Notice2026-05165
Proposed Exemption From Certain Prohibited Transaction Restrictions Involving AT&T Inc. (Together With AT&T Inc.'s Affiliates, AT&T or the Applicant) Located in Dallas, Texas
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
March 17, 2026
Effective
September 9, 2013
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This document contains a notice of pendency before the Department of Labor (the Department) of a proposed amendment to Prohibited Transaction Exemption (PTE) 2014-06.
Full Text
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<title>Federal Register, Volume 91 Issue 51 (Tuesday, March 17, 2026)</title>
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[Federal Register Volume 91, Number 51 (Tuesday, March 17, 2026)]
[Notices]
[Pages 12817-12827]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05165]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Exemption Application No. D-11981]
Proposed Exemption From Certain Prohibited Transaction
Restrictions Involving AT&T Inc. (Together With AT&T Inc.'s Affiliates,
AT&T or the Applicant) Located in Dallas, Texas
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed amendment of PTE 2014-06.
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SUMMARY: This document contains a notice of pendency before the
Department of Labor (the Department) of a proposed amendment to
Prohibited Transaction Exemption (PTE) 2014-06.
DATES:
Exemption date: If this proposed exemption is granted, Sections I,
II and III of PTE 2014-06 would be in effect between September 9, 2013,
to October 14, 2018; and Sections IV, V, VI, and VII of PTE 2014-06,
which are added by this amendment, would be in effect between October
15, 2018, to April 5, 2023.
Comments due: Written comments and requests for a public hearing on
the proposed exemption must be received by the Department by June 17,
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-11981:
<bullet> via email to <a href="/cdn-cgi/l/email-protection#9ffab2d0dadbdffbf0f3b1f8f0e9"><span class="__cf_email__" data-cfemail="096c24464c4d496d6665276e667f">[email protected]</span></a>; or
<bullet> online through <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 before 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. See SUPPLEMENTARY INFORMATION below for
additional information regarding comments.
FOR FURTHER INFORMATION CONTACT: Ms. Anna Vaughan of the Department at
(202) 693-8565. (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 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 hearing request does not meet the requirements
above; (2) the only issues identified for exploration at the hearing
are matters of law; or (3) the factual issues identified can be fully
explored through the submission of evidence in written (including
electronic) form.
Warning: 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 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), 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 it in the body of
your comment. If you send an email directly to EBSA without going
through <a href="https://www.regulations.gov">https://www.regulations.gov</a>, your email address will be
automatically captured and included as part of the comment that is
placed in the public record and made available on the internet.
Proposed Amendment to PTE 2014-06
The Department is considering granting the amendment to PTE 2014-06
\1\ pursuant to its authority under ERISA section 408(a) and Code
Section 4975(c)(2), and in accordance with the Department's exemption
procedures.\2\ PTE 2014-06 permitted AT&T Inc. to contribute 320
million Series A Cumulative Preferred Membership Interests of AT&T
Mobility II LLC (the Preferred Interests) to the SBC Master Pension
Trust (the Trust), which is the trust that holds the assets of the AT&T
Pension Benefit Plan (the Plan). The proposed amendment does not affect
the amount of benefits that participants are entitled to receive under
the Plan.
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\1\ 79 FR 43072 (July 24, 2014). Unless otherwise noted, the
facts and representations of PTE 2014-06 are incorporated herein.
\2\ 29 CFR part 2570, subpart B (75 FR 66637, 66644, October 27,
2011). 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. 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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As discussed in further detail below, following the Trust's
acquisition of the Preferred Interests, AT&T Inc. negotiated with the
Independent Fiduciary of the Plan to modify certain terms and
provisions relevant to the Plan's continued holding of the Preferred
Interests, to enhance the transferability of the Preferred Interests.
These modifications occurred on October 15, 2018 (the Modifications).
The Independent Fiduciary approved the Modifications as being
beneficial to the Plan, after requesting that AT&T Inc. make an
additional $80 million contribution to the Plan, which AT&T Inc. did.
The Applicant requested this amendment so that the exemptive relief and
conditions of PTE 2014-06 would be consistent with the Modifications.
As described in more detail below, following the Modifications, the
Independent Fiduciary disposed of the Preferred Interests. It is the
Department's understanding that the Trust has not held the Preferred
Interests since April 5, 2023. Therefore, the relief in this exemption
ends on that date.
As initially granted, PTE 2014-06 had three sections (Sections I,
II and III). Those sections remain effective from September 9, 2013,
through October 14,
[[Page 12818]]
2018. The proposed amendment adds new Sections IV through VI, which
remain effective from October 15, 2018, through April 5, 2023. This
proposed amendment also adds new Section VII, which clearly describes
the effective dates for Sections I through VI.
Benefits of the Exemption: As described in more detail below, the
Department is proposing relief based on the Trust's receipt of an
additional $80,000,000 in cash from AT&T in connection with the
Modifications, as well as the Applicant's representations that the
Modifications would increase the transferability of the Preferred
Interests.
Summary of Facts and Representations <SUP>3</SUP>
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\3\ The Department notes that availability of this amendment and
PTE 2014-06 are subject to the express condition that the material
facts and representations contained in application D-11981 are true
and complete, and accurately describe all material terms of the
transactions covered by the amendment. If there is any material
change in a transaction covered by the amendment, or in a material
fact or representation described in the application, the amendment
will cease to apply as of the date of such change.
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1. AT&T Inc. AT&T Inc. is a holding company that maintains its
principal offices in Dallas, Texas. Together with its affiliates, AT&T
Inc. provides telecommunication services worldwide.
2. AT&T Mobility II LLC (AT&T Mobility or the Issuer). AT&T
Mobility is a wholly owned subsidiary of AT&T that provides wireless
services marketed under AT&T's name.
3. The AT&T Pension Benefit Plan (i.e., the Plan) and the SBC
Master Pension Trust (i.e., the Trust). The Plan is a noncontributory
qualified defined benefit pension plan sponsored by AT&T, covering
substantially all U.S. bargained and non-bargained employees of
participating subsidiaries of AT&T. The Plan provides retirement,
disability, death and certain other ancillary benefits to approximately
286,355 Plan participants. The assets of the Plan are held in the
Trust, which is administered and maintained by the AT&T Inc. Benefit
Plan Investment Committee. As of December 31, 2023, the Trust had total
assets of approximately $30,018,512,000.\4\
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\4\ In 2019, the Plan and the Trust merged with the Time Warner
Inc. Pension Benefit Plan and the Time Warner Inc. Master Pension
Trust, respectively, as result of AT&T's acquisition of Time Warner
Inc. on June 14, 2018.
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4. PTE 2014-06. On July 24, 2014, the Department granted exemptive
relief from ERISA sections 406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(D),
406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2) and 407(a),\5\ effective
September 9, 2013, for: (a) the one-time, in-kind contribution (the
Contribution) by AT&T of 320 million Series A Cumulative Perpetual
Preferred Membership Interests (i.e., the Preferred Interests) of AT&T
Mobility to the Trust; (b) the holding of the Preferred Interests by
the Trust on behalf of the Plan; (c) the disposition of the Preferred
Interests by the Trust in connection with the Independent Fiduciary's
exercise of a put option (the Put Option); (d) the disposition of the
Preferred Interests by the Trust in connection with AT&T's exercise of
a call option (the Call Option); and (e) certain changes or adjustments
relating to the Preferred Interests resulting from a Change of Control
of AT&T Mobility.\6\
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\5\ For a discussion of the how the transactions covered by PTE
2014-06 violate the prohibited transaction provisions of ERISA,
please refer to the Notice of Proposed Exemption Involving AT&T
Inc., at 78 FR 55107 (September 9, 2013).
\6\ The term ``Change of Control'' was described in PTE 2014-06
as: (1) the occurrence of any merger, reorganization or other
transaction that results in AT&T, directly or indirectly, owning
less than fifty percent of the capital or profits interests (where
the Issuer remains taxable as a partnership), or equity (if the
Issuer becomes taxable as a corporation), of the Issuer, exclusive
of the Preferred Interests; or (2) a transfer of fifty percent or
more of the Plan liabilities and Trust assets to an entity not under
common control with AT&T Inc.
