment
penalties in connection with any Loan.\11\ Each Loan must be secured
solely with the Equipment purchased with the Loan. At the time the Loan
is entered into, the interest rate on the Loan must not be greater than
the interest rate on a substantially similar loan that could be
obtained from an unrelated, third-party lender.
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\11\ The Department notes that the amount being financed with a
Loan may include costs for shipping and for updating the Equipment
for the Plan's use and operations (including, but not limited to new
tires, tracks, hoses, cables, safety-related equipment, and
electronic upgrades, etc.).
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15. If the Plan defaults on a Loan, Local 627 may declare the
entire Loan immediately due and payable 30 days after prior written
notice or repossess the underlying Equipment securing the defaulted
Loan 30 days after prior written notice. However, in such event, the
Plan will not be liable for any costs associated with the repossession
of the Equipment and will not be liable for any amount remaining on the
Loan. The terms of each Loan must provide that, if the Equipment that
is the subject of the Loan is repossessed by Local 627 consistent with
the terms of this exemption, and the Independent Fiduciary determines
that the fair market value of the Equipment exceeds the Loan balance,
Local 627 must pay the Plan any such excess within 30 days of the
repossession.
16. The Employer Trustees may amend the Loan Procedures if the
amendment is consistent with this exemption and approved by the
Independent Fiduciary. The Independent Fiduciary may also propose to
amend the Loan Procedures consistent with the terms of this exemption,
in consultation with the Employer Trustees, to facilitate compliance
with its obligations under the exemption. The Loan Program may be
terminated by a majority vote of the Plan's Trustees after paying off
all outstanding Loans between the Plan and Local 627, unless the Plan
is prudently required to terminate the Loan Program immediately, which
termination may be made by majority vote of the Employer Trustees only.
Unless the Employer Trustees immediately terminate the
[[Page 43638]]
Loan Program, the Plan will provide Local 627 with 90 days' advance
written notice of the Plan's intent to cease the Loan Program and Local
627 must provide the Plan with 180 days' advance written notice of its
intent to stop issuing Loans under the Loan Program.
Exemptive Relief Requested and Analysis
17. ERISA section 406(a) prohibits a wide range of transactions
between a plan and a party in interest with respect to the plan. As a
labor union whose members are covered under the Plan, Local 627 is a
party in interest with respect to the Plan under ERISA section
3(14)(D), because it is an employee organization whose members are
covered under the Plan.
18. ERISA section 406(a)(1)(A) prohibits a sale or exchange, or
leasing, of any property between a plan and a party in interest. If
this exemption is granted and the Plan purchases Equipment with Loan
proceeds, the Plan will grant Local 627 a security interest in the
purchased Equipment. Therefore, the Plan's receipt of Loan proceeds in
exchange for Local 627's receipt of a security interest in the
purchased Equipment would violate ERISA section 406(a)(1)(A).
19. ERISA section 406(a)(1)(B) prohibits the lending of money or
other extension of credit between the plan and a party in interest.
Each Loan would violate ERISA section 406(a)(1)(B) because it would
involve Local 627 lending funds to the Plan.
20. ERISA section 406(a)(1)(D) prohibits the transfer to, or use by
or for the benefit of, a party in interest, of any assets of a plan.
The Plan's repayment of a Loan would violate ERISA section 406(a)(1)(D)
because it would involve the transfer of Plan assets to Local 627.
21. ERISA section 406(b)(1) prohibits a fiduciary from dealing with
a plan's assets in their own interest or own account. Because the Union
Trustees participated in the creation and development of the Loan
Program, and the Union Trustees have an interest in Local 627 that
could affect their best judgment as Plan fiduciaries, Loans by Local
627 to the Plan under the Loan Program may violate ERISA section
406(b)(1).
22. Finally, ERISA section 406(b)(2) prohibits a fiduciary from
acting in any transaction involving the plan on behalf of a party whose
interests are adverse to the Plan's interests. Because the Union
Trustees participated in the creation and development of the Loan
Program, and the Union Trustees have an interest in Local 627 that are
adverse to the Plan's interests, Loans by Local 627 to the Plan under
the Loan Program may violate 406(b)(2).
