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Federal Register / Vol. 68, No.

41 / Monday, March 3, 2003 / Notices 10035

(5) An estimate of the total number of unless otherwise stated in the Notice of requested to the Secretary of Labor.
respondents and the amount of time Proposed Exemption, within 45 days Therefore, these notices of proposed
estimated for an average respondent to from the date of publication of this exemption are issued solely by the
respond: 140,000 responses at 30 Federal Register Notice. Comments and Department.
minutes per response. requests for a hearing should state: (1) The applications contain
(6) An estimate of the total public The name, address, and telephone representations with regard to the
burden (in hours) associated with the number of the person making the proposed exemptions which are
collection: 70,000 annual burden hours. comment or request, and (2) the nature summarized below. Interested persons
If you have additional comments, of the person’s interest in the exemption are referred to the applications on file
suggestions, or need a copy of the and the manner in which the person with the Department for a complete
proposed information collection would be adversely affected by the statement of the facts and
instrument with instructions, or exemption. A request for a hearing must representations.
additional information, please contact also state the issues to be addressed and Deutsche Bank AG
Richard A. Sloan 202–514–3291, include a general description of the Located in New York, New York
Director, Regulations and Forms evidence to be presented at the hearing. Exemption Application Number D–10840
Services Division, Immigration and ADDRESSES: All written comments and
Naturalization Service, U.S. Department Proposed Exemption
requests for a hearing (at least three
of Justice, Room 4304, 425 I Street, NW., copies) should be sent to the Employee The Department is considering
Washington, DC 20536. Additionally, Benefits Security Administration granting an exemption under the
comments and/or suggestions regarding (EBSA), Office of Exemption authority of section 408(a) of the
the item(s) contained in this notice, Determinations, Room N–5649, U.S. Employee Retirement Income Security
especially regarding the estimated Department of Labor, 200 Constitution Act of 1974 (the Act) and section
public burden and associated response Avenue, NW., Washington, DC 20210. 4975(c)(2) of the Internal Revenue Code
time may also be directed to Mr. Attention: Application No. lll, of 1986, as amended (the Code) and in
Richard A. Sloan. stated in each Notice of Proposed accordance with the procedures set
If additional information is required Exemption. Interested persons are also forth in 29 CFR Part 2570, Subpart B (55
contact: Mr. Robert B. Briggs, Clearance invited to submit comments and/or FR 32836, 32847, August 10, 1990).
Officer, United States Department of hearing requests to EBSA via e-mail or Section I—Retroactive Relief
Justice, Information Management and FAX. Any such comments or requests
Security Staff, Justice Management For the period from June 4, 1999 until
should be sent either by e-mail to: the date this proposed exemption is
Division, 601 D Street, NW., Patrick moffittb@pwba.dol.gov, or by FAX to
Henry Building, Suite 1600, granted, the restrictions of section
(202) 219–0204 by the end of the 406(a) and (b)(1) and (b)(2) of the Act
Washington, DC 20530. scheduled comment period. The and the sanctions resulting from the
Dated: February 26, 2003. applications for exemption and the application of section 4975 of the Code,
Richard A. Sloan, comments received will be available for by reason of section 4975(c)(1)(A)
Department Clearance Officer, United States public inspection in the Public through (E) of the Code, shall not apply
Department of Justice, Immigration and Documents Room of the Employee to the investment of the assets of a Bank
Naturalization Service. Benefits Security Administration, U.S. Plan or a Client Plan (either, a Plan) in
[FR Doc. 03–4910 Filed 2–28–03; 8:45 am] Department of Labor, Room N–1513, deposits of Deutsche Bank AG, its
BILLING CODE 4410–10–M 200 Constitution Avenue, NW., current or future branches, and/or its
Washington, DC 20210. current or future subsidiaries, if—
Notice to Interested Persons (a) Deutsche Bank AG is supervised
DEPARTMENT OF LABOR
by the Deutsche Bundesbank and/or the
Notice of the proposed exemptions
Employee Benefits Security Bundesanstalt fur
will be provided to all interested
Administration Finanzdienstleistungsaufsicht (the
persons in the manner agreed upon by
BAFin),1 and, in the case of a subsidiary
[Application No. D–10840, et al.] the applicant and the Department
of Deutsche Bank AG, is also supervised
within 15 days of the date of publication
by similar local government authorities;
Proposed Exemptions; Deutsche Bank in the Federal Register. Such notice (b) The deposit bears a rate of interest
AG shall include a copy of the notice of that is reasonable, as defined in section
proposed exemption as published in the III(f);
AGENCY: Employee Benefits Security
Federal Register and shall inform (c) The investment is:
Administration, Labor. interested persons of their right to (i) Made by a Bank Plan; or
ACTION: Notice of proposed exemptions. comment and to request a hearing (ii) Made by a Client Plan and
SUMMARY: This document contains (where appropriate). expressly authorized pursuant to a
notices of pendency before the SUPPLEMENTARY INFORMATION: The provision of such Plan (or trust thereof)
Department of Labor (the Department) of proposed exemptions were requested in or expressly authorized by an
proposed exemptions from certain of the applications filed pursuant to section independent fiduciary,2 as defined in
prohibited transaction restrictions of the 408(a) of the Act and/or section
Employee Retirement Income Security 4975(c)(2) of the Code, and in 1 For purposes of this exemption, if granted,

accordance with procedures set forth in supervision of Deutsche Bank AG by the BAFin is
Act of 1974 (the Act) and/or the Internal deemed to include supervision of Deutsche Bank
Revenue Code of 1986 (the Code). 29 CFR part 2570, subpart B (55 FR AG by the Federal Banking Supervisory Authority
32836, 32847, August 10, 1990). (das Bundesaufsichtsamt fuer das Kreditwesen), the
Written Comments and Hearing Effective December 31, 1978, section predecessor to the BAFin.
Requests 102 of Reorganization Plan No. 4 of 2 The Department notes that the Act’s general

standards of fiduciary conduct would apply to
All interested persons are invited to 1978, 5 U.S.C. App. 1 (1996), transferred arrangements involving the investment of Plan
submit written comments or requests for the authority of the Secretary of the assets permitted by this proposed exemption, if
a hearing on the pending exemptions, Treasury to issue exemptions of the type Continued