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5. According to AT&T, the Contribution enhanced the Plan's funding
by providing substantially in excess of the amount of contributions
required to be made by AT&T by applicable pension rules. At the time of
the Contribution, the Plan was underfunded by approximately $9.32
billion. The Contribution added approximately $9.21 billion in assets,
which included the value of the Preferred Interests and other cash
payments.\7\ AT&T acknowledged that, in addition to funding the Plan,
the Contribution benefitted AT&T by decreasing the corporation's
pension liabilities, as would be viewed favorably by lenders and the
capital markets. These benefits allowed AT&T the flexibility to invest
further in its business.
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\7\ The Applicant states that the Preferred Interests were
initially valued at approximately $9.2 billion and that the Trust
ultimately received a total of $13.1 billion in proceeds from: (1)
the sale of certain Preferred Interests, (2) the exercise of the Put
Option to AT&T on two separate dates, and (3) dividends from the
Preferred Interests.
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6. The Contribution significantly enhanced the Plan's cash flow.
Among other things, the Preferred Interests have accrued cumulative
distributions of $1.75 per Preferred Interest per year. At the time of
the Contribution, these distributions provided $560 million in annual
cash flow to the Trust, which represented approximately 11% of the
Trust's annual cash flow requirements to pay benefits. As a condition
of PTE 2014-06, the Department required AT&T to make a lump-sum cash
contribution of $700 million in addition to the contribution of the
Preferred Interests. Further, to ensure that AT&T would not solely rely
on the value of the Preferred Interests to meet its funding
obligations, the Department required AT&T to make an additional lump
sum cash contribution to the Plan no later than September 19, 2019, in
an amount equal to AT&T's minimum required contribution obligation to
the Plan for the period from 2013-2017. In determining the amount
required to satisfy the minimum contribution obligation, AT&T could not
count the value of the Preferred Interests to the extent the value
exceeded 10% of the Plan's assets on January 1, 2018, and AT&T could
not consider any contributions that it had paid over those years (if
any).\8\
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\8\ As of January 1, 2018, the Preferred Interests represented
16.8% of Plan assets with the result that Preferred Interests
constituting 6.8% of the Plan's holdings were not counted in
determining the minimum contribution obligation. According to AT&T,
no additional contribution was required to be made to the Plan.
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7. The rights and obligations of the parties in connection with the
transactions covered by PTE 2014-06 were primarily governed by these
three agreements:
(a) Contribution Agreement. The Contribution of Preferred Interests
was made pursuant to a Contribution Agreement dated August 30, 2013,
involving: (i) Brock Fiduciary Services LLC, the Plan's Independent
Fiduciary; (ii), JPMorgan Chase Bank, N.A., as directed trustee of the
Trust; and (iii) AT&T Inc. and (iv) AT&T Mobility (the Contribution
Agreement). The Contribution Agreement governed the terms and
conditions of the Contribution of the Preferred Interests, the Call
Option and the Put Option and provided the definitions of Option Price
\9\ and Change in Control for the purposes of such terms. The Call
Option, in general terms, provided AT&T with the right to purchase all
or any portion of the Preferred Interests from the Trust at a price
equal to the Option Price, upon the occurrence of
[[Page 12819]]
certain dates or events.\10\ The Put Option, in general terms,
permitted the Independent Fiduciary to require AT&T or AT&T Mobility to
purchase the Preferred Interests from the Trust at the Option Price, on
or after the earliest of certain dates or events.\11\ Furthermore, the
Contribution Agreement governed the settlement method of the Put Option
and Call Option, including that AT&T could settle the options by
delivering unregistered shares of AT&T stock to the Trust. The Call
Option and the Put Option generally provided the only means by which
the Preferred Interests could be transferred out of the Trust by the
Independent Fiduciary, absent the Issuer's consent. The Call Option was
generally exercisable by AT&T on or after September 9, 2018, and the
Put Option was generally exercisable by the Independent Fiduciary on
behalf of the Plan on or after September 9, 2020.
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\9\ The ``Option Price'' of a Preferred Interest for purposes of
PTE 2014-06 generally means, an amount equal to the greater of: (1)
The Fair Market Value of the Preferred Interest determined by the
Independent Fiduciary as of the last date of the calendar quarter
preceding the date of notice of exercise of a Call Option or Put
Option; or (2) the sum of $25.00 per share (i.e., $8 billion in the
aggregate) plus any accrued and unpaid Distributions.
\10\ These dates/events are: (1) during the twelve-month period
following the date AT&T issues an annual report reflecting that the
Plan is fully funded; (2) on or after a Change of Control; or (3) on
or after the fifth anniversary of the date on which the Preferred
Interests are contributed to the Trust (September 9, 2018).
\11\ These dates/events were: (1) The first date that the
Issuer's debt-to-total-capitalization ratio (as defined in the
Contribution Agreement) exceeds that of AT&T; (2) the date on which
AT&T, Inc. is rated below investment grade for two consecutive
calendar quarters by at least two of the following rating agencies:
(x) Standard & Poor's Ratings Services, (y) Moody's Investor
Services, Inc., or (z) FitchRatings, Inc.; (3) a Change of Control;
or (4) the seventh anniversary of the date on which the Preferred
Interests are contributed to the Trust (September 9, 2020).
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(b) LLC Agreement. The Preferred Interests, which were the subject
of the Contribution, were governed by the Second Amended and Restated
Limited Liability Company Agreement of AT&T Mobility II LLC. The LLC
Agreement also describes the limitations and obligations of the Issuer,
AT&T Mobility, while the Preferred Interests are outstanding, as well
as providing a definition of ``fair market value'' for purposes of the
Independent Fiduciary's valuation of the Preferred Interests, as
described in more detail below.
(c) Registration Rights Agreement. AT&T had the right to pay for
any Preferred Interests purchased pursuant to the Put Option or the
Call Option by delivering unregistered AT&T Shares to the Trust. The
Registration Rights Agreement generally required AT&T to register the
AT&T Shares (if any) that were delivered to the Trust pursuant to the
Call Option or the Put Option.\12\
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\12\ The Registration Rights Agreement was agreed to by and
among AT&T, the Trust, and Brock, effective August 30, 2013.
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8. The Independent Fiduciary's Discretion Under PTE 2014-06. The
Independent Fiduciary was given sole authority to: (a) exercise all
rights of the Trust with respect to the Preferred Interests, including
but not limited to negotiating and accepting any amendments to the
Contribution Agreement; (b) enter into any agreements for the benefit
of the Plan and the Trust, to carry out the purposes of its obligations
under PTE 2014-06; (c) enter into any agreements, incur reasonable
costs on behalf of the Plan and the Trust, or pledge or hypothecate
assets of the Trust in order to carry out interest rate swap
transactions and credit default swap transactions, and (d) make any
decision to monetize or otherwise dispose of any and all of the AT&T
Shares received by the Trust in exchange therefor pursuant to the
Contribution Agreement.
9. The Modifications to PTE 2014-06 Covered by this Proposed
Amendment.<SUP>13</SUP> The Independent Fiduciary negotiated with AT&T
Inc. to make certain modifications to the terms and provisions of the
Contribution Agreement, the LLC Agreement, and the Registration Rights
Agreement. These modifications became effective on October 15, 2018
(i.e., the Modifications). AT&T explains that the Modifications
primarily enhanced the transferability of the Preferred Interests.
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\13\ This proposed amendment does not provide relief from the
requirements of, or specific sections of, any law not noted herein.
Accordingly, AT&T is responsible for ensuring compliance with any
other laws applicable to this transaction.
