Notice2025-21195
Proposed Exemption for Certain Prohibited Transactions Involving Hawai'i Pacific Health and Its Subsidiary, Straub Clinic & Hospital Located in Honolulu, Hawaii
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
November 26, 2025
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
The Department of Labor (the Department) is considering granting an exemption that would permit the Hawai[revaps]i Pacific Health Retirement Plan (the Plan) to sell a parcel of improved real property (the Property) to Straub Clinic & Hospital (Straub) for at least the greater of $16,247,000 or 10% over the Appraised Value of the Property as of the date of the sale (the Sale). As discussed in the Summary of Facts and Representations section below, absent an exemption, the Sale would be prohibited by the Employee Retirement Income Security Act of 1974 (ERISA) and/or the Internal Revenue Code of 1986 (the Code).
Full Text
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<title>Federal Register, Volume 90 Issue 226 (Wednesday, November 26, 2025)</title>
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[Federal Register Volume 90, Number 226 (Wednesday, November 26, 2025)]
[Notices]
[Pages 54387-54392]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-21195]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Exemption Application No. D-12082]
Proposed Exemption for Certain Prohibited Transactions Involving
Hawai[revaps]i Pacific Health and Its Subsidiary, Straub Clinic &
Hospital Located in Honolulu, Hawaii
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed exemption.
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SUMMARY: The Department of Labor (the Department) is considering
granting an exemption that would permit the Hawai[revaps]i Pacific
Health Retirement Plan (the Plan) to sell a parcel of improved real
property (the Property) to Straub Clinic & Hospital (Straub) for at
least the greater of $16,247,000 or 10% over the Appraised Value of the
Property as of the date of the sale (the Sale). As discussed in the
Summary of Facts and Representations section below, absent an
exemption, the Sale would be prohibited by the Employee Retirement
Income Security Act of 1974 (ERISA) and/or the Internal Revenue Code of
1986 (the Code).
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 by January
16, 2026.
ADDRESSES: All written comments and requests for a hearing should be
submitted to the Employee Benefits Security Administration (EBSA),
Office of Exemption Determinations, Attention: Application No. D-12082:
<bullet> via email to <a href="/cdn-cgi/l/email-protection#f297dfbdb7b6b2969d9edc959d84"><span class="__cf_email__" data-cfemail="17723a5852535773787b39707861">[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: Nicholas Schroth of the Department 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 will grant a hearing request made in accordance with the
requirements above when it finds that a hearing is necessary to fully
explore material factual issues identified by the requestor and 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 information provided in the public record and online,
unless the commenter claims that any of the included information 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), or 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 them in the body of
your comment. If you send an email directly to EBSA without going
through <a href="https://www.regulations.gov">https://www.regulations.gov</a>, your email address will be
automatically captured and included as part of the comment that is
placed in the public record and made available on the internet.
Proposed Exemption
The Department is considering granting this exemption under the
authority of ERISA section 408(a) and in accordance with the
Department's exemption procedures regulation.\1\ The exemption would
provide relief from the restrictions of ERISA sections 406(a)(1)(A) and
(D) and sections 406(b)(1) and (b)(2), discussed below, but would not
provide relief from any other violation of law.\2\
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\1\ 29 CFR part 2570, subpart B (75 FR 66637, 66644, October 27,
2011). The Department's exemption procedures regulation was amended
at 89 FR 4662, on January 24, 2024, with an effective date of April
8, 2024. However, because the application was submitted on December
5, 2022, the procedures in effect as of that date govern. 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 is proposing this exemption under its sole authority.
\2\ Any references hereinafter to sections of ERISA shall be
deemed to refer to the corresponding sections of the Code, unless
indicated otherwise.
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Benefits of the Exemption: The Department is proposing this
exemption based in part on its expectation that the Plan will receive
at least $16,247,000 from the Sale, which represents $1,477,000 more
than the Property's Appraised Value \3\ as of April 1, 2024.