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10036 Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices

section III (g), with respect to such Plan; receives, upon request, copies of the following the date this proposed
and most recent financial statement of exemption is granted, the first request
(d) in situations where Deutsche Bank Deutsche Bank AG and/or its occurs at least 45 days prior to such
AG, or any of its affiliates that are banks subsidiaries; investment and the second request
or registered investment advisors, acts (e) Immediately after any material occurs within 30 days thereafter;
as an investment manager on behalf of adverse change in the financial (i) Investments in the deposits of a
a Plan, the amount of such Plan’s assets condition of Deutsche Bank AG, subsidiary of Deutsche Bank AG will be
invested in the deposits of Deutsche Deutsche Bank AG will notify each Plan backed by the full faith and credit of
Bank AG does not average, over any six fiduciary of such material adverse Deutsche Bank AG;
month period, more than 5% of the total change and will not use its authority to (j) Short-term debt issued by Deutsche
amount of the plan’s assets managed by continue the program of deposits with Bank AG is rated in one of the three
such investment manager. respect to the Plans without the consent highest categories by an independent
of a Bank Plan fiduciary or an rating agency such as Standard & Poors,
Section II—Prospective Relief
independent Client Plan fiduciary; Moody’s or a similar institution;
Effective after the date this proposed (f) In situations where Deutsche Bank
exemption is granted, the restrictions of (k) Deutsche Bank AG maintains or
AG, or any of its affiliates that are banks
section 406(a) and (b)(1) and (b)(2) of causes to be maintained within the
or registered investment advisors, acts
the Act and the sanctions resulting from United States for a period of six years
as an investment manager on behalf of
the application of section 4975 of the from the date of such transaction, in a
a Plan, the amount of such Plan’s assets
Code, by reason of section 4975(c)(1)(A) manner that is convenient and
invested in the deposits of Deutsche
through (E) of the Code, shall not apply accessible for audit and examination,
Bank AG does not average, over any six
to the investment of the assets of a Plan such records as are necessary to enable
month period, more than 1% of the total
in deposits of Deutsche Bank AG, its the persons described below in
amount of the plan’s assets managed by
current or future branches, and/or its paragraph (1) of this proposed
such investment manager;
current or future subsidiaries, if— (g) Deutsche Bank AG— exemption to determine whether the
(a) Deutsche Bank AG is supervised (1) Agrees to submit to the conditions of this exemption have been
by the Deutsche Bundesbank and/or the jurisdiction of the United States; met, except that a prohibited transaction
BAFin, and, in the case of a subsidiary (2) Agrees to appoint an agent for will not be considered to have occurred
of Deutsche Bank AG, is also supervised service of process in the United States, if, due to circumstances beyond the
by similar local government authorities; which may be an affiliate (the Process control of Deutsche Bank AG, the
(b) The deposit bears a rate of interest Agent); records are lost or destroyed prior to the
that is reasonable, as defined in section (3) Consents to service of process on end of the six-year period; and
II (f); the Process Agent; (l)(1) Except as provided in paragraph
(c) Prior to: (i) An investment of Plan (4) Agrees that it may be sued in the (2) of this section (l) and
assets in bank deposits; or (ii) the United States Courts in connection with notwithstanding any provisions of
commencement of any Deutsche Bank the transactions described in this subsections (a)(2) and (b) of section 504
AG program that invests Plan assets in proposed exemption; of the Act, the records referred to in
such deposits, an independent fiduciary (5) Agrees that any judgment may be paragraph (k) are unconditionally
(other than with respect to a Bank Plan) collectable by an employee benefit plan available at their customary location in
receives a written disclosure describing: in the United States from Deutsche Bank the United States for examination
(A) The circumstances pursuant to AG; and during normal business hours by—
which Plan assets will be invested in (6) Agrees to comply with, and be (i) Any duly authorized employee or
deposits of Deutsche Bank AG or its subject to, all relevant provisions of the representative of the Department or the
subsidiaries or branches; and Act. Internal Revenue Service,
(B) A description of the applicable (h) The investment is: (ii) Any fiduciary of a Plan, or any
sovereign regulatory authority/ (i) Made by a Bank Plan and
duly authorized employee or
authorities governing the activities of authorized by a Bank Plan fiduciary; or
representative of such fiduciary, and
Deutsche Bank AG; (ii) Made by a Client Plan and
(d) A fiduciary independent of authorized by an independent fiduciary (iii) Any participant or beneficiary of
Deutsche Bank AG and its affiliates with respect to such Client Plan. a Plan or duly authorized employee or
(other than with respect to a Bank Plan) Notwithstanding (h)(i) and (h)(ii) above, representative of such participant or
authorization for the investment by a beneficiary;
granted. In this regard, section 404 of the Act Plan in the deposits of Deutsche Bank (2) None of the persons described in
requires, among other things, a fiduciary to AG may be presumed notwithstanding paragraphs (l)(1)(ii) and (iii) shall be
discharge his duties respecting a plan solely in the authorized to examine trade secrets of
interest of the plan’s participants and beneficiaries
that Deutsche Bank AG does not receive
and in a prudent manner. Accordingly, an any response from such Plan pursuant Deutsche Bank AG, or commercial or
independent fiduciary with respect to a Plan must to two written requests by Deutsche financial information that is privileged
act prudently with respect to: (1) The decision to Bank AG (one request by a certified or confidential.
enter into an arrangement described herein; and (2)
the negotiation of the terms of such an arrangement,
mailing that contains only such request) Section III—Definitions
including, among other things, the specific terms by for the authorization, provided that: (A)
which Plan assets will be invested in the deposits with respect to Plans that invest in the (a) The term ‘‘bank’’ means a bank
of Deutsche Bank AG. The Department further deposits of Deutsche Bank AG prior to supervised by the United States, a state,
emphasizes that it expects plan fiduciaries, prior to or a sovereign government.
allowing or authorizing the transactions described
the date this proposed exemption is
herein, to fully understand the benefits and risks granted, the first request occurs not later (b) An ‘‘affiliate’’ of a person includes:
associated with such transactions, following than 45 days after the date the proposed (1) Any person that directly, or
disclosure by Deutsche Bank AG of all relevant exemption is granted and the second indirectly through one or more
information. In addition, the Department notes that
such plan fiduciaries must periodically monitor,
request occurs within 30 days thereafter; intermediaries, controls or is controlled
and have the ability to so monitor, the services and (B) with respect to Plans that invest by, or is under common control with,
provided by Deutsche Bank AG. in the deposits of Deutsche Bank AG such person;

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Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices 10037