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Specifically, the Modifications:
(a) provided that the Preferred Interests are transferable by the
Trust and all subsequent holders of the Preferred Interests without the
Issuer's (i.e., AT&T Mobility's) prior approval; \14\
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\14\ The Independent Fiduciary and AT&T further agreed that the
Issuer will cooperate with private placement offerings in
furtherance of any transfer, sale, or assignment of the Preferred
Interests, in whole or in part, provided that the Issuer will select
the investment banking firm to conduct each of such private
placement offerings, provide the financial information, document
preparation and other support required for such private placement
offering to the holder of the Preferred Interests and/or the
investment bank on a timely basis and the Issuer will bear all costs
associated with such private placement offerings.
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(b) provided that the Put Option may be exercised by any holder of
the Preferred Interests; \15\
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\15\ The Modifications accomplished (b) by removing the Call
Option from the Contribution Agreement and adding a redemption
option (the Redemption Option) to the LLC Agreement.
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(c) gave the Issuer (i.e., AT&T Mobility) the right to redeem the
Preferred Interests during specific periods on or after September 9,
2022, (four years later than AT&T was originally permitted) while
removing the redemption trigger relating to the fully funded status of
the Trust under Generally Accepted Accounting Principles; \16\ and
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\16\ Under PTE 2014-06, AT&T was entitled to exercise the Call
Option at any time during the twelve-month period following the date
AT&T issues an annual report reflecting that the Plan is fully
funded. AT&T never exercised the Call Option pursuant to this
provision.
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(d) preserved all of the Trust's rights with respect to the
Preferred Interests, except for the following: (i) the Put Option was
modified so that during each calendar quarter, it may be exercised by
the Trust (and any subsequent transferee) only during specific periods
that alternate with the periods during which the Redemption Option may
be exercised, and (ii) the Registration Rights Agreement was modified
to change the consequences to AT&T if it were to fail to register AT&T
Inc. common stock received by the Trust as a result of the exercise of
the Put Option or the Redemption Option (the Failure to Register
Modification).
10. Before the Failure to Register Modification, under PTE 2014-06,
if the Trust exercised the Put Option and AT&T delivered unregistered
AT&T Shares to the Plan in exchange for the Preferred Interests, and
AT&T failed to register such AT&T Shares, then AT&T was obligated to
repurchase those unregistered AT&T Shares at their fair market value
(as determined by the Independent Fiduciary). Following the Failure to
Register Modification, if AT&T failed to register the AT&T Shares
delivered to the Plan in exchange for the Preferred Interests, AT&T was
prohibited from declaring any dividends on its outstanding common stock
and from making any ``Restricted Share Repurchases'' as defined in the
Registration Rights Agreement. Further, the obligation of AT&T to
purchase back the unregistered AT&T Shares from the Trust was removed
from the Registration Rights Agreement.
11. Description of the Independent Fiduciary. The Independent
Fiduciary represents that it has extensive experience as an independent
fiduciary and as an appraiser of non-publicly traded securities,
including securities of the same type as the Preferred Interests. The
Independent Fiduciary represents further that: (a) it is independent
of, and unrelated to, AT&T; (b) it does not directly or indirectly
receive any compensation or other consideration from AT&T; \17\ (c) the
compensation for
[[Page 12820]]
its services is not contingent upon, or in any way affected by, its
decisions; and (d) it has not previously provided services to AT&T.
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\17\ The Independent Fiduciary represents that the fees and
expenses it receives as Independent Fiduciary will be paid by the
Plan, although for convenience, AT&T may, from time to time, pay the
Independent Fiduciary's fees and expenses and receive reimbursement
from the Plan to the extent permitted by law.
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12. In addition, the Independent Fiduciary has not entered into and
will 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; or waives any rights, claims, or remedies of the Plan
under ERISA, state, or Federal law against the Independent Fiduciary
with respect to the transactions that are the subject of this
exemption.
Finally, the Applicant represents that the selection of Brock as
the Independent Fiduciary was based solely on Brock's qualifications to
serve as a qualified independent fiduciary and was made after a prudent
process that included a determination that Brock did not have any
interests in any party in interest involved in the covered transactions
or in the covered transactions themselves which may affect the exercise
of Brock's best judgment as a fiduciary.
13. The Independent Fiduciary's Reasons why the Modifications are
in the Interest of the Plans. The Independent Fiduciary made the
following representations regarding its negotiation and analysis of the
Modifications, as reported to the Department on November 8, 2019 (the
Independent Fiduciary Report).
a. Transferability at the Holder's Discretion. Prior to the
Modifications, the Preferred Interests could not be transferred to a
third party without the approval of AT&T. This could have had a
limiting effect on the marketability of the Preferred Interests,
especially since a third-party transferee would have no assurance that
a similar approval would be granted to the third-party for further
transfer should the third-party want to resell the Preferred Interests.
The Modifications simplify the transferability of the Preferred
Interests and enhance the marketability of the Preferred Interests, by
giving discretion to the party holding such securities to transfer
them.
According to the Independent Fiduciary, given that the Preferred
Interests accounted for approximately 17% of the Plan's assets,\18\ the
Plan benefited from simplifying the transferability of the Preferred
Interests without having to meet the conditions for exercising the Put
Option. This Modification, which makes the Preferred Interests
transferable solely at the discretion of the holder, significantly
enhances the Plan's flexibility to reduce its exposure to a single
security. Interest rate conditions may provide the Plan with the
opportunity to obtain better value by selling the Preferred Interests
to a third party rather than exercising the Put Options before the
Redemption Option became exercisable in 2022.
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\18\ As of the date of the Independent Fiduciary's Report, dated
October 11, 2018.
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b. Elimination of Call Option Triggering Event related to Plan's
Fully Funded Status and Replacement of Call Option with Redemption
Option. Under PTE 2014-06, the Call Option could be exercised by AT&T
upon the earlier of: the occurrence of certain events described in the
Contribution Agreement; or September 9, 2018. As part of the
Modifications, the Call Option was replaced with the Redemption Option,
which is exercisable on substantially the same terms, conditions and
obligations as the Call Option was, except that (i) there is no trigger
relating to the fully funded status of the Trust, and (ii) the exercise
of the Redemption Option by the Issuer is only permissible periodically
after September 9, 2022 (other than as a result of a Change of
Control). The combined Modifications thus amount to a net elimination
of AT&T's right to call the Preferred Interests if the Plan becomes
fully funded, which is a positive for the Plan.
c. Alternating Exercise of Put Options and Redemption Options and
Giving a Put Option to Subsequent Purchasers. Starting September 9,
2020, the Put Option will be exercisable during the first and last 15
business days of each quarter, instead of at any time of the
Independent Fiduciary's choosing. These exercise periods will alternate
with the periods during which the Redemption Right may be exercised by
the Issuer. The Independent Fiduciary states that this restriction on
the timing of the exercise of the Put Option has minimal impact, since
any decision to exercise the Put Option would be the result of an
advance deliberate consideration and analysis, and the timing for
determination of the Option Price (i.e., the last day of the
immediately preceding calendar quarter) does not change. Should Brock
decide on short notice that exercising the Put Option would be the
right course of action for the Plan, the limitation would mean a delay
of not more than a few weeks for its effective implementation, while
the Preferred Interests would continue to accrue cumulative
distributions of $1.75 per Preferred Interest per year, equal to a 7%
return.
The Independent Fiduciary also notes that it negotiated for a Put
Option to be added to the LLC Agreement to be exercisable by subsequent
holders of the Preferred Interests.\19\ This new Put Option would be
substantially identical to the Put Option in the Contribution
Agreement, except that the Issuer, rather than AT&T, would be the
counterparty. According to Brock, this has had a positive impact on the
potential sale value of the Preferred Interests, because it provides
prospective third-party purchasers with an additional avenue for
liquidity if they acquire the Preferred Interests from the Plan.
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\19\ The right to exercise the existing Put Option under the
Contribution Agreement would remain solely that of the Plan. As in
the case of the Redemption Option, adding a Put Option to the LLC
Agreement was necessary to accommodate making the Preferred
Interests freely transferable to third parties.