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\3\ ``Appraised Value'' means the greater of a property's ``Fair
Market Value'' or its ``Investment Value'' as determined by an
independent appraiser. These terms are discussed in further detail
below.
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Summary of Facts and Representations <SUP>4</SUP>
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\4\ 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 opinion 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 D-12082 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 the Department's sole discretion. See 29 CFR
2570.49.
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The Applicant and the Plan
1. Hawai[revaps]i Pacific Health is a tax-exempt, charitable
organization that
[[Page 54388]]
operates a health system in Hawaii. Hawai[revaps]i Pacific Health
sponsors the Plan, which is a defined benefit plan with 8,513
participants and $451,900,283 in net assets as of December 31, 2023.
The Plan's named fiduciary and plan administrator is the Hawai[revaps]i
Pacific Health Retirement Plan Finance Committee (Committee).
2. Hawai[revaps]i Pacific Health wholly controls Straub. Straub
owns and operates a medical center located at 888 South King Street,
Honolulu, HI 96813 and is an employer of employees covered under the
Plan.
3. On January 2, 1969, the Plan purchased approximately 31,498
square feet of unimproved land from Pacific Holiday Inc., an unrelated
party. At that time, Straub owned a parcel of real estate that abutted
the Property on two sides. On the date of purchase, the Plan and Straub
entered into a 75-year lease of the Property (the Lease). The Lease
required Straub to construct a building on the Property, and Straub
built a parking garage that stood partially on the Plan's Property and
partially on Straub's abutting property. In 1973, Straub constructed a
hospital building primarily on Straub's property, but a small portion
of the hospital was constructed on the Property.
3. On September 18, 1981, the Department granted PTE 81-71, which
exempted the Lease from ERISA sections 406(a), 406(b)(1) and (b)(2).\5\
The preamble to the proposal for PTE 81-71 required an independent
fiduciary to serve as a trustee to the Plan and to determine whether
entering into the Lease was in the best interests of the Plan, and, if
so to: monitor the Lease; verify the timely collection of rental
payments; oversee the periodic reappraisal of the Property; and
``enforce[ ] those legal remedies as may be available.'' In March,
2001, Straub appointed Central Pacific Bank (CPB) to serve as the
Plan's independent fiduciary for purposes of PTE 81-71, replacing the
prior trustee.\6\ A provision in the Lease required Straub to pay
certain Plan expenses relating to the Property, including taxes,
utilities, and maintenance (Property Expenses).
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\5\ See 46 FR 46438 (September 18, 1981). The Sponsor represents
that the Plan did not need an exemption before PTE 81-71 because
ERISA Section 414(c) provides that ERISA Sections 406 and 407(a)
shall not apply until June 30, 1984, to a lease or joint use of
property involving the plan and a party in interest pursuant to a
binding contract in effect on July 1, 1974. The Sponsor states that
since the Plan and Straub partnership executed the lease in 1969,
they did not need an exemption until 1984. The Department is not
expressing a view whether ERISA section 414(c) applies to the Lease
of the Property prior to the publication of PTE 81-71 as such
matters are outside the scope of this proposed exemption.
\6\ The original independent fiduciary under PTE 81-71 was
American Trust Company of Hawaii, Inc., which merged into Hawaii
Trust Company, Limited, and which further merged into the Bank of
Hawaii (specifically into its trustee division, Pacific Century
Trust). Pacific Century Trust was replaced as the Independent
Fiduciary for purposes of PTE 81-71 by CPB.
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4. From 2006 until 2022, the Plan paid Property Expenses in
violation of the Lease and PTE 81-71.\7\ Straub represented that it is
not possible to ascertain what caused the Plan to pay these expenses
due to a merger involving the Plan and turnover in personnel.
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\7\ Plan assets were used to pay the following expenses: (1)
$54,816 in appraisal fees from 2006 to 2022; (2) $185,310 in rental
income taxes for the Property from 2011 to 2016; (3) $78,880 in
trustee fees from 2011 to 2022; (4) $9,835 in bank fees from 2011 to
2022; and (5) $167,376 in state taxes from 2017 to 2022. The
Applicant represents that the total amount of expenses paid by the
Plan in violation of the lease agreement was $496,217 from 2006 to
2022.