Statutory Findings
23. ``The Proposed Exemption is Administratively Feasible.'' The
Department has tentatively determined that the requested exemption is
administratively feasible for the Department, because, among other
things, the Independent Fiduciary will represent the interests of the
Plan for all purposes with respect to each Loan and its repayment, and
will provide annual reports to the Department.
24. ``The Proposed Exemption is in the Interest of the Plan.'' The
Department has tentatively determined that the proposed exemption is in
the interest of the Plan because, among other things, each Loan will be
on more favorable terms (including lower overall cost to the Plan) than
those offered by a third-party lender for a comparable loan.
25. ``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 and its participants and
beneficiaries because, among other things, the Plan will be protected
by an Independent Fiduciary who will have the sole discretionary
authority to approve a Loan on behalf of the Plan.
Notice to Interested Persons
Interested persons include participants and beneficiaries of the
Plan. The Applicants will provide notification to interested persons by
electronic mail and/or first-class mail within fifteen (15) calendar
days of the date of the publication of the Notice in the Federal
Register. The mailing will contain a copy of the Notice, as it appears
in the Federal Register, plus a copy of the Supplemental Statement that
is required pursuant to 29 CFR 2570.43(a)(2), which advises the
interested persons of their right to comment and to request a hearing.
The Department will not consider comments and requests for a hearing it
receives later than forty-five (45) days from the date of the
publication of the Notice in the Federal Register.
All comments will be made available to the public.
Warning: If you submit a comment, the Department 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. 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) does not relieve a fiduciary or other party
in interest from certain other provisions of ERISA, 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);
(2) Before an exemption may be granted under ERISA section 408(a),
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, 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
The Department is considering granting the proposed exemption under
the authority of ERISA Section 408(a), and in accordance with the
procedures set forth in the exemption procedure regulation.\12\
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\12\ 29 CFR part 2570, subpart B (76 FR 66637, 66644, October
27, 2011).
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Section I. Covered Transactions
If this proposed exemption is granted and Section II conditions are
met, the restrictions of ERISA sections 406(a)(1)(A), (B), and (D),
406(b)(1), and
[[Page 43639]]
406(b)(2) shall not apply to: one or more loans (the Loan(s)) by the
International Union of Operating Engineers Local Union 627 (Local 627)
to the International Union of Operating Engineers Local Union 627
Training Fund of Oklahoma (the Plan) for the Plan's purchase of heavy
machinery equipment that will solely be used in the Plan's
apprenticeship training (the Equipment); the Plan's repayment of the
Loan(s) to Local 627; and the Plan's grant to Local 627 of a security
interest in the Equipment, provided the conditions set forth in Section
II are met.
Section II. Conditions
(a) The terms and conditions of each Loan are at least as favorable
to the Plan and its participants and beneficiaries as the terms and
conditions that the Plan could have obtained in an arm's-length
transaction with an unrelated third party;
(b) The proceeds of each Loan are used solely for the Plan's
acquisition of a specific piece of Equipment;
(c) The determination to enter into a Loan on behalf of the Plan
must be made by a qualified independent fiduciary prudently selected by
the Employer Trustees (the Independent Fiduciary);
(d) The interest rate on each Loan must be two (2) percentage
points below the U.S. Prime lending rate, provided that the interest
rate for any Loan will be not less than one (1) percent nor greater
than three (3) percent.