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d. Modification to Registration Rights Agreement. According to the
Independent Fiduciary, replacing AT&T's obligation repurchase
unregistered AT&T Shares delivered in exchange for the Preferred
Interests with a prohibition of AT&T paying dividends on its common
stock so long as unregistered AT&T Shares remain outstanding represents
a de minimis change that applies to a highly remote possibility, to
which the Independent Fiduciary attaches no cost or value. For this
restriction to come into effect, AT&T would have to: (i) elect to
deliver AT&T Shares rather than cash when the Redemption Option or the
Put Options are exercised; and (ii) be unable to qualify for a
registration statement.\20\ Just as improbable, AT&T would then decide
to stop paying dividends on outstanding AT&T Shares rather than remedy
the situation by voluntarily buying back the unregistered AT&T Shares
held by the Trust. Such a remote scenario would plausibly occur only in
a situation where AT&T is in effect insolvent. But that would mean that
AT&T's common stock would be worth almost nothing, making a purchase of
the Preferred Interests virtually impossible (and impracticable) using
common stock.
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\20\ The Applicant states that the current Registration Rights
Agreement requires AT&T to use its reasonable best efforts to file a
shelf registration or other securities forms for an offering of the
AT&T Shares. Further, the Applicant states that AT&T does not
envision any path where it elects not to register the AT&T Shares or
cannot register the shares.
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14. Additional Contribution to the Plan. The Independent Fiduciary
[[Page 12821]]
represents that it negotiated an additional $80 million cash payment to
the Plan from AT&T to coincide with the Modifications. According to the
Independent Fiduciary, the $80 million contribution represented roughly
half of the Independent Fiduciary's estimate of the risk-adjusted tax
savings to AT&T that AT&T would have received in connection with the
Plan's agreement to the Modifications by October 15, 2018.\21\ While
the $80 million contribution arguably represented only an acceleration
of future contributions, because AT&T ultimately has the obligation to
fund the Plan, this contribution benefits the Plan not only because of
its certainty but because it could be immediately invested on a tax-
deferred basis. The Independent Fiduciary states that, although the
benefits of the Modifications themselves outweigh the negatives, it
insisted that AT&T agree to make a material cash contribution to the
Plan as an added incentive.
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\21\ The Applicant represents that in fact there was no tax
benefit in 2018 because the deduction was already taken in 2013 when
the Preferred Interests were contributed. In this regard, the tax
benefit stemming from the Modifications would only have been
received if the IRS disallowed the earlier deduction (which it did
not do) and then permitted AT&T to take it when AT&T modified the
securities in 2018 to enhance their transferability.
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15. Proceeds Received by the Trust for the Interests. The
Independent Fiduciary, acting on behalf of the Trust, disposed of the
Preferred Interests over the course of 3 transactions, on September 28,
2020, February 7, 2023, and April 5, 2023. While the first transaction
was a sale to independent third parties, the second two transactions
involved the Independent Fiduciary's exercise of the Put Option. Based
on a representation from the Independent Fiduciary, the summary of the
proceeds received by the Trust is as follows:
----------------------------------------------------------------------------------------------------------------
February 7, 2023
Sale or put exercise date September 28, 2020 \22\ April 5, 2023 Combined
----------------------------------------------------------------------------------------------------------------
Sale or Put.................... Sale to PIMCO Put to AT&T....... Put to AT&T....... ...................
Entities.
Number of Interests Sold or Put 106,666,666....... 656,033........... 212,677,301....... 320,000,000
----------------------------------------------------------------------------------------------------------------
Proceeds received \23\ Total proceeds
----------------------------------------------------------------------------------------------------------------
Sale/Put Price................. $2,839,999,982.25. $16,400,825.00.... $5,316,932,525.00. $8,173,333,332.25
Accrued Preferred Return to $45,111,111.18.... $114,805.78....... $97,181,711.15.... $142,407,628.11
Sale/Put Date.
--------------------------------------------------------------------------------
Proceeds Received.......... $2,885,111,093.43. $16,515,630.78.... $5,414,114,236.15. $8,315,740,960.36
----------------------------------------------------------------------------------------------------------------
Proceeds per interest Average per
interest
----------------------------------------------------------------------------------------------------------------
Sale/Put Price................. $26.62500000...... $25.00000000...... $25.00000000...... $25.54166666
Accrued Preferred Return to $0.42291667....... $0.17500000....... $0.45694444....... $0.44502384
Sale/Put Date.
--------------------------------------------------------------------------------
Total per Interest......... $27.04791667...... $25.17500000...... $25.45694444...... $25.98669050
----------------------------------------------------------------------------------------------------------------
a. Third Party Sale. On September 28, 2020, the Independent
Fiduciary directed the sale of 106,666,666 Preferred Interests in a
private offering to several funds advised or sub-advised by PIMCO
Investment Management (the PIMCO Funds).\24\ The Applicant states that
the timing of the sale was based on the Independent Fiduciary's review
of market conditions and the composition of assets held by the Trust.
The Applicant represents that the PIMCO Funds were neither parties in
interest to the Plan nor related to AT&T or its affiliates. According
to the Applicant, it was originally expected that the Preferred
Interests would be sold to multiple investors given the size of the
offering, but late in the process PIMCO asked if they could purchase
the entire amount. The Applicant represents that the price per
Preferred Interest in the sale to the PIMCO Funds was $27.048, for a
total of $2,885,111,093.43. The Applicant represents that, according to
the Independent Fiduciary, the price was the result of an arm's length
negotiation and representative of the market value of the Preferred
Interests. According to the Independent Fiduciary's letter to the Trust
dated February 18, 2021, the sale was made at a price significantly
higher than the Trust would have obtained had the Independent Fiduciary
elected to exercise the Put Option.\25\
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\22\ The Applicant represents that the Put Notice was received
from the Independent Fiduciary for 213,333,334 Preferred Interests
on December 27, 2022, during the allowable window. However, the
Contribution Agreement includes a ``Put 12-Month Cap'', under which
AT&T was not obligated by the Put Option to purchase more than one-
third of the original shares in a given 12-month period of time. On
January 27, 2023, 656,033 Preferred Interests were released from the
12-month cap, so it was agreed that AT&T would purchase those shares
at that time. Winter storms in Dallas, coupled with the physical
share certificates having been moved from New York to Louisiana,
drove the need for extra time to complete the settlement process,
which was completed on Feb. 7, 2023.
\23\ Between November 1, 2013 and February 1, 2023, the Trust
received total dividend payments of $4,747,600,000. Together with
the $8,315,740,960.36 proceeds received by the Trust from the sale
and put transactions, the Trust received a total cash amount of
$13,062,600,000 from the Preferred Interests, $3,852,260,000 more
than the Preferred Interests' initial valuation of $9,210,000,000.
\24\ The Applicant represents that AT&T Mobility selected Credit
Suisse as the investment banking firm to conduct the offering. The
Applicant represents that Credit Suisse shared its views with the
Independent Fiduciary regarding market conditions, target buyers,
valuation of Preferred Interests and marketing strategy. Based on
the expressed views of Credit Suisse, the Independent Fiduciary
decided to move forward with the sale.
\25\ The record for the Exemption Application, No. D-11981,
provides more information regarding the sale of the Preferred
Interests to the PIMCO Funds, including the Independent Fiduciary's
quarterly valuation report dated October 26, 2020, and the pricing
memorandum for the Preferred Interests sold in the private
placement.
---------------------------------------------------------------------------
b. Exercise #1 of Put Option. The Applicant represents that on
February 6, 2023, the Independent Fiduciary directed the exercise of
the Put Option for 656,033 Preferred Interests, causing the Preferred
Interests to be transferred to AT&T pursuant to the terms of PTE 2014-
06. The price per Preferred Interest paid by AT&T to the Plan in the
connection with the February 6th exercise of the Put Option was $25.175
per Preferred Interest, for a total purchase price of $16,515,630.78.
The Applicant represents that this option price equals the Independent
Fiduciary's valuation of the Preferred Interests pursuant to its most
recently completed valuation report.\26\
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\26\ The Independent Fiduciary's quarterly valuation report
dated January 20, 2023, is a part of the public record for Exemption
Application No. D-11981 and can be requested by contacting the
Department's Public Disclosure Office.