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5. On May 31, 2022, Straub repaid the Plan $315,056, which Straub
states includes all Property Expenses and $148,805.59 in lost earnings
for the funds that the Plan erroneously paid on Straub's behalf for all
years within the then-applicable statute of limitations (i.e. 2015 to
2022). On June 14, 2022, Hawai[revaps]i Pacific Health paid IRS excise
taxes totaling $80,099 relating to the repayment of Plan expenses.
Straub has not yet repaid the Plan approximately $180,185 in Property
Expenses that the Plan erroneously paid from 2006 to 2014 because it
claims the payments fell outside the statute of limitations, although
Straub will be required to repay that amount under the terms of this
exemption, if granted.
The Transaction
6. This proposed exemption, if granted, allows the Plan to sell the
Property to Straub for at least the greater of $16,247,000 or 110% of
the Appraised Value of the Property on the date of Sale. The Applicant
states that Straub intends to incorporate the Property, once purchased,
in the construction of a new medical campus (Straub Medical Center).
The Applicant represents that development of the Straub Medical Center
began on its own property in December 2021. If the exemption is
granted, the second phase of the development will involve tearing down
the parking structure on the Property and further developing the Straub
Medical Center.
Legal Analysis
7. ERISA section 406(a)(1)(A) prohibits a plan fiduciary from
causing a plan to engage in a transaction if it knows or should know
that such transaction constitutes a direct or indirect sale or
exchange, or leasing, of any property between the plan and a party in
interest. Straub is a party in interest with respect to the Plan
pursuant to ERISA section 3(14)(G), because it is a subsidiary
controlled by Hawai[revaps]i Pacific Health, a fiduciary with respect
to the Plan. The Sale would violate ERISA section 406(a)(1)(A) because
the Sale would involve the sale of the Property by the Plan to Straub,
a party in interest to the Plan.
8. ERISA section 406(a)(1)(D) prohibits a plan fiduciary from
causing a plan to engage in a transaction if it knows or should know
that such transaction constitutes a direct or indirect transfer to or
use by or for the benefit of a party in interest, of the assets of the
plan. The Sale would violate ERISA section 406(a)(1)(D) because the
Sale would involve the transfer of a Plan asset (the Property) to
Straub for the use by, and for the benefit of, Straub, a party in
interest to the Plan.
9. ERISA section 406(b)(1) prohibits a fiduciary from dealing with
plan assets in its own interest or for its own account, and 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 interests of the Plan. The Sale would violate ERISA sections
406(b)(1) and 406(b)(2) because Hawai[revaps]i Pacific Health and the
Committee would be: dealing with Plan assets for its own interest by
causing the Plan to sell the Property to a party (Straub) in which
Hawai[revaps]i Pacific Health has an interest; and acting on behalf of
Straub, a party that has interests that are adverse to the interests of
the Plan.
10. Therefore, subject to the parties' adherence to the conditions
described herein, the Department is proposing an exemption from ERISA
sections 406(a)(1)(A) and (D) and 406(b)(1) and (2) for the Sale.
The Qualified Independent Fiduciary (QIF)
11. On July 11, 2022, the Hawai[revaps]i Pacific Health and CPB
signed a new agreement for CPB to act as the QIF for purposes of the
Sale. Under the terms of the agreement, CPB will prudently
[[Page 54389]]
monitor, negotiate and, if appropriate, approve the Sale. CPB
represents that it has served as an independent fiduciary on behalf of
70 plan accounts other than the Plan (none of which were related to
Hawai[revaps]i Pacific Health) and that the revenue it received for the
current federal income tax year from all parties in interest to the
Sale is not more than 2% of CPB's annual revenues from the prior income
tax year.\8\
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\8\ CPB represents that the percentage of its 2025 revenue that
is derived from all parties in interest, or its affiliates is 0.13%,
which was computed by comparing (i) the amount of the fiduciary's
projected revenues from 2025 that will be derived from the party in
interest or its affiliates (the numerator); and (ii) CPB's revenue
from all sources (including fixed, nondiscretionary retirement
income) for the prior federal income tax year (the denominator).