(2) Any officer, director, employee or authorization to constitute an act with converting the currency from/to
relative of such person, or partner of any described in section 406(b) of the Act. U.S. dollars.4 The Applicant
such person; and additionally represents that an
Summary of Facts and Representations
(3) Any corporation or partnership of investment in bank deposits may be
which such person is an officer, 1. Deutsche Bank AG (hereinafter, made for short periods of time,
director, partner or employee. Deutsche Bank or the Applicant) is a rendering such investments vehicles
(c) The term ‘‘control’’ means the German banking corporation and essential in foreign markets where
power to exercise a controlling commercial bank that provides a wide collective investment funds are not
influence over the management or range of services to various types of available to invest short-term cash
policies of a person other than an entities worldwide. Deutsche Bank is balances. Finally, the Applicant states
individual. one of the largest financial institutions that an investment in bank deposits
(d) A ‘‘Client Plan’’ refers to an in the world in terms of assets held, provides a competitive rate of return on
employee benefit plan as described in managing over $585 billion in assets currency being held ‘‘idle’’ pending
section 3(3) with respect to which either through collective trusts, reinvestment, making such an
Deutsche Bank AG acts as a trustee or separately, managed accounts, or investment attractive with respect to
custodian. mutual funds. portfolios investing globally.
Deutsche Bank Trust Company 4. The Applicant states that the
(e) A ‘‘Bank Plan’’ means a plan
Americas (DBTCA) 3 is a wholly-owned investment of ‘‘idle’’ foreign currency in
sponsored or maintained by:
indirect subsidiary of Deutsche Bank. bank deposits may be achieved either
(1) Deutsche Bank AG or any person DBTCA is a commercial bank that
that directly, or indirectly through one directly or through cash management
provides a wide range of services to programs. According to the Applicant,
or more intermediaries, controls or is various types of entities worldwide.
controlled by, or is under common the arrangement by which foreign
2. In general terms, the transactions currency is invested often is determined
control with, Deutsche Bank AG or; contained in this proposed exemption by the amount of time an investment
(2) Any entity in which Deutsche involve the investment of ‘‘idle’’ foreign manager anticipates the assets being
Bank AG holds more than a ten percent currency in bank deposits, either invested will remain in such an
equity interest. directly or through a cash management investment vehicle. In this regard, the
(f) A ‘‘reasonable’’ rate of interest program. In this regard, the Applicant Applicant represents that an investment
means a rate of interest determinable by states that, for various reasons, a manager who seeks to invest plan assets
reference to short-term rates available to portfolio manager may seek to hold in bank deposits on a day-to-day basis
other customers of the bank, those foreign currency ‘‘idle’’ for short periods will likely allow such assets to be
offered by other banks, those available of time. For example, the Applicant ‘‘swept’’ into the bank deposits of the
from money market funds, those states that an investment manager may plan’s global custodian through a cash
applicable to short-term instruments hold ‘‘idle’’ the foreign currency a management program. Pursuant to such
such as repurchase agreements, or by portfolio has received from the a program, uninvested cash balances left
reference to a benchmark such as liquidation of foreign securities while with any subcustodian are placed on an
sovereign short term debt (e.g., in the determining how to reinvest such overnight basis into the same currency
U.S., treasury bills), all in the currency. deposits of the global custodian or the
jurisdiction where the rate is being 3. According to the Applicant, there subcustodian (which may or may not be
evaluated. The requirement that an are limited options with respect to the a branch or an affiliate of the global
interest rate be ‘‘reasonable’’ does not investment of ‘‘idle’’ foreign currency. custodian).5
preclude the payment of no interest in In this regard, the Applicant states that By comparison, the Applicant
situations where the deposit is with a most short-term investment vehicles are represents that to the extent an
branch or subsidiary of Deutsche Bank denominated in U.S. dollars. As a result, investment manager expects ‘‘idle’’
AG that acts as a local subcustodian and to invest foreign currency in such foreign currency will remain in bank
no interest is paid to similarly situated vehicles, an investment manager would deposits on a short-term basis of fixed
custody clients of the global custodian have to convert the foreign currency to duration (i.e., 30 days, 60 days, etc.), the
so long as, prior any investment in U.S. dollars (and, thereafter, convert the manager may choose to invest the
deposits that pays no interest, Deutsche U.S. dollars back to foreign currency). currency directly in bank deposits.
Bank AG discloses to the appropriate Due to the costs associated with such Unlike a cash management program,
Plan fiduciary that no interest may be conversion(s), the Applicant states, it is this method of investing in bank
paid with respect to an arrangement often not economically viable to invest deposits involves an investment
described above. Notwithstanding the ‘‘idle’’ foreign currency in most of the manager’s affirmative act of investing in
foregoing, if local law is changed to financial vehicles available for short- the deposits of a particular bank (upon
preclude the payment of interest, and term investments. taking into consideration, among other
Deutsche Bank AG discloses such fact to Given this and for the reasons stated things, the interest rates and credit
the appropriate Plan fiduciary as soon below, the Applicant states that ratings of various banks).
as reasonably possible. investment managers and plan sponsors 5. The Applicant states that global
(g) An ‘‘independent fiduciary’’ often seek to invest ‘‘idle’’ currency in custodians often provide cash
means a fiduciary independent of bank deposits. In this regard, the
Deutsche Bank AG and its affiliates who Applicant represents that most global 4 For example, when a portfolio that uses the

has the authority to make the banks take deposits in many different EAFE index as a benchmark (and has assets
invested primarily in Europe, Asia and the Far East)
investments described herein, or to foreign currencies. Accordingly, an holds ‘‘idle’’ foreign currency, the portfolio will
instruct the trustee or other fiduciary investment manager may invest the generally allow such assets to remain in a foreign
with respect to such investments, and currency of a particular foreign nation currency until the next investment in that country
who has no interest in the transaction sector occurs.
in the same-currency deposits of a bank 5 The Applicant notes, however, that in certain
which may affect the exercise of such without incurring the costs associated instances (i.e., late trades) uninvested balances may
authorizing fiduciary’s best judgment as have to remain with the subcustodian without being
a fiduciary so as to cause such 3 Formerly, Bankers Trust Company. placed into the global custodian’s deposits.