---------------------------------------------------------------------------
c. Exercise #2 of Put Option. The Applicant represents that, on
April 5, 2023, the Independent Fiduciary
[[Page 12822]]
directed the exercise of the Put Option for the remaining 212,677,301
Preferred Interests held by the Trust, causing the Preferred Interests
to be transferred to AT&T pursuant to the terms of PTE 2014-06. The
price per Preferred Interest paid by AT&T to the Plan in the connection
with the April 5th exercise of the Put Option was $25.4569 per
Preferred Interest, for a total purchase price of $5,414,114,236.15.
According to the Applicant, the price that AT&T paid for the Preferred
Interests exceeded the valuation provided by the Independent Fiduciary
in its most recent quarterly valuation report because it included the
accrued and unpaid distribution between April 1, 2023, to April 5,
2023.\27\
---------------------------------------------------------------------------
\27\ The Independent Fiduciary's quarterly valuation report
dated April 12, 2023, is a part of the public record for Exemption
Application No. D-11981 and can be requested by contacting the
Department's Public Disclosure Office.
---------------------------------------------------------------------------
16. Need for Exemptive Relief. The Applicant does not believe that
AT&T's unilateral waiver of its rights vis-[agrave]-vis the
transferability of the Preferred Interests requires an amendment to the
terms of PTE 2014-06. However, according to the Applicant, the proposed
changes to the timing of the Put Option and revisions to the
Registration Rights Agreement could require an amendment to the
conditions to PTE 2014-06, because the definition of ``Put Option'' in
PTE 2014-06 provides for different periods during which the Independent
Fiduciary can exercise the Put Option on behalf of the Plan. Further,
the definitions of the Preferred Interests, Redemption Option, and
certain other operative terms have been changed to take into account
the Modifications, as described above. Therefore, in order to avoid a
technical violation of PTE 2014-06 resulting from the definitional
change in those terms, this proposed amendment amends PTE 2014-06 to be
consistent with the Modifications described above as of the date they
were effective (October 15, 2018).
17. The Department notes that the Independent Fiduciary exercised
the Put Option to cause AT&T to buy back all the remaining Preferred
Interests held by the Trust on April 5, 2023, in exchange for cash.
Because the Trust did not hold the Preferred Interests or any AT&T
Shares received in respect of any Preferred Interests after the
Independent Fiduciary's exercise of the Put Option, exemptive relief is
only provided to AT&T and the Plan under this exemption until April 5,
2023.
18. The modifications described above are reflected in the
following revisions to PTE 2014-06 (which include new conditions
required by the Department):
a. New Section IV. Definitions. The Department is proposing the
following revisions to the ``Definitions'' section in PTE 2014-06:
<bullet> A new definition of ``Modifications'' was added, to
describe the modifications negotiated and approved by the Independent
Fiduciary that became effective on October 15, 2018.
<bullet> A new definition of ``LLC Agreement'' was added and would
mean: the Fourth Amended and Restated Limited Liability Company
Agreement of AT&T Mobility II LLC, effective October 15, 2018.
<bullet> The definition of ``Call Option'' would reflect the right
of AT&T under the Contribution Agreement to purchase the Preferred
Interests from the Trust, from September 1, 2013, until October 14,
2018, at which point the Call Option was replaced by the Redemption
Option effective October 15, 2018.
<bullet> The definition of ``Put Option'' reflects that, after
September 9, 2020, any holder of the Preferred Interests (including the
Trust) can exercise the Put Option during the first and last 15
business days of each fiscal quarter instead of at any time of the
holder's choosing.
<bullet> A new definition of ``Redemption Option'' was added to
reflect the right of the Issuer under the LLC Agreement to redeem the
Preferred Interests in whole or in part (i) upon a Change of Control or
(ii) on or after September 9, 2022, during the ``Exercise Period.''
<bullet> The definition of ``Exercise Period'' was added to reflect
the alternating periods of time within which the Preferred Interests
can be redeemed by the Issuer pursuant to the Redemption Option and/or
put to AT&T or the Issuer by any holder of the Preferred Interests
(including the Independent Fiduciary on behalf of the Trust) pursuant
to the Put Option.
<bullet> The definition of ``Option Price'' reflects revisions to
the Contribution Agreement and the LLC Agreement that removed the Call
Option from the Contribution Agreement and added a Redemption Option
and Put Option to the LLC Agreement, and to better reflect the
understanding of the term by the parties. Further, references to ``the
occurrence of prior events'' are no longer included in the definition
of Option Price but are instead included in a new definition.
<bullet> Definitions of ``Fair Market Value of the Preferred
Interest'' and ``Contingent Event'' have been added, to better clarify
and confirm the parties' understanding of these terms and to reflect
the removal of the Call Option from the Contribution Agreement and
addition of the Redemption Option and Put Option to the LLC Agreement,
each effective October 15, 2018.
<bullet> The definition of ``Change of Control'' differs in that
clause (ii), specifying an event involving the transfer of fifty
percent or more of the Plan liabilities and Trust assets to an entity
not under common control with AT&T, now only applies for purposes of
the Contribution Agreement.
<bullet> The definition of ``Distributions'' was added for
clarification and refers to the distribution rights carried by the
Preferred Interests of $1.75 per Preferred Interest.
b. New Section V. Effective October 15, 2018: Covered Transactions.
This new section differs from the PTE 2014-06 ``Covered Transactions''
section as follows:
<bullet> No relief is being provided for the contribution of the
Preferred Interests by AT&T to the SBC Master Pension Trust, since that
contribution was a one-time transaction covered by PTE 2014-06, as
initially granted.
<bullet> The section provides other non-substantive changes to
streamline and/or clarify the covered transactions.
c. New Section VI. Effective as of October 15, 2018: Conditions.
This new section differs from the PTE 2014-06 ``Covered Transactions''
section as follows:
<bullet> Requires that the Independent Fiduciary have discretion
regarding the disposition of AT&T Shares in accordance with the
Investment Management Agreement (which was amended as of October 15,
2018) and the Registration Rights Agreement.
<bullet> Requires that any modification of the Plan's rights and
obligations under any term, definition or condition of the amendment,
including any Modification, must be negotiated and approved in advance
on behalf of the Plan by the Independent Fiduciary.
<bullet> Includes a new requirement that the selection of the
Independent Fiduciary is based solely on the Independent Fiduciary's
qualifications pursuant to a prudent process and with the understanding
that the Independent Fiduciary has no interest in the transaction that
could affect the best exercise of its duties as a fiduciary.
<bullet> New conditions requiring that neither the Plan nor any
third party may indemnify the Independent Fiduciary or the Independent
Appraiser, for (or limit in any way) any liability that is attributable
to negligence or violations of ERISA, state or Federal law (as
applicable), and no contract or
[[Page 12823]]
instrument purports to waive any such liability.
<bullet> A new condition requiring that the terms of any
transactions between the Plan and a purchaser of Preferred Interests or
any AT&T Shares be no less favorable to the Plan than arms' length
terms between unrelated parties.
<bullet> A new condition requiring that the Preferred Interests
must be transferable by the Trust and by all subsequent holders of the
Preferred Interests at the holder's sole discretion.
<bullet> A new condition requiring that AT&T must have made the
additional cash payment to the Plan of $80 million no later than
October 15, 2018, in connection with the Modifications.
<bullet> A new condition prohibiting AT&T from declaring any
dividends on, or making any repurchases of, any AT&T Shares, in the
event that the Trust held any unregistered AT&T Shares that were
received in exchange for the Preferred Interests.
<bullet> A new condition requiring that all the material facts and
representations set forth in the Summary of Facts and Representation be
true and accurate and that the Applicant will promptly inform the
Department in the event any material fact or representation ceases to
be true and accurate.
<bullet> A requirement that the records necessary to prove
adherence to the conditions of the exemption are maintained for 6 years
from the later of the date that exemptive relief under the exemption is
needed, or the date of publication of the final exemption.