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The Qualified Independent Appraiser
12. CPB retained Lesher Chee Stadlbauer (Lesher) to act as the
qualified independent appraiser (QIA) \9\ regarding the Sale. Lesher's
personnel are accredited as Hawaii State Certified General Appraisers
and have provided real estate valuations for more than 80 years for
landowners, real estate managers, developers, lenders, investors,
trusts, attorneys and governmental agencies. Additionally, the revenue
Lesher received, and its projected revenues, for the 2025 tax year from
parties in interest (and their affiliates) to the transaction are not
more than 2% of Lesher's annual revenues based on its prior income tax
year.
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\9\ As defined in 29 CFR 2570.31(i).
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13. Lesher appraised the Fair Market Value and Investment Value of
the Property at $13,030,000 and $14,770,000, respectively, as of April
1, 2024.\10\ If this exemption is granted, Lesher will appraise the
Fair Market Value and Investment Value of the Property as of the date
of the Sale and will provide a qualified appraisal report \11\ to the
QIF.
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\10\ Lesher's defines Investment Value as the value of a
property to a particular investor or class of investors based on the
investor's specific requirements. In the instant case, Lesher
considered the potential benefit to Straub who owned the abutting
parcel of real estate. For illustrative purposes, the appraisal
submitted with the application provides that the Fair Market Value
of the Property on 11/1/2022 is $13,030,000 and the Investment Value
of the Property on 11/1/2023 is $14,410,000.
\11\ As defined in 29 CFR 2570.31(h).
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The Independent Fiduciary's Report
14. CPB concluded in a report, dated November 21, 2022, that the
Plan would benefit from selling the Property for two primary reasons.
First, even though Lesher determined the appraised Investment Value to
be $14,770,000 on April 1, 2024, CPB negotiated an additional
$1,477,000, or 10% above the Property's Appraised Value, as of April 1,
2024 to arrive at $16,247,000.\12\ In order to ensure that the Plan
receives a comparable increased benefit on the date of Sale, the
proposed exemption requires that Straub must pay the Plan at least the
greater of (a) $16,247,000 or (b) 110% of the Appraised Value at the
time of Sale. Furthermore, the Department notes that, in order to
approve the Sale on behalf of the Plan, CPB, as the independent
fiduciary for the Plan, is required to find that the Sale is in the
best interest of the Plan and its participants and beneficiaries, which
may require CPB to further negotiate a higher sales price than
described above.
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\12\ The Property's Fair Market Value was determined as of
November 1, 2022, and updated on April 1, 2024.
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15. Second, CPB represented that the Sale would enable the Plan to
remove an illiquid asset from the Plan's inventory of investments. The
Property's appraiser represented that the 20-year lease and the
Property's odd shape would decrease its value to an independent third
party. Further, Straub owns the improvements on the property that cover
both the Property and Straub's abutting property. To sell the Property
after the expiration of the Lease, the Plan may require Straub to
demolish those current improvements, and the Plan would only receive
value for the underlying land. CPB ultimately concluded that the Sale
of the Property to Straub was in the interest of, and protective of,
the Plan and its participants and beneficiaries. CPB reaffirmed this
conclusion on November 27, 2024 in an updated report.