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10038 Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices

management services whereby foreign DBTCA Program) 7 to every account for Branch) in the same currency in which
currency left with an affiliated which it acts either as a custodian or it is maintained (although some residual
subcustodian will be either: (1) Swept trustee.8 Such Program, the Applicant amounts, in the same currency, may
into the deposits of the global custodian states, is comprised of two parts: One remain in the deposits of the local
(or branch of subsidiary thereof); or (2) that relates to domestic portfolios (i.e., subcustodian). For all other currencies,
left in a non-interest bearing account assets that are invested in the U.S.) and the Applicant states, Idle Cash remains
with the subcustodian. According to the another that relates to global portfolios. in deposits of the local subcustodian.
Applicant, ‘‘idle’’ foreign currency may In this regard, the Applicant states that The Applicant states that, with
be swept to the global custodian for with respect to domestic-only portfolios, respect to all currencies that are part of
several reasons. For example, the global upon opening an account, the Plan the sweep to the London Branch, the
custodian may offer a better interest rate fiduciary responsible for choosing amount of interest paid equals the
and/or have a better credit rating than DBTCA as the Plan’s trustee or deposit rate less a cash management fee.
banks that are not parties in interest custodian also selects a sweep vehicle In this regard, the deposit rate is the
with respect to such plan. By for cash left temporarily uninvested higher of the London Branch overnight
comparison, ‘‘idle’’ foreign currency (Idle Cash) by the Plan’s portfolio deposit rate for such currency
may remain with the subcustodian in manager (which may or may not be
(generally, a weekly or monthly average,
situations where the movement of the DBTCA or an affiliate). The Applicant
depending on the currency) or the
currency outside the subcustodial bank represents that the sweep vehicle is
subcustodian’s rate. According to the
would be too costly. Finally, ‘‘idle’’ often a collective trust for short-term
Applicant, the cash management fees
foreign currency may remain in the investments managed by DBTCA or an
differ by currency and are disclosed in
account of a client of the subcustodian affiliate although, at the election of the
advance to an independent fiduciary for
in situations involving, among other fiduciary, the cash sweep vehicle may
each Client Plan and an appropriate
things, late trades and unpredicted cash also be a mutual fund affiliated with
Bank Plan fiduciary for each Bank Plan.
flows. DBTCA or a fund managed by, for
The Applicant notes that Plan
example, an investment manager not
6. Accordingly, the Applicant seeks fiduciaries are informed that they will
affiliated with DBTCA. The Applicant
an exemption to permit the investment earn interest at the calculated rate on
states that Plans investing in DBTCA’s
of Plan assets in deposits of Deutsche the entire contractual cash balances 10
collective funds are informed, as part of
Bank and its non-U.S. banking branches without any action necessary on their
the disclosure that accompanies these
and subsidiaries, either directly or part and without any minimum balance
investments, of the sweep vehicle used.
through cash management programs. requirements. In addition, the Applicant
For global investments, the Applicant
The Applicant states that this states that Plan fiduciaries are informed
states that each Client Plan fiduciary
exemption, if granted, is intended to that their respective Plans will receive
and each Bank Plan fiduciary is
cover only those Plan investments in the specified rate on all cash that is part
provided detailed disclosure, including
bank deposits that are temporary in of the Plan’s contractual cash balance,
the types of overnight investments
nature. regardless of whether their contractual
utilized by the global cash management
The Applicant cites a lack of program and the fees related to the cash balance exceeds their actual
applicable statutory relief with respect program. ERISA clients investing balance.
to deposits in branches or subsidiaries globally that have uninvested U.S. Second, for all currencies that are not
of foreign banks affiliated with a dollars have access to the types of ‘‘cash swept,11 the Idle Cash will remain in
custodian or a trustee when such foreign sweep’’ vehicles described above. deposits of the local subcustodian.
banks are not supervised by the U.S. or According to the Applicant, Idle Cash Deutsche Bank represents that with
a state.6 In addition, the Applicant cites is invested pursuant to the DBTCA cash respect to these currencies, Deutsche
a lack of administrative relief with management program in one of two Bank earns a cash management fee. In
respect to the investment of plan assets ways. First, Idle Cash denominated as markets where individual client
in overnight deposits by a plan sponsor sweep currencies 9 are deposited in the accounts are maintained with the
who is not an in-house asset manager London Branch of DBTCA (the London subcustodian due to local regulations,
(i.e., an INHAM as described in PTE 96– Plans will receive interest on actual
23 (61 FR 15975 (Apr. 10 (1996)) or by 7 According to Applicant, the DBTCA is currently
balances with no minimum rate
an investment manager who is not a the only cash management program offered by
Deutsche Bank containing the types of transactions
guaranteed. In these currencies, no fee
qualified professional asset manager described herein.
(i.e., a QPAM as described in PTE 84– 8 The Applicant states that Deutsche Bank is not 10 A contractual balance, Deutsche Bank notes, is
14 (49 FR 9494 (Mar. 13, 1984) and seeking relief pursuant to this proposed exemption the cash, securities and other investments that the
corrected at 50 FR 41430 (Oct. 10 with respect to the Bankers Trust Program itself or, Client Plan would expect to have on a given date,
1985)). to the extent relevant, any other cash management assuming all transactions have settled in a timely
program. Rather, the Applicant states that if this fashion. Thus, assuming that an investment
7. Specifically, the Applicant states proposed exemption is granted, the Bankers Trust manager executed a sale of a security to settle trade
that DBTCA is a global custodian that Program, and any future program involving the date plus 3 days (T+3), and the investment manager
types of transactions provided relief herein, will did not execute a trade using those sales proceeds
offers a cash management program (the comply with the statutory exemption contained in until a date two days hence, the proceeds would be
408(b)(6) of ERISA. Accordingly, the Department is swept to a deposit pursuant to the sweep program
6 The Applicant states that where the global not providing any relief herein with respect to the regardless of whether such proceeds are received on
custodian is a U.S. or state supervised bank or trust Bankers Trust Program or any other cash the third day.
company, relief for the investment in bank deposits management offered by Deutsche Bank AG. 11 In this regard, as of January 29, 2000, the

by a plan is provided by section 408(b)(4) of ERISA. 9 The Applicant represents that, as of January 29, currencies on which interest is credited, but are not
In addition, the applicant states that in situations 2000, the Australian Dollar, British Pound Sterling, swept to the London Branch are: the Argentine
where the foreign subcustodian is not affiliated Canadian Dollar, Danish Krone, EMU Euro, Hong Peso, Czech Koruna, Greek Drachma, Hungarian
with the global custodian, the global custodian may Kong Dollar, Norwegian Krone, South African Forint, Indonesian Rupiah, Israeli Shekel, Japanese
rely on PTE 84–14 to exempt the extension of credit Rand, Swedish Krona, Swiss Franc, and the U.S. Yen, Jordanian Dinar, Korean Won, Mexican Peso,
and the use of plan assets by the foreign Dollar are considered sweep currencies. Pursuant to New Taiwan Dollar, New Zealand Dollar,
subcustodian party in interest inherent in the the Bankers Trust Program, U.S. Dollars are swept Philippine Peso, Polish Zloty, Singapore Dollar,
investment in that subcustodian’s deposits. to the U.S. and put in collective trusts. Slovak Koruna, Thai Baht, and Turkish Lire.