<bullet> A new condition requiring that AT&T make available to the
Department all records necessary to ensure that each condition of this
exemption has been met within 30 days of request by the Department.
Department's Note: Section VI may contain additional modifications
not mentioned directly above that are intended to clarify or streamline
the conditions in PTE 2014-06. The Department cautions the Applicant to
closely read the operative language of the proposed exemption during
the comment period and notify the Department in a written comment if
they have concerns about adherence to any of the conditions described
therein.
d. New Section VII. Effective Dates. This new section provides the
effective dates for all sections of the exemption. In this regard,
Sections I, II, and III of PTE 2014-06 are effective from September 9,
2013, through October 14, 2018; and Sections IV, V, VI, and VII of PTE
2014-06 (added by this amendment) are effective from October 15, 2018,
through April 5, 2023.
19. The Department's Findings. The Department has the authority
under ERISA section 408(a) to grant and amend exemptions 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.\28\ The Department's
findings required under ERISA section 408(a) are discussed below.
---------------------------------------------------------------------------
\28\ Regulations at 29 CFR 2570.30 to 2570.52 describe the
procedures for applying for an administrative exemption under ERISA.
---------------------------------------------------------------------------
20. The Proposed Amendment is ``In the Interests of the Plan.'' The
Department has tentatively determined that the proposed amendment is in
the interest of the Plan and its participants and beneficiaries since,
among other things, the Modifications allow the Plan to more freely
transfer the Preferred Interests, and the Plan received an $80 million
cash contribution in return for agreeing to the Modifications.
21. The Proposed Amendment is ``Protective of the Plan.'' The
Department has tentatively determined that the proposed amendment is
protective of the Plan and its participants and beneficiaries since,
among other things, the Modifications were negotiated by a qualified,
experienced Independent Fiduciary acting solely on behalf of the Trust.
Further, in addition to the new requirements of this amendment,
described above, all protections of PTE 2014-06 not affected by the
Modifications will remain in place.
22. The Proposed Amendment is ``Administratively Feasible.'' The
Department has tentatively determined that the proposed amendment is
administratively feasible since, among other things, the Independent
Fiduciary represented the interests of the Plan for all purposes with
respect to the Plan's holding of the Preferred Interests and must
confirm to the Department that all of the conditions of this amendment
have been met.
23. Summary. Given the conditions described above, the Department
has tentatively determined that the relief sought by the Applicant
satisfies the statutory requirements for an exemption under ERISA
section 408(a).
Notice to Interested Persons
Notice of the proposed exemption will be provided to all interested
persons in the manner approved by the Department and will contain the
documents described therein and a supplemental statement required by 29
CFR 2570.43(a)(2). The supplemental statement will inform interested
persons of their right to comment on and to request a hearing with
respect to the pending exemption. All written comments and/or requests
for a hearing must be received by the Department by June 17, 2026. All
comments will be made available to the public.
Warning: If you submit a comment, EBSA recommends that you include
your name and other contact information in the body of your comment,
but DO NOT submit information that you consider to be confidential, or
otherwise protected (such as Social Security number or an unlisted
phone number) or confidential business information that you do not want
publicly disclosed. All comments may be posted on the internet and can
be retrieved by most internet search engines.
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under ERISA section 408(a) and/or Code section 4975(c)(2) does not
relieve a fiduciary or other party in interest or disqualified person
from certain other provisions of ERISA and/or the Code, including any
prohibited transaction provisions to which the exemption does not apply
and the general fiduciary responsibility provisions of ERISA section
404, which, among other things, require a fiduciary to discharge their
duties respecting the plan solely in the interest of the plan and its
participants and beneficiaries and in a prudent manner in accordance
with ERISA section 404(a)(1)(B); nor does it affect the requirement of
Code section 401(a) that the plan must operate for the exclusive
benefit of the employees of the employer maintaining the plan and their
beneficiaries;
(2) Before an exemption may be granted under ERISA section 408(a)
and/or Code section 4975(c)(2), the Department must find that the
exemption is administratively feasible, in the interests of the plan
and of its participants and beneficiaries, and protective of the rights
of participants and beneficiaries of the plan;
(3) The proposed exemption, if granted, would be supplemental to,
and not in derogation of, any other provisions of ERISA and/or the
Code, including statutory or administrative exemptions and transitional
rules. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is, in fact, a prohibited transaction; and
[[Page 12824]]
(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 Amendment to PTE 2014-06
Based on the foregoing facts and representations submitted by AT&T,
Inc. (together with AT&T Inc.'s affiliates, AT&T or the Applicant), the
Department is considering amending PTE 2014-06 (79 FR 43072, July 24,
2014), an individual exemption previously granted by the Department
under the authority of section 408(a) of the Employee Retirement Income
Security Act of 1974, as amended (ERISA) and section 4975(c)(2) of the
Internal Revenue Code of 1986, as amended (the Code), and in accordance
with the procedures set forth in 29 CFR part 2570, subpart B (76 FR
66637, 66644, October 27, 2011), as follows:
Section IV. Definitions
For purposes of Sections V and VI:
(a) The term ``Affiliate'' means:
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with the person;
(2) Any officer, director, employee, relative, or partner in any
such person;
(3) Any corporation or partnership of which such person is an
officer, director, partner, or employee.
For the purposes of clause (a)(1) above, the term ``control'' means
the power to exercise a controlling influence over the management or
policies of a person other than an individual.
(b) The term ``AT&T Mobility'' means AT&T Mobility II LLC.
(c) The term ``AT&T Shares'' means shares of AT&T Inc. common
stock.
(d) The term ``Call Option'' means the right of AT&T under the
Contribution Agreement to purchase all or any portion of the Preferred
Interests from the Trust, from September 1, 2013, until October 14,
2018. Effective October 15, 2018, the Call Option was replaced by the
Redemption Option, described below.
(e) The term ``Change of Control'' means: (i) the occurrence of any
merger, reorganization or other transaction that results in AT&T Inc.,
directly or indirectly, owning less than fifty percent of the capital
or profits interests (where AT&T Mobility remains taxable as a
partnership), or equity (if AT&T Mobility becomes taxable as a
corporation), of AT&T Mobility exclusive of the Preferred Interests
and/or (ii) solely for purposes of the Contribution Agreement, a
transfer of fifty percent or more of the Plan liabilities and Trust
assets to an entity not under common control with AT&T Inc.
(f) The term ``Committee'' means the AT&T Inc. Benefit Plan
Investment Committee, which has been delegated the power and authority
to appoint and remove trustees and investment managers, and to enter
into and amend trust agreements and other agreements relating to the
management of Plan assets and, in respect of such power and authority,
has been designated by AT&T Services, Inc. as a ``named fiduciary'' of
the Plan.
(g) The term ``Contingent Event'' means (1) the first date that the
Issuer's ``debt-to-total-capitalization ratio'' (as defined in the
Contribution Agreement and the LLC Agreement, as applicable) exceeds
that of AT&T, (2) the date on which AT&T is rated below investment
grade for two consecutive calendar quarters by at least two of the
following rating agencies: (x) S&P Global Ratings, (y) Moody's, or (z)
Fitch Group, or (3) a Change of Control.
(h) The term ``Contribution Agreement'' means the Amended and
Restated Contribution Agreement between Brock Fiduciary Services LLC,
JPMorgan Chase Bank, N.A., as Directed Trustee of the Trust, AT&T Inc.
and AT&T Mobility II LLC, dated October 15, 2018.
(i) The term ``Distributions'' means distribution rights carried by
the Preferred Interests of $1.75 per Preferred Interest, for a total of
$560 million per year in cash payable to the Trust as measured on the
date of the Contribution, in accordance with the terms of the
Contribution Agreement.
(j) The term ``Exercise Period'' means, with respect to the Put
Option, the period comprised of the first 15 business days and the last
15 business days of any fiscal quarter of AT&T; and with respect to the
Redemption Option, the period beginning on the 26th business day of any
fiscal quarter of AT&T and ending on the 35th business day of such
quarter.