16. The conditions of the exemption, if granted, require the QIF to
evaluate and monitor the Sale and to confirm whether the terms and
conditions of the exemption have been satisfied. As required by the
conditions for the exemption, the QIF must represent that it has, among
other things, in full accordance with its prudence and loyalty
obligations under ERISA sections 404(a)(1)(A) and (B), reviewed a new
qualified independent appraisal dated immediately preceding the Sale,
negotiated the Sale in accordance with the QIF's fiduciary duties and
this exemption, and made the final determination to approve the Sale on
behalf of the Plan. The QIF must monitor the Sale throughout its
duration on behalf of the Plan for compliance with the general terms of
the transaction and with the conditions of the exemption and take any
appropriate actions to safeguard the interests of the Plan and its
participants and beneficiaries. The QIF also must negotiate a higher
price than the current purchase price, if necessary, under its
fiduciary duties of prudence and loyalty, to determine that the Sale is
in the best interest of the Plan and its participants and
beneficiaries.
17. The QIF must also conclude, in full accordance with its
prudence and loyalty obligations under ERISA section 404(a)(1)(A) and
(B), that all Property Expenses erroneously paid by the Plan on behalf
of Straub were repaid with the appropriate interest, including Property
Expenses that were erroneously paid by the Plan that fall outside the
statute of limitations and which were not repaid by Straub to the Plan
prior to this exemption. The QIF must document the basis for its
conclusions in a written report submitted to the Department's Office of
Exemption Determinations no more than 60 days after the Sale or the
QIF's determination that the Sale is not in the interest of the Plan.
The report must include copies of all documents and evidence the QIF
relied on when conducting its review.
Other Protective Conditions
18. The Sale must take place within 60 days of the date of
publication of the exemption in the Federal Register. The Plan may not
pay any costs associated with the Sale and the terms and conditions of
the Sale must be as favorable to the Plan as those that the Plan would
receive in an arm's length transaction with an unrelated party. The
Plan may not provide indemnification, reimbursement, or waiver rights
to the QIF or QIA.
19. Straub must pay back the Plan the erroneously paid Property
Expenses from 2006 to 2014, prior to the Sale. The Sale cannot commence
until the QIF concludes that Straub paid back the appropriate amounts.
Additionally, Straub must pay the IRS the appropriate legally required
excise tax on all prohibited transactions from 2006 to 2022 relating to
the erroneously paid property expenses. However, Straub need not pay
the IRS prior to the Sale to meet the terms of this exemption. Should
there be a dispute with the IRS concerning the amount of excise tax
Straub must pay, Straub must pay the amount the IRS concludes is due or
adhere to the applicable court order concerning the amount due. If the
IRS does not receive the appropriate excise tax after a final
determination by the court or the IRS, this exemption is considered
retroactively null and void prior to the Sale.
20. Straub and Hawai[revaps]i Pacific Health must maintain the
appropriate records relating to the Sale for a period of 6
[[Page 54390]]
years and provide the Department access to these records upon the
Department's request. All the material facts and representations made
by the Applicant that are set forth in the Summary of Facts and
Representations must be true and accurate at all times.
Statutory Findings
21. The Department has the authority under ERISA section 408(a) to
grant an exemption from the prohibited transaction provisions of ERISA
section 406 if the Department finds that the transaction is in the
interest and protective of the rights of the affected plan and its
participants and beneficiaries and is administratively feasible.
22. ``In the Interest of the Plan and its Participants and
Beneficiaries.'' The Department has tentatively determined that the
proposed exemption would be in the interest of the Plan and its
participants and beneficiaries because: (a) if approved by the QIF, the
Plan will receive the greater of $16,247,000 or 110% of the Appraised
Value at the time of Sale; (b) the Sale will allow the Plan to remove
an illiquid asset from its investments; (c) the Plan has not and will
not incur any transaction costs in connection with the Sale; (d) the
Sale will not be subject to any financing contingencies because Straub
will be making a one-time, lump-sum, cash payment to the Plan on the
closing date for the Sale; (e) the Sale will eliminate ongoing
appraisal fees, administrative costs, taxes, and fiduciary fees and
legal responsibilities that are associated with the Plan's continuing
ownership of the Property; and (f) CPB will reimburse the Plan for the
improper payments of Property Expenses and any associated lost interest
not already paid to the Plan.