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Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices 10039

or spread is earned for the DBTCA and through special audits as ordered by Deutsche Bank represents that there are
program. the supervisory authorities. The BAFin two deposit insurance programs that
The Applicant represents that Plan obtains information on the condition of currently cover Deutsche Bank and its
sponsors and/or Plan investment Deutsche Bank and its branches by foreign branches. The first is the
managers will receive information requiring the submission of periodic, European Union deposit insurance
regarding the amounts of Idle Cash consolidated financial reports, and system, which insures deposits up to
remaining, account activity, and the through a mandatory annual report the lesser of 90% of the deposit or
rates paid on the Idle Cash through prepared by an independent auditor.14 20,000 euros. This statutory deposit
monthly reports. Plan sponsors and Plan Deutsche Bank represents that the protection system is maintained by the
investment managers may also receive annual audit includes foreign branches German Bank Institution for
such information through DBTCA’s and subsidiaries. The auditor is required Indemnification, the
proprietary on-line system (provided to give positive assurance regarding Entschadigungseinrichtung dutscher
that they arrange for this service). whether the institution has fulfilled its Banken (the EdB), which is maintained
8. The Applicant represents that duties under the German Banking Act. by the Association of German Banks, the
Deutsche Bank is supervised by the This requires, Deutsche Bank notes, the Bundesverband Deutscher Banken, and
Deutsche Bundesbank and the BAFin.12 auditor to comment on the asset quality is subject to supervision by the BAFin.
The Deutsche Bundesbank is the central and the internal control environment of The second deposit insurance
bank of the Federal Republic of each part of the institution, including program is the Deposit Protection Fund,
Germany and part of the European subsidiaries, in detail. The BAFin also the Einlagensicherungsfonds,
System of Central Banks (the ESCB). receives information regarding capital maintained by the Association of
The Applicant represents that the adequacy, country risk exposure and German Banks. This fund, the
Deutsche Bundesbank is primarily foreign exchange exposures from participation in which is voluntary,
focused on maintaining the stability of Deutsche Bank. German banking law safeguards liabilities in excess of the
the ‘‘Euro’’13 and the execution of mandates penalties to ensure correct thresholds guaranteed by the European
domestic and international payments. In reporting to the BAFin. The auditors of Union program, up to a protection
addition, the Applicant states that the Deutsche Bank face penalties for gross ceiling for each creditor of 30% of the
Deutsche Bundesbank also participates violation of their auditing duties. liable capital of the bank.15 This
in the supervision of credit institutions The BAFin supervises all branches of program is funded by the premiums
and financial services institutions. Deutsche Bank, wherever located, paid by participating German banks and
The BAFin is the German Federal subjecting them to announced and deposit-taking trust companies. The
Banking Supervisory Authority, an unannounced on-site audits and all fund relies on the Auditing Association
independent federal institution other supervisory controls applicable to of German Banks, which audits banks
German banks. Deutsche Bank and makes recommendations that are
responsible to the German Ministry of
represents that in its branches located in required to be implemented.
Finance. The BAFin supervises the
a member state of the European Deposits in subsidiaries of Deutsche
operations of banks, banking groups,
Economic Area (the EEA), such audits Bank are not insured through the
financial holding groups and branches
are carried out consistent with the German deposit insurance system.
of foreign banks in Germany and has the
applicable European Directives, and However, the Applicant represents that
authority to: (a) Issue and withdraw
with respect to branches outside the investments by Plans in the deposits of
banking licenses; (b) issue regulations
EEA, consistent with the applicable a subsidiary of Deutsche Bank will be
on the capital and liquidity
international agreements, memoranda of backed by the full faith and credit of
requirements of banks; (c) request
understanding or other arrangements Deutsche Bank.
information and conduct investigations; with the relevant foreign supervisory 10. The Applicant proposes certain
and (d) intervene in cases of inadequate authorities. Deutsche Bank subsidiaries safeguards applicable to both the
capital or liquidity, or in cases of are consolidated with Deutsche Bank for retroactive and prospective portions of
endangered deposits or risk of purposes of the capital ratios that the this proposed exemption. In this regard,
bankruptcy by means of temporarily bank is required to meet on a group- the Applicant states that the investment
prohibiting certain banking transactions. wide basis. Supervision extends to the by a Plan in the deposits of Deutsche
Specifically, the BAFin ensures that adequacy of equity capital of banking Bank will be limited. With respect to the
Deutsche Bank has procedures for and financial holding groups and retroactive portion of the exemption, if
monitoring and controlling its compliance with the regulation granted, in situations where Deutsche
worldwide activities through various regarding large loans granted by such Bank AG, or any of its affiliates that are
statutory and regulatory standards such groups. banks or registered investment advisors,
as: Requirements for adequate internal 9. Deposits in branches of Deutsche acts as an investment manager on behalf
controls, oversight, administration and Bank are insured. In this regard, of a Plan, the amount of such Plan’s
financial resources. The BAFin further
assets invested in the deposits of
reviews compliance with these 14 Deutsche Bank notes that the audits of their
Deutsche Bank does not average, over
limitations on operations and internal financials are done in accordance with the auditing
standards established by the International any six month period, more than 5% of
control requirements through an annual
Federation of Accountants (IFAC), which is an the total amount of the assets managed
audit performed by the year-end auditor organization of national accountancy bodies, by such investment manager. With
including the American Institute of Certified Public respect to the prospective portion of the
12 Deutsche Bank AG, New York Branch, is
Accountants (AICPA), to develop and harmonize
regulated by the New York State Banking worldwide auditing standards. The financial exemption, if granted, the percentage
Department. In addition, certain activities of the statements are prepared in accordance with limitation described above shall equal
U.S. affiliates of Deutsche Bank are regulated by the standards established by the International one percent. In all cases, the Applicant
Federal Reserve Bank of New York. Accounting Standards Committee (IASC), which is
13 The term ‘‘Euro’’ means the single European
states, the interest earned on the
a body formed to achieve uniformity in accounting
currency adopted by eleven Member States of the principles used in financial statement reporting. deposits described herein will be
European Union, which are: Austria, Belgium, The international equivalents to the U.S.’s AICPA
Finland, France, Germany, Ireland, Italy, and the Financial Accounting Standards Board 15 Liable Capital means the core capital and

Luxembourg, the Netherlands, Portugal, and Spain. (FASB) are the IFAC and the IASC, respectively. additional capital.