(k) The term ``Fair Market Value of the Preferred Interest'' means
(1) in cases of the exercise of the Put Option on or after September 9,
2020 (other than an exercise prior to September 9, 2022 as the result
of a Contingent Event) OR upon the exercise of the Redemption Option on
or after September 9, 2022, an amount determined based upon $25.00 per
Preferred Interest plus any accrued and unpaid Distributions and market
conditions at the time; and (2) in cases of the exercise of the Put
Option prior to September 9, 2022 as the result of a Contingent Event
OR upon the exercise of the Redemption Option prior to September 9,
2022, an amount determined based upon the sum of: (x) $25.00 per
Preferred Interest plus any accrued and unpaid Distributions, and (y)
the present value of future Distributions through and ending on
September 9, 2022 (excluding accrued and unpaid Distributions accounted
for in (x) immediately above).
(l) The term ``Investment Management Agreement'' means the
Investment Management Agreement by and between AT&T Services, Inc., the
AT&T Benefit Plan Investment Committee, AT&T Inc. and Brock Fiduciary
Services LLC, amended as of October 15, 2018.
(m) The term ``Independent Appraiser'' means an individual or
entity meeting the definition of a ``Qualified Independent Appraiser''
under 29 CFR 2570.31(i) retained to determine, on behalf of the Plan,
the Fair Market Value of the Preferred Interests as of the date of the
Contribution and while the Preferred Interests are held on behalf of
the Plan. For avoidance of doubt, the Independent Appraiser may be the
Independent Fiduciary, provided it qualifies as a Qualified Independent
Appraiser.
(n) The term ``Independent Fiduciary'' means Brock Fiduciary
Services LLC and any other fiduciary who: (1) is independent or
unrelated to AT&T Inc. and its Affiliates and has the appropriate
training, experience, and facilities to act on behalf of the Plan
regarding the covered transactions in accordance with the fiduciary
duties and responsibilities prescribed by ERISA (including, if
necessary, the responsibility to seek the counsel of knowledgeable
advisors to assist in its compliance with ERISA); and (2) if relevant,
succeeds Brock Fiduciary Services LLC pursuant to the terms of the
Investment Management Agreement, Independent Fiduciary Agreement, or
other relevant agreement. The Independent Fiduciary will not be deemed
to be independent of and unrelated to AT&T Inc. and its Affiliates if:
(i) such fiduciary directly or indirectly controls, is controlled by or
is under common control, with AT&T and its Affiliates; (ii) such
fiduciary directly or indirectly receives any compensation or other
consideration in connection with any transaction described in this
proposed amendment other than for acting as an Independent Fiduciary in
connection with the transactions described herein, provided that the
[[Page 12825]]
amount or payment of such compensation is not contingent upon, or in
any way affected by, the Independent Fiduciary's ultimate decision; and
(iii) the annual gross revenue received by the Independent Fiduciary,
during any year of its engagement, from AT&T Inc. and its Affiliates,
exceeds two percent (2%) of the Independent Fiduciary's annual gross
revenue from all sources (for federal income tax purposes) for its
prior tax year. For the purposes of this Section IV(n), the term
``control'' has the meaning set forth in Section IV(a) above.
(o) The term ``Independent Fiduciary Agreement'' means the
Independent Fiduciary Agreement dated May 1, 2012, as amended, by and
among AT&T Services, AT&T Inc. and Brock Fiduciary Services LLC.
(p) The term ``Issuer'' means AT&T Mobility II LLC.
(q) The term ``LLC Agreement'' means the Fourth Amended and
Restated Limited Liability Company Agreement of AT&T Mobility II LLC,
effective October 15, 2018.
(r) The term ``Modifications'' means the modifications negotiated
and approved by the Independent Fiduciary that became effective on
October 15, 2018, that, in general: (1) provide that the Preferred
Interests are transferable by the Trust and all subsequent holders of
the Preferred Interests without the Issuer's prior approval; (2)
provide that the Put Option may be exercised by any holder of the
Preferred Interests; (3) remove the Call Option from the Contribution
Agreement, and add the Redemption Option to the LLC Agreement, whereby
AT&T Mobility has the right to redeem the Preferred Interests; and (4)
preserve all of the Trust's rights with respect to the Preferred
Interests, except for the following: (i) the Put Option was modified so
that during each calendar quarter, it may be exercised only during
specific periods that alternate with the periods during which the
Redemption Option may be exercised, and (ii) the Registration Rights
Agreement was modified to change the consequences to AT&T if it were to
fail to register AT&T Inc. common stock received by the Trust as a
result of the exercise of the Put Option or the Redemption Option.
(s) The term ``Option Price'' means an amount equal to the greater
of: (1) the Fair Market Value of the Preferred Interest, determined by
the Independent Fiduciary as of the last date of the calendar quarter
preceding the date of exercise of the Redemption Option or the Put
Option, as the case may be, or for the portion of Preferred Interests
that are not immediately purchased by AT&T or the Issuer pursuant to
the Redemption Option or the Put Option because of the limitation on
AT&T's obligation to purchase the Preferred Interests pursuant to the
Put Option to no more than 106,666,667 Preferred Interests in any
twelve month period, (except in the event of a Change of Control) the
Fair Market Value of the Preferred Interest, determined by the
Independent Fiduciary as of the last date of the calendar quarter
immediately preceding the date such portion of the Preferred Interest
is actually purchased by AT&T Inc.; and (2) the sum of $25.00 (i.e., $8
billion in the aggregate) plus any accrued and unpaid Distributions.
(t) The term ``Plan'' means the AT&T Pension Benefit Plan.
(u) The term ``Preferred Interests'' means the Series A Cumulative
Perpetual Preferred Membership Interests in AT&T Mobility, an indirect
wholly owned limited liability company subsidiary of AT&T Inc., as such
Preferred Interests were modified effective October 15, 2018, pursuant
to the Contribution Agreement, the LLC Agreement and the Registration
Rights Agreement.
(v) The term ``Put Option'' means the right of the Independent
Fiduciary on behalf of the Trust to require AT&T to purchase the
Preferred Interests pursuant to the terms and conditions set forth in
the Contribution Agreement; or the right of any holder of the Preferred
Interests (including the Independent Fiduciary on behalf of the Trust)
to require the Issuer to purchase the Preferred Interests pursuant to
the terms and conditions set forth in the LLC Agreement, as applicable,
at the Option Price per Preferred Interest, at any time and from time
to time on or after the earliest of: (1) the first date that the
Issuer's debt-to-total-capitalization ratio exceeds that of AT&T; (2)
the date on which AT&T Inc. is rated below investment grade for two
consecutive calendar quarters by at least two of the following rating
agencies: (x) S&P Global Ratings, (y) Moody's, or (z) Fitch Group; (3)
a Change of Control; or (4) on or after September 9, 2020, as long as
the exercise is within the Exercise Period.
(w) The term ``Redemption Option'' means the right of the Issuer to
redeem the Preferred Interests in whole or in part pursuant to the
terms and conditions set forth in the LLC Agreement, at the Option
Price per Preferred Interest at any time and from time to time on or
after the earliest of: (1) a Change of Control; or (2) September 9,
2022, the ninth anniversary of the date on which the Preferred
Interests were contributed to the Trust, as long as such redemption is
within the Exercise Period.
(x) The term ``Registration Rights Agreement'' means the Amended
and Restated Registration Rights Agreement by and among AT&T Inc., the
SBC Master Pension Trust and Brock Fiduciary Services LLC, as
Independent Fiduciary and investment manager with respect to the AT&T
Pension Benefit Plan, a participating plan in the SBC Master Pension
Trust, dated October 15, 2018.
(y) The term ``Trust'' means the SBC Master Pension Trust,
established and maintained pursuant to an agreement between AT&T Inc.
and JPMorgan Chase Bank, N.A., as amended and restated effective as of
February 1, 2012.