23. ``Protective of the Rights of Participants and Beneficiaries of
the Plan.'' The Department has tentatively determined that the proposed
exemption is protective of the rights of Plan participants and
beneficiaries because a QIF will represent the interests of the Plan's
participants and beneficiaries with respect to: (a) selecting a QIA;
(b) reviewing the QIA's Qualified Appraisal Report to ensure this
report appraises the Fair Market Value and Investment Value of the
Property as of the transaction date (i.e. date of the Sale) based on
appropriate appraisal methodologies; (c) negotiating the purchase price
of the Property solely in the interests of participants and
beneficiaries in accordance with the QIA's ERISA duties and the terms
of this exemption, if granted; (d) reviewing and negotiating the terms
and execution of the Sale; and (e) authorizing the Plan to sell the
Property to Straub.
24. ``Administratively Feasible.'' The Department has tentatively
determined that the proposed exemption would be administratively
feasible because: (a) a QIF will monitor, review, negotiate, and
potentially authorize the Sale of the Property to Straub and (b) the
QIF will exercise its duties solely in the interest of participants and
beneficiaries in accordance with ERISA and the conditions of this
exemption.
Notice to Interested Persons
Interested persons include participants and beneficiaries of the
Plan. The Applicant will provide notification to interested persons by
electronic mail and/or first-class mail within 21 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 received by the
Department after 51 days from the date of the publication of the Notice
in the Federal Register.
All comments will be made available to the public.
Warning: Do not include any personally identifiable information
(such as name, address, or other contact information) or confidential
business information that you do not want publicly disclosed. All
comments become part of the disclosable administrative record. Further,
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 or disqualified person from certain other provisions of
ERISA and/or the Code, including any prohibited transaction provisions
to which the exemption does not apply and the general fiduciary
responsibility provisions of ERISA section 404, which, among other
things, require a fiduciary to discharge their duties respecting the
plan solely in the interest of the plan and its participants and
beneficiaries and in a prudent manner in accordance with ERISA section
404(a)(1)(B); nor does it affect the requirement of Code section 401(a)
that the plan must operate for the exclusive benefit of the employees
of the employer maintaining the plan and their beneficiaries;
(2) Before an exemption may be granted under ERISA section 408(a),
the Department must find that the exemption is administratively
feasible, in the interests of the plan and of its participants and
beneficiaries, and protective of the rights of participants and
beneficiaries of the plan;
(3) The proposed exemption, if granted, would be supplemental to,
and not in derogation of, any other provisions of ERISA and/or the
Code, including statutory or administrative exemptions and transitional
rules. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is, in fact, a prohibited transaction; and
(4) The proposed exemption, if granted, would be subject to the
express condition that the material facts and representations contained
in the application are true and complete at all times and that the
application accurately describes all material terms of the transactions
which are the subject of the exemption.
Proposed Exemption
The Department is considering granting an exemption under the
authority of ERISA section 408(a) in accordance with the Department's
exemption procedures regulation.\13\ Effective December 31, 1978,
section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1
(1996), transferred the authority of the Secretary of the Treasury to
issue exemptions of the type requested by the Applicant to the
Secretary of Labor. Therefore, this notice of proposed exemption is
issued solely by the Department.
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\13\ 29 CFR part 2570, subpart B (75 FR 66637, 66644, October
27, 2011). The Department's exemption procedures regulation was
amended at 89 FR 4662, on January 24, 2024, with an effective date
of April 8, 2024. However, because the application was submitted on
December 5, 2022, the procedures in effect as of that date govern.
For purposes of this proposed exemption, references to ERISA section
406, unless otherwise specified, should be read to refer as well to
the corresponding provisions of Code section 4975.
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Section I. Definitions
(a) ``Appraised Value'' means the greater of a property's Fair
Market Value or its Investment Value, as determined by the QIA.