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10040 Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices

reasonable, determinable by reference will furnish to each Plan certain statutory criteria for an exemption
to, among other things, short-term rates relevant information including its most under section 408(a) of the Act since,
available to other customers of Deutsche recent available audited and unaudited among other things:
Bank, those offered by other banks, and financial statements and will give (a) Deutsche Bank was supervised by
those available from money market prompt notice of any material adverse the Deutsche Bundesbank and/or the
funds. The Applicant notes that in changes in its financial condition that BAFin, and, in the case of a subsidiary
situations where the deposit is with a occur prior to the date of such of Deutsche Bank, was also supervised
branch or subsidiary of Deutsche Bank statements. Upon giving this notice, the by similar local government authorities;
that acts as a local subcustodian, no Applicant states, Deutsche Bank AG (b) The deposits provided each
interest may be paid with respect to will not use its authority to continue the affected Plan with a rate of interest that
such deposit to the extent that: no program of deposits with respect to the was reasonable; and
interest is paid to similarly situated Plans without the consent of a Bank (c) In situations where Deutsche Bank,
custody clients of the global custodian, Plan fiduciary or an independent Client or any of its affiliates that are banks or
and, prospectively, Deutsche Bank Plan fiduciary. registered investment advisors, acts as
discloses to the appropriate Plan In addition, with respect to the an investment manager on behalf of a
fiduciary that no interest may be paid deposit cash management program Plan, the amount of such Plan’s assets
pursuant to such an arrangement. In described herein, Deutsche Bank, and invested in the deposits of Deutsche
addition, no interest may be paid in its branches and subsidiaries, will Bank does not average, over any six
situations where local law is changed to comply with the indicia of ownership month period, more than 5% of the total
preclude the payment of interest and requirements under section 404(b) of the amount of the assets managed by such
Deutsche Bank discloses such fact to the Act and the regulations promulgated investment manager.
appropriate Plan fiduciary as soon as under 29 CFR 2550.404b–1(a)(2)(i)(A).16 14. The Applicant represents that,
reasonably possible. Further, Deutsche Bank: (a) Agrees to prospectively, the described
Retroactively, a Client Plan must submit to the jurisdiction of the courts transactions satisfy the statutory criteria
authorize an investment in the deposits of the United States; (b) agrees to for an exemption under section 408(a) of
of Deutsche Bank pursuant to a appoint a Process Agent for service of the Act since, among other things:
provision of such Plan or the trust process in the United States, which may (a) Prior to either: An investment of
thereof (unless the investments were be an affiliate; (c) consents to service of Plan assets in bank deposits; or the
expressly authorized by an independent process on the Process Agent; (d) agrees commencement of any Deutsche Bank
fiduciary). Prospectively, investments in that it may be sued in the courts of the AG program that invests Plan assets in
the deposits of Deutsche Bank must be: United States in connection with such deposits, an independent fiduciary
(i) Made by a Bank Plan and authorized transactions described in this proposed (other than with respect to a Bank Plan)
by an Bank Plan fiduciary; or (ii) made exemption; (e) agrees that any judgment receives a written disclosure describing:
a Client Plan and authorized by an may be collectable by an employee (i) The circumstances pursuant to
independent fiduciary with respect to benefit plan in the United States from which Plan assets will be invested in
such Client Plan. In this regard, Deutsche Bank; and (f) agrees to comply deposits of Deutsche Bank or its
Notwithstanding, authorization for the with, and be subject to, all relevant subsidiaries or branches; and
investment by a Plan in the deposits of provisions of the Act. (ii) A description of the applicable
Deutsche Bank AG may be presumed The Applicant states that the deposits sovereign regulatory authority/
notwithstanding that Deutsche Bank described herein will be in safe, well- authorities governing the activities of
does not receive any response from such capitalized financial institutions. In this Deutsche Bank;
Plan pursuant to two written requests by regard, the proposal prospectively (b) Immediately after any material
Deutsche Bank (one request by a requires that short-term debt issued by adverse change in the financial
certified mailing that contains only such Deutsche Bank must be rated in one of condition of Deutsche Bank, Deutsche
request) for the authorization, provided the three highest categories by an Bank will notify each Plan fiduciary of
that: (A) With respect to Plans that independent rating agency such as such material adverse change and will
invest in the deposits of Deutsche Bank Standard & Poors, Moody’s or a similar not use its authority to continue the
prior to the date this proposed program of deposits with respect to the
institution.
exemption is granted, the first request 12. The Applicant represents that the Plans without the consent of the
occurs not later than 45 days after the proposed exemption would be appropriate Bank Plan fiduciary or an
date the proposed exemption is granted administratively feasible since the independent Client Plan fiduciary;
and the second request occurs within 30 (c) Deutsche Bank—
transactions would be transparent to
days thereafter; and (B) with respect to (1) Agrees to submit to the
Client Plan fiduciaries and no action on
Plans that invest in the deposits of jurisdiction of the United States;
the part of the government or plan
Deutsche Bank following the date this (2) Agrees to appoint the Process
sponsors would be necessary to
proposed exemption is granted, the first Agent;
effectuate such transactions, other than
request occurs at least 45 days prior to (3) Consents to service of process on
the grant of the exemption and an initial
such investment and the second request the Process Agent;
authorization by a Client Plan fiduciary (4) Agrees that it may be sued in the
occurs within 30 days thereafter.
Further, Deutsche Bank has been and that is independent of Deutsche Bank United States Courts in connection with
will continue to be supervised by the (i.e., an independent fiduciary) or an the transactions described in this
Deutsche Bundesbank and/or the appropriate Bank Plan fiduciary. proposed exemption;
BAFin, and, in the case of a subsidiary 13. In summary, the Applicant (5) Agrees that any judgment may be
of Deutsche Bank, by similar local represents that, retroactively, the collectable by an employee benefit plan
government authorities. described transactions satisfy the in the United States from Deutsche
11. With respect to the prospective 16 The Department is expressing no opinion as to
Bank; and
portion of this proposed exemption, the whether the requirements of ERISA section 404(b)
(6) Agrees to comply with, and be
Applicant represents that Plans will be and the regulations promulgated thereunder have subject to, all relevant provisions of the
further protected in that Deutsche Bank been met. Act.