(e) At the time the Loan is entered into, the interest rate on the
Loan must not be greater than the interest rate on a substantially
similar loan that could be obtained from an unrelated, third-party
lender;
(f) With respect to each Loan, the Plan will not pay any fees or
expenses, including any prepayment penalty, in connection with the
Loan, or be subject to payment of any other amounts other than
principal and interest, except that the Plan may pay direct expenses
reasonably incurred by the Independent Fiduciary and the Independent
Appraiser in the performance of their duties;
(g) Each Loan must be secured solely with the Equipment purchased
with the Loan. If the Plan defaults on a Loan, then 30 days after prior
written notice delivered to the Employer Trustees, Local 627 may
declare the entire Loan immediately due and payable or commence
proceedings to repossess the underlying Equipment securing the
defaulted Loan. However, in such an event, the Plan will not be liable
for any costs or expenses associated with the repossession of the
Equipment, including legal fees, administrative fees, or expenses
related to relocating any Equipment, and the Plan will not be liable
for any amount remaining on the Loan. The terms of each Loan must
provide that, if the Equipment that is the subject of the Loan is
repossessed by Local 627 consistent with the terms of this exemption,
and the Independent Fiduciary determines that the fair market value of
the Equipment exceeds the Loan balance, then Local 627 must pay the
Plan such excess within 30 days of the repossession;
(h) The trustees appointed by the employers of members of Local
627, which are signatory to the agreement establishing the Plan
(collectively, or individually, the Employer Trustee(s)) must
unanimously determine in accordance with their fiduciary duties of
loyalty and prudence, in writing, that the Loan Program complies with
the terms of this exemption, if granted, and is an appropriate means to
finance the purchase of the Equipment and is in the best interests of
the Plan and its participants and beneficiaries;
(i) The trustees appointed by Local 627 (collectively, or
individually, the Union Trustee(s)) will not play any role in the
operation of the Loan Program and will not participate in any
discussion or vote regarding the Loan Program, except for the
termination of the Loan Program;
(j) The Independent Fiduciary represents that they understand and
accept the duties and responsibilities to act as a fiduciary under
ERISA when acting as a fiduciary on behalf of the Plan. The Independent
Fiduciary must also perform the following tasks:
(1) Review the needs, assets and mission of the Plan, and determine
that it is prudent for the Plan to enter into each Loan;
(2) Negotiate (if appropriate) and approve the terms and conditions
of each Loan;
(3) Determine that the terms of each Loan are in the interests of,
and protective of, the Plan and the Plan's participants or
beneficiaries;
(4) Continuously represent the Plan's interests for all purposes
with respect to each Loan, including:
(A) monitoring the Loans to ensure that the parties adhere to the
terms and conditions of each Loan agreement;
(B) enforcing the Plan's rights under a Loan's terms and the Loan
Procedures;
(C) taking appropriate steps to ensure that participation in the
Loan Program remains in the best interest of the Plan and its
participants and beneficiaries; and
(D) monitoring the Equipment to ensure its usage is consistent with
the mission of the Plan;
(5) Ensure and verify that all the conditions of this exemption
continue to be met;
(6) Notify the Department by email at <a href="/cdn-cgi/l/email-protection#7510583a303135111a195b121a03"><span class="__cf_email__" data-cfemail="2b4e06646e6f6b4f4447054c445d">[email protected]</span></a> upon
discovering any conduct that violates the conditions for the exemption
within seven (7) calendar days of the discovery, describing the conduct
involved and steps taken or intended to be taken by the Independent
Fiduciary to remedy the breach; and
(7) Annual Summary Reporting: Prepare a written report at the end
of each calendar year containing a summary of any new and outstanding
Loans made under the Loan Program, including but not limited to a
description of the Equipment purchased using proceeds from such Loans;
and a certification that the Independent Fiduciary determined, in
accordance with its fiduciary duties under ERISA, that any new and
outstanding Loans: (a) are necessary for the Plan's operation; (b) are
on more favorable terms (including lower overall cost) to the Plan than
those offered by a third-party lender for a comparable loan; (c) were
entered into for the benefit of the Plan and not Local 627; and (d)
meet all the requirements of the Loan Procedures and this exemption.