(b) ``Plan'' means the Hawai[revaps]i Pacific Health Retirement
Plan, a defined benefit plan that provides retirement benefits to
Hawai[revaps]i Pacific Health
[[Page 54391]]
employees and the employees of Straub Clinic & Hospital. Hawai[revaps]i
Pacific Health appointed the Hawaii Pacific Health Retirement Plan
Finance Committee (the Committee) to serve as the Plan's named
fiduciary and plan administrator.
(c) ``Investment Value'' means the value of a property to a
particular investor or class of investors based on the investor's
specific requirements. In the instant case, Lesher considered the
potential benefit to Straub for purchasing the Property because Straub
owned an abutting parcel of real estate.
(d) The ``Property'' means the parcel of real property owned by the
Plan located at 888 South King Street, Honolulu, HI 96813.
(e) ``Property Expenses'' mean the expenses and costs relating to
the Property that Straub was responsible to pay pursuant to several
provisions in the lease between Straub and the Plan, dated January 2,
1969. These costs and expenses include taxes, utilities, and
maintenance.
(f) ``Purchase Price'' means the price paid by Straub to the Plan
for the Property, which must be the greater of $16,247,000 or 110% of
the Appraised Value as determined by the QIA on the date of Sale. This
amount may be further negotiated upwards by the QIF if necessary to
determine that the Sale is in the best interest of the Plan.
(g) ``Qualified Appraisal Report'' means the report appraising the
Property as of the Sale date that comports with the requirements of 29
CFR 2570.31(h).
(h) ``QIA'' means Lesher Chee Stadlbauer (Lesher), or such other
``Qualified Independent Appraiser,'' as defined in 29 CFR 2570.31(i),
hired by the QIF to determine the Property's Appraised Value as of the
date of the Sale. If the QIF replaces Lesher with a new entity to act
as the QIA in connection with the Sale, the new entity must be approved
in writing by the Department and the Department must receive a copy of
the new appraiser's appraisal report for the Property 60 days in
advance of the Sale.
(i) ``QIF'' means Central Pacific Bank (CPB), or such other
``Qualified Independent Fiduciary,'' as defined in 29 CFR 2570.31(j),
hired by the Plan to monitor, review, negotiate, and exercise the sole
authority to approve the Sale of the Property in accordance with the
requirements of ERISA Section 404(a) and 404(b), and this exemption, if
granted. If the Plan replaces CPB with a new entity to serve as the QIF
in connection with the Sale, the new entity must be approved in writing
by the Department 90 days in advance of the Sale.
(j) ``Straub'' means Straub Clinic & Hospital, a wholly controlled
subsidiary of Hawai[revaps]i Pacific Health, the employees of which are
participants in the Plan.
Section II. Transactions
This exemption would provide relief from the prohibited
transactions provisions of ERISA sections 406(a)(1)(A), 406(a)(1)(D),
406(b)(1), and 406(b)(2) for Hawai[revaps]i Pacific Health and the
Committee in connection with the sale of the Property by the Plan to
Straub in exchange for a lump sum payment of cash equal to the Purchase
Price (the Sale). To receive this relief, the conditions in Section III
must be met in conformance with the definitions in Section I.
Section III. Conditions
(a) The Sale must be a lump sum payment in cash equal to the
Purchase Price, and the Sale must take place within 60 days of the date
of publication of the exemption in the Federal Register.