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Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices 10041

(d) Investments in the deposits of a (e) MetLife took all appropriate the Metropolitan Life Retirement Plan
subsidiary of Deutsche Bank will be actions necessary to safeguard the for United States Salaried Employees
backed by the full faith and credit of interests of the Account and the Plans and the Metropolitan Life Retirement
Deutsche Bank; and in connection with the Sale. Plan for the United States
(e) Short-term debt issued by (f) If the exercise of any of MetLife’s Commissioned Employees. MetLife
Deutsche Bank is rated in one of the rights, claims or causes of action in believes that the MetLife Plan became a
three highest categories by an connection with its ownership of the participant in the Account at or near the
independent rating agency such as Note results in MetLife recovering from time of its inception. The investing
Standard & Poors, Moody’s or a similar PG&E an aggregate amount that is Plans hold units in the Account on a pro
institution. greater than the sales price for such rata basis. MetLife represents that the
For Further Information Contact: Note, MetLife will refund such excess purchase by the MetLife Plan of units in
Christopher Motta of the Department, amount to the Account. the Account is covered under section
telephone (202) 693–8544. (This is not Effective Date: If granted, this 408(b)(8) of ERISA.19
a toll-free number.) proposed exemption will be effective as On February 2, 1971, the Account was
Metropolitan Life Insurance Company of April 6, 2001. initially approved by New York State
(MetLife) Summary of Facts and Representations Insurance Department (the NYSID), an
Located in New York, NY independent state agency that regulates
[Application No. D–11042] 1. MetLife is a life insurance company MetLife. The purpose of the Account is
organized under the laws of New York to achieve the highest possible current
Proposed Exemption and is subject to supervision and income consistent with the preservation
Based on the facts and representations examination of the New York of capital and maintenance of liquidity.
set forth in the application, the Superintendent of Insurance (the The Account is permitted to invest in
Department is considering granting an Superintendent). MetLife is a wholly money market instruments with
exemption under the authority of owned subsidiary of MetLife, Inc., a maturities of 13 months of less.
section 408(a) of the Act (or ERISA) and publicly held Delaware corporation. In Generally, the average maturity is less
section 4975(c)(2) of the Code and in terms of assets, MetLife is the second than 60 days. The Account is valued
accordance with the procedures set largest life insurance company in the daily and is managed to maintain a
forth in 29 CFR part 2570, subpart B (55 United States. As of September 30, stable one dollar value, similar to a
FR 32836, 32847, August 10, 1990).17 If 2002, MetLife, including its insurance money market fund. As of April 6,.
the exemption is granted, the company subsidiaries, had total assets 2001, which is the date of the Sale
restrictions of sections 406(a), 406(b)(1) under management of approximately transaction described herein, the
and 406(b)(2) of the Act and the $290.1 billion 18 and, as of December 31, Account had a market value of
sanctions resulting from the application 2001, approximately $1.9 trillion of life $119,000,000. Also as of such date,
of section 4975 of the Code, by reason insurance in force. Among the insurance participating investors in the Account
of section 4975(c)(1)(A) through (E) of products and services it offers, MetLife included a number of ERISA Plan 20 and
the Code, shall not apply, effective April and certain of its affiliates provide the MetLife Plan, which had invested
6, 2001, to the cash sale (the Sale) to funding, asset management and other approximately $66,746,000 in the
MetLife of a note (the Note), issued by services for thousands of employee Account.
the Pacific Gas & Electric Company benefit plans subject to the provisions of 3. On December 15, 2000, the Account
(PG&E), by MetLife’s Liquidity Plus Title I of the Act. MetLife maintains purchased, in book-entry form, certain
Account (the Account) for which pooled and single plan separate commercial paper (the Commercial
MetLife acts as investment manager and accounts in which Title I pension, Paper) (CUSIP 69430JPC1) from Merrill
is a party in interest with respect to profit-sharing, welfare benefit, and thrift Lynch, an unrelated third party, at a
employee benefit plans (the Plans) plans invest, and MetLife and/or its discount from face value for $15,856,
invested in such Account, provided that affiliates manage all or a portion of the 284.27. The Commercial Paper, which
the following conditions were met: assets of such separate accounts. was also issued on December 15, 2000
(a) The Sale was a one-time Additionally, MetLife has a number of by PG&E, California’s largest public
transaction for cash. subsidiaries and affiliates that provide utility and an unrelated party, had a
(b) The sales price for the Note was maturity date of February 12, 2001. The
certain financial services, including
based upon an amount representing the par value 21 of the Commercial Paper
investment management and brokerage
greater of the Note’s outstanding was $16,031,000, which was payable at
services.
principal balance, plus accrued interest, 2. MetLife is the investment manager maturity. The Commercial Paper’s yield
or the Note’s fair market value as or adviser (or an affiliate of such was 6.723274 percent and it represented
determined by independent broker- investment manager or adviser) of approximately 13 percent of the
dealers. various portfolios that are subject to the Account’s assets.22
(c) The Account did not pay any fees, 4. The decision to invest assets in the
Act. Among the separate accounts
commissions or other expenses in Commercial Paper was made by MetLife
managed by MetLife is the Account,
connection with the Sale.
(d) As manager of the Account, which is a short term liquidity plus
19 The Department, is expressing no opinion
MetLife determined, at the time of the separate account that invests in short-
herein on whether the purchase by the MetLife Plan
transaction, that the Sale was term debt obligations. The Account is of units in the Account is statutorily exempt under
appropriate for, and in the best interests managed by MetLife on behalf of ERISA section 408(b)(8) of the Act.
of, the Account, the Plans investing and non-ERISA regulated Plans, 20 Primarily, defined benefit pension plans.

therein, and their participants and including the Metropolitan Life 21 Defined as the value of the Commercial Paper

Retirement Plan for United States at maturity.
beneficiaries. 22 As of December 15, 2000, the MetLife Pension
Employees (the MetLife Plan), the
Plan had total assets of $4,047,574,285.00. Of the
17 For purposes of this proposed exemption, surviving entity following the merger of total assets, the MetLife Pension Plan invested
references to provisions of Title I of the Act, unless $11,494,583.03 in the Commercial Paper, which
otherwise specified, refer also to corresponding 18 This figure does not include the fourth quarter, represented approximately 0.3 percent of such
provisions of the Code. which has not yet been published. Plan’s assets.