Section V. Covered Transactions
Effective October 15, 2018, the restrictions of ERISA sections
406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(D), 406(a)(1)(E), 406(a)(2),
406(b)(1), 406(b)(2), and 407(a) and the sanctions resulting from the
application of Code section 4975 (a) and (b), by reason of Code section
4975(c)(1)(A), 4975(c)(1)(B), 4975(c)(1)(D) and 4975(c)(1)(E), shall
not apply to AT&T and the Plan with respect to the following
transactions, provided that the conditions described in Section VI are
satisfied:
(a) The holding of the Preferred Interests by the Trust on behalf
of the Plan;
(b) The granting by the Trust to the Issuer of the Redemption
Option, and the disposition of the Preferred Interests in connection
with the exercise of the Redemption Option; and
(c) The holding by the Trust of the Put Option, and the disposition
by the Trust of the Preferred Interests in connection with the Trust's
exercise of the Put Option.
VI. Conditions
Relief for the transactions described in Section V of this proposed
amendment is conditioned upon the parties' adherence to the following
requirements, in accordance with the Definitions provided in Section
IV:
(a) The Preferred Interests had a liquidation value of $25 per
Preferred Interest and carry distribution rights of $1.75 per Preferred
Interest (i.e., the Distributions), for a total of $560 million per
year in cash payable to the Trust as measured on the date of the
Contribution, in accordance with the terms of the Contribution
Agreement;
(b) The Plan did not incur fees, costs or other charges in
connection with the transactions described in Section V, other than
fees and expenses of the
[[Page 12826]]
Independent Fiduciary for duties required by this exemption, as
amended, as described herein;
(c) For the duration of the Investment Management Agreement, an
Independent Fiduciary acted solely on behalf of the Plan and the Trust,
represented the Plan's interests for all purposes with respect to the
Preferred Interests, and determined, prior to entering into any of the
transactions described in Section V, that each such transaction was in
the interest of the Plan;
(d) The selection of the Independent Fiduciary was based solely on
the Independent Fiduciary's qualifications to serve as a qualified
independent fiduciary and was made after a prudent process that
included a determination that the Independent Fiduciary is qualified to
perform the work required in connection with this exemption, and that
the Independent Fiduciary does not have any interests in any party in
interest involved in the covered transactions or in the covered
transactions themselves which may affect the exercise of such
fiduciary's best judgment as a fiduciary;
(e) For the duration of the Investment Management Agreement, the
Independent Fiduciary had complete discretion regarding the disposition
of any AT&T Shares received in exchange for Preferred Interests, in
accordance with the Investment Management Agreement, as further defined
below, and the Registration Rights Agreement;
(f) The Independent Fiduciary negotiated and approved, on behalf of
the Plan and the Trust, the terms and conditions of the Contribution
Agreement, including the terms of the Preferred Interests and the Call
Option set forth in the Contribution Agreement, as well as the terms of
the Redemption Option and the Put Option set forth in the LLC
Agreement, and terms of the Investment Management Agreement and the
Registration Rights Agreement, and any modification of the Plan's
rights and obligations under any term, definition or condition of the
amendment, including the Modifications, in advance of such term,
condition or modification;
(g) The Independent Fiduciary managed the holding and disposition
of the Preferred Interests and took whatever action it deemed necessary
to protect the rights of the Plan with respect to the Preferred
Interests or the AT&T Shares received in connection with the exercise
of the Redemption Option or the Put Option;
(h) The Independent Fiduciary monitored AT&T and the Issuer to
determine whether a Change of Control, or a different Contingent Event,
had occurred that permits the Trust to dispose of the Preferred
Interests;
(i) The Independent Fiduciary: did 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; or waive any rights,
claims, or remedies of the Plan under ERISA, state, or Federal law
against the Independent Fiduciary with respect to the transactions that
are the subject of this exemption;
(j) An Independent Appraiser, acting on behalf of the Plan,
determined the Fair Market Value of the Preferred Interests contributed
to the Trust on behalf of the Plan as of the date of the Contribution
and while the Preferred Interests were held on behalf of the Plan, and
for all purposes under this exemption, consistent with sound principles
of valuation. The Independent Appraiser: did not enter into, any
agreement, arrangement, or understanding that included any provision
that provides for the direct or indirect indemnification or
reimbursement of the Independent Appraiser 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 Independent Appraiser's work;
or waive any rights, claims or remedies of the Plan or its participants
and beneficiaries under ERISA, the Code, or other Federal and state
laws against the Independent Appraiser with respect to the transactions
that are the subject of this exemption;
(k) The terms of any transactions between the Plan and a purchaser
of Preferred Interests or any AT&T Shares received in connection with
the Preferred Interests were no less favorable to the Plan than terms
negotiated at arm's length under similar circumstances between
unrelated third parties determined by the Independent Fiduciary at the
time the contractual terms with respect to such transactions, including
without limitation, the Put Option and the Redemption Option, were
entered into;
(l) The Preferred Interests ranked senior to any other equity
holders of the Issuer in respect of: the right to receive
Distributions; and the right to receive Distributions or payments out
of the assets of the Issuer upon liquidation of the Issuer, in
accordance with the terms of the Contribution Agreement;
(m) In the event that the Distributions were in arrears, AT&T was
restricted from making certain transfers of cash out of the Issuer or
declaring dividends on and repurchasing AT&T Shares, in accordance with
the terms of the Contribution Agreement;
(n) AT&T was not permitted to declare any dividends on, or make any
repurchases of, AT&T Shares during any time there remained any
unregistered AT&T Shares held by the Trust that were received in
exchange for the Preferred Interests;
(o) The Committee and the Independent Fiduciary maintain for a
period of six (6) years from the later of (1) the latest date that
exemptive relief under this exemption, as amended, is necessary to
avoid engaging in a non-exempt prohibited transaction, or (2) the date
of publication of this amendment, in a manner that is convenient and
accessible for audit and examination, the records necessary to enable
the persons described in paragraph (p)(1) below to determine whether
conditions of this exemption have been met, except that (1) a
prohibited transaction will not be considered to have occurred if, due
to circumstances beyond the control of the Committee and/or the
Independent Fiduciary, the records are lost or destroyed prior to the
end of the six-year period, and (2) no party in interest other than the
Committee 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 (p) below; and
(p)(1) Except as provided in section (2) of this paragraph and not
withstanding any provisions of subsections (a)(2) and (b) of ERISA
section 504, the records referred to in paragraph (o) 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) AT&T or any duly authorized representative of AT&T;
(iii) the Independent Fiduciary or any duly authorized
representative of the Independent Fiduciary;
(iv) the Committee or any duly authorized representative of the
Committee; and
(v) any participant or beneficiary of the Plan, or any duly
authorized representative of such participant or beneficiary;
(2) None of the persons described above in paragraph (p)(1) (iii)
or (v) shall be authorized to examine the trade
[[Page 12827]]
secrets of AT&T or commercial or financial information that is
privileged or confidential, and should AT&T refuse to disclose
information on the basis that such information is exempt from
disclosure; AT&T shall by the close of the thirtieth (30th) day
following the request, provide a written notice advising that person of
the reasons for the refusal and that the Department may request such
information;
(q) Notwithstanding any provision in this exemption, as amended, to
the contrary, the Preferred Interests were transferable by the Trust
and all subsequent holders of the Preferred Interests at the holder's
sole discretion in accordance with the terms of the LLC Agreement;
(r) AT&T made an additional cash payment to the Trust of $80
million dollars no later than October 15, 2018, solely in connection
with the Modifications described herein;
(s) All the material facts and representations set forth in the
Summary of Facts and Representation must be true and accurate and the
Applicant will promptly inform the Department in the event that it
becomes aware that any material fact or representation is no longer
true and accurate; and
(t) AT&T 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.
Section VII. Exemption Dates
(a) Sections I, II and III of PTE 2014-06 are in effect between
September 9, 2013, to October 14, 2018.
(b) Sections IV, V and VI of PTE 2014-06, which are added by this
amendment, are in effect October 15, 2018, to April 5, 2023.
Christopher Motta,
Acting Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2026-05165 Filed 3-16-26; 8:45 am]
BILLING CODE 4510-29-P
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</html>Indexed from Federal Register on March 17, 2026.
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.