(b) The QIF must have the sole authority to approve the Sale and
take any other fiduciary action on behalf of the Plan with respect to
the Sale; and the QIF must take the following actions in accordance
with its fiduciary responsibilities under ERISA Section 404(a) and (b):
(1) Determine whether it is prudent to go forward with the Sale and
make a final determination on the record whether or not to proceed with
the Sale;
(2) Approve the terms and conditions of the Sale;
(3) Retain the services of a QIA, review the Qualified Appraisal
Report, approve the methodology used by the QIA, and ensure that such
methodology is properly applied in determining the Property's Fair
Market Value and Investment Value on the date of the Sale;
(4) Negotiate a higher price than the current Purchase Price, if
necessary, in order to determine that the Sale is in the best interest
of the Plan and its participants and beneficiaries;
(5) Monitor the Sale throughout its duration on behalf of the Plan
to ensure the parties' compliance with the terms of applicable sale
agreements and related documents and enforce the rights of the Plan and
its participants and beneficiaries in connection with such agreements;
(6) Monitor compliance with the conditions for this exemption, if
granted, and take any appropriate actions to safeguard the interests of
the Plan and its participants and beneficiaries;
(7) Review and approve in writing, prior to approving the Sale,
that the amounts of Property Expenses erroneously paid by the Plan from
2006 through 2014, with associated lost interest as calculated using
the Department's VFCP Calculator, have been paid by Straub to the Plan
to make the Plan whole, using the Department's applicable correction
procedures; \14\
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\14\ See 29 CFR parts 2560 and 2570, most recently amended in
the Federal Register at 90 FR 4192 (January 15, 2025). The
Department's VFCP Calculator can be found online at <a href="https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/vfcp/calculator">https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/vfcp/calculator</a>.
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(8) Create and deliver to the Department a report (i) justifying
its conclusion that the Sale is in the best interest of the Plan and
its participants and beneficiaries, and conducted in accordance with
the terms of this exemption, (ii) confirming that the calculation and
repayment of the erroneously paid expenses described in the preamble to
the notice of proposed exemption (above) and associated lost interest
were accurately repaid, and (iii) confirming that the conditions for
the exemption have been satisfied with copies of any applicable reports
needed to make the confirmations. The Report must be delivered to the
Department within 60 days after the Sale, or the QIF's determination
that the Sale is not in the interest of the Plan, at <a href="/cdn-cgi/l/email-protection#1b7e36545e5f5b7f7477357c746d"><span class="__cf_email__" data-cfemail="187d35575d5c587c7774367f776e">[email protected]</span></a>.
(c) The Plan does not pay any costs associated with the Sale,
including brokerage commissions, fees, appraisal costs, or any other
expenses.
(d) The terms and conditions of the Sale are at least as favorable
to the Plan as those it would have obtained in an arm's length
transaction with an unrelated party.
(e) The QIF 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 QIF by the Plan or other party for any failure to
adhere to its contractual obligations or to state or Federal laws
applicable to the QIF's work; and the QIF may not seek or receive any
waiver of any rights, claims, or remedies of the Plan under ERISA,
state, or Federal law against the QIF with respect to the subject
matter of the exemption;
(f) The QIA 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
[[Page 54392]]
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; and 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;
(g) Straub must pay back to the Plan the remaining Property
Expenses the Plan erroneously paid from 2006 through 2014, including
lost interest, in violation of the Lease and PTE 81-71. Straub must pay
the IRS the legally required excise tax for all prohibited transactions
conducted by the Plan from 2006 until 2022.
(h) Straub and Hawai[revaps]i Pacific Health maintains 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 (i)(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 merely
because, due to circumstances beyond the control of Straub,
Hawai[revaps]i Pacific Health, and/or the QIF, the records are lost or
destroyed prior to the end of the six-year period, and (ii) no party in
interest other than Straub, Hawai[revaps]i Pacific Health or the QIF
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 (i) below;
(i)(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 (h) 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) Straub, Hawai[revaps]i Pacific Health or any duly authorized
representative of Straub or Hawai[revaps]i Pacific Health;
(iii) the QIF or any duly authorized representative of the QIF;
(iv) any participant or beneficiary of the Plan, or any duly
authorized representative of such participant or beneficiary;
(j) Straub, Hawai[revaps]i Pacific Health and/or QIF must provide
to the Department the records necessary to demonstrate that the
conditions of the exemption have been met, within 30 days from the date
the Department requests such records; and
(k) All the material facts and representations made by the
Applicant that are set forth in the Summary of Facts and
Representations must be true and accurate at all times.
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, this 19th day of November 2025.
Christopher Motta,
Acting Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2025-21195 Filed 11-25-25; 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 November 26, 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.