The Annual Report must be delivered to the Department and the Plan's
trustees no later than March 31st of the year that immediately follows
the year to which the Annual Report corresponds. The Annual Report must
also describe any amendment to the Loan Procedures;
(k) The Independent Fiduciary's engagement agreement to provide
services in connection with any transaction described in this proposed
exemption must not: (1) contain any provisions that violate ERISA
section 410; (2) include 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; (3) or waive any rights, claims, or remedies of the
Plan under ERISA, state, or Federal law against the Independent
Fiduciary with respect to any transaction described in this exemption;
(l) The Independent Fiduciary has sole authority to retain the
services of a qualified independent appraiser (the Independent
Appraiser), if necessary, to value any of the Plan's Equipment (or
parts of Equipment) that need to be purchased or replaced, provided
that any such Independent Appraiser must
[[Page 43640]]
meet the Department's definition for a qualified independent appraiser
as provided in the Department's regulation codified at 29 CFR
2570.31(i) (as amended). Furthermore, the Independent Appraiser
retained by the Independent Fiduciary may not enter into any agreement,
arrangement or understanding with the Plan, or with the Independent
Fiduciary on behalf of the Plan, that includes any provision that: (1)
provides for the direct or indirect indemnification or reimbursement of
Independent Appraiser by the Plan or another party for any failure to
adhere to its contractual obligations or to state or Federal laws
applicable to the Independent Appraiser's work; or (2) waives 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 Independent Appraiser with respect to the transaction(s)
that are the subject of the exemption;
(m) Termination of the Independent Fiduciary. The Employer Trustees
must provide the Department with notice of the termination of the
Independent Fiduciary's services contract for any reason within 15
business days after the Employer Trustees have knowledge of such
termination. The Employer Trustees must notify the Department before
retaining the services of a new Independent Fiduciary and entering into
any Loan approved by such new Independent Fiduciary, and must provide a
written report to the Department describing the methodology used by the
Employer Trustees to select such Independent Fiduciary containing the
information required by the Department's exemption procedure regulation
at 29 CFR 2570.34(d) (as amended), including a certification that
neither the proposed new Independent Fiduciary nor any entity related
to such new Independent Fiduciary has a prior or current relationship
with the Plan or Local 627. The Independent Fiduciary will be deemed
approved by the Department within 10 business days unless the
Department objects by electronic mail within such time period. The
Department may approve or object to the proposed new Independent
Fiduciary in its sole discretion based on factors established in the
Department's regulation codified at 29 CFR 2570.31(j) (as amended);
(n) The Loan Program is governed by a written set of procedures
(Loan Procedures) requiring that:
(1) The terms of each Loan comply with the provisions of this
exemption, if granted;
(2) Each Loan and each repayment of a Loan comply with the terms of
the Loan Program and the Loan Procedures;
(3) The Loan Procedures may be amended by the Employer Trustees if
the amendment is consistent with this exemption and approved by the
Independent Fiduciary, and the Independent Fiduciary may also propose
to amend the Loan Procedures consistent with the terms of this
exemption, in consultation with the Employer Trustees, to facilitate
compliance with its obligations under the exemption; and
(4) The Loan Program may be terminated by a majority vote of the
Plan's Trustees after paying off all outstanding Loans between the Plan
and Local 627, unless the Plan is prudently required to terminate the
Loan Program immediately, which termination may be by majority vote of
the Employer Trustees only. Unless the Employer Trustees immediately
terminate the Loan Program, the Plan will provide Local 627 with 90
days' advance written notice of the Plan's intent to cease the Loan
Program and Local 627 must provide the Plan with 180 days' advance
written notice of its intent to stop issuing Loans under the Loan
Program;
(o) All the material facts and representations set forth in the
Summary of Facts and Representations are true and accurate at all
times; and
(p) The Plan will maintain, for six (6) years beginning immediately
following any conduct that is taken in relation to any transaction that
is detailed above in Section I, all records necessary to demonstrate
that the conditions of this exemption have been met and make such
records available to the Department within 30 calendar days of the
Department's request.
Exemption date: If granted, the exemption will be in effect as of
the date the grant notice is published in the Federal Register.
Signed at Washington, DC.
Christopher Motta,
Acting Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2025-17391 Filed 9-9-25; 8:45 am]
BILLING CODE 4510-29-P
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</html>Indexed from Federal Register on September 10, 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.