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10042 Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices

as investment manager of the Account. (also in book-entry form) in order to the Note, the purchase price was set
MetLife represents that the investment credit the holders of the Commercial above the market price. In this regard,
was consistent with the Account’s Paper until it could resolve its MetLife has provided a letter from Gian
investment policies and objectives.23 At difficulties. The conversion occurred on Solomon, of the New York Money Desk
the time the Account acquired the February 12, 2001. Everyone who held of Goldman Sachs & Co. (Goldman
Commercial Paper, it was rated ‘‘A–1’’ the Commercial Paper received Notes in Sachs) dated August 9, 2002 regarding
by Standard & Poor’s Corporation and the conversion, including the Account. the price at which the Commerical
‘‘P–1’’ by Moody’s Investor Services, The Note earned interest at the London Paper would have traded on April 6,
Inc. Interbank Offered Rate (LIBOR), a 2001. According to Mr. Solomon,
5. Due to its inability to pay the floating rate with no fixed floor. Goldman Sachs did not effect any trades
principal amount of the Commercial According to the applicant, the LIBOR in the Commercial Paper on April 6,
Paper as a result of the energy crisis (the rate was presumably selected because it 2001. However, on April 3, 2001,
Energy Crisis),24 PG&E unilaterally is a published rate that matches up with Goldman Sachs effected trades in PG&E
converted, dollar-for-dollar, the commercial paper rates. Although the commercial paper having a scheduled
Commercial Paper into an interest- Note had no specific maturity date, maturity date of January 19, 2002, at
bearing floating rate note (i.e., the Note) PG&E announced during a dollar prices between $72–$74 of the
teleconference with all of its debt par amount. Mr. Solomon notes that
23 The Department is expressing no opinion in
holders and in a subsequent news these dollar prices were below the face
this proposed exemption regarding whether the release that its plan was to pay the Note
acquisition and holding of the Note by the Account
amount of such securities.
violated any of the fiduciary responsibility down as soon as possible. The Note is Mr. Solomon also states that Goldman
provisions of Part 4 of Title I of the Act. The currently traded by independent brokers Sachs has no interest in the Commercial
Department notes that section 404(a) of the Act and is not listed on an exchange. As Paper that is subject of the exemption
requires, among other things, that a fiduciary of a described below in Representation 6, no
plan act prudently, solely in the interest of the
request. Further, he represents that
plan’s participants and beneficiaries, and for the interest has been paid on the Note since Goldman Sachs has no personal interest
exclusive purpose of providing benefits to PG&E’s declaration of bankruptcy. or bias with respect to the subject matter
participants and beneficiaries when making 6. On April 6, 2001, PG&E declared of the exemption application or the
investment decisions on behalf of a plan. Section bankruptcy and filed a voluntary
404(a) of the Act also states that a plan fiduciary
parties involved, and that Goldman
should diversify the investments of a plan so as to petition under Chapter 11 of the Sachs has received no compensation for
minimize the risk of large losses, unless under the Bankruptcy Code. As a result of PG&E’s providing the pricing information.25
circumstances it is clearly prudent not to do so. bankruptcy filing, the market value of 9. MetLife represents that the Sale
In this regard, the Department is not providing the Note decreased according to verbal resulted in an assignment of all of the
any opinion on whether a particular category of quotes obtained by MetLife’s money
investments or investment strategy would be Account’s rights, claims and causes of
considered prudent or in the best interests of a plan traders from two independent brokers. action against PG&E. Accordingly,
as required by section 404 of the Act. The Since the market values for all PG&E MetLife states that if the exercise of any
determination of the prudence of a particular securities were trading below par and of the foregoing rights, claims or causes
investment or investment course of action must be would continue to trade in that way
made by a plan fiduciary after appropriate of action results in its recovering from
consideration to those facts and circumstances that, until the bankruptcy was settled, PG&E an aggregate amount that is
given the scope of such fiduciary’s investment MetLife determined that if the Account greater than the sales price for the Note,
duties, the fiduciary knows or should know are retained the Note, the value of the such excess amount will be refunded to
relevant to the particular investment or investment Account would be required to be
course of action involved, including a plan’s the Account (after deducting all
potential exposure to losses and the role the
reported below a value of $1.00 per reasonable expenses incurred in
investment or investment course of action plays in share resulting in a loss to the Account connection with the recovery).
that portion of the plan’s portfolio with respect to investors. Therefore, MetLife sought 10. In summary, it is represented that
which the fiduciary has investment duties (see 29 permission from the NYSID to acquire
CFR 2550.404a–1). The Department also notes that
the transaction has satisfied the
in order to act prudently in making investment
the Note from the Account. statutory criteria for an exemption
decisions, a plan fiduciary must consider, among 7. The transaction was subsequently under section 408(a) of the Act because:
other factors, the availability, risks and potential approved by the NYSID on April 6, (a) The Sale was a one-time
return of alternative investments for the plan. Thus, 2001, and it became effective on that transaction for cash.
a particular investment by a plan, which is selected date. MetLife purchased the Note from
in preference to other alternative investments,
(b) The sales price for the Note was
would generally not be prudent if such investment the Account for a cash payment of based upon an amount representing the
involves a greater risk to the security of a plan’s $16,041,857.11. This sum was the same greater of the Note’s outstanding
assets than other comparable investments offering as the par value of the Note, plus the principal balance, plus accrued interest,
a similar return or result. accrued interest. The Account paid no
24 In this regard, PG&E, along with other
or the Note’s fair market value as
commissions or other expenses in determined by independent broker-
California utilities, was hit by soaring wholesale
power costs and the state’s 1996 deregulation law. connection with the Sale. MetLife dealers.
Energy deregulation caused blackouts throughout represents that the Sale allowed the (c) The Account did not pay any fees,
California. Soaring utility rates were the subject of Account to continue operation in the commissions or other expenses in
debate as the wholesale prices of electricity manner customers expected.
skyrocketed, jumping to an average of $30 per connection with the Sale.
megawatt hour. California was the first state to Specifically, additions and withdrawals
deregulate its electricity market in 1996. The move from the Account could continue to be 25 In addition to the above, MetLife represents

was supposed to lower the bills of consumers by made at $1.00 per share. Accordingly, that its money market traders obtained verbal bids
preventing most utilities from passing rising costs MetLife requests an administrative for the Note on an indicative basis from three
on to their customers. Under deregulation, the independent brokers at around the time of the Sale.
state’s investor-owned utilities sold most of their exemption from the Department with According to MetLife, bids received from Goldman
power plants and were forced to repurchase them respect to the Sale. If granted, the Sachs ranged from $57–$62 of the par value of the
at higher market prices. PG&E was faced with $9 exemption will be effective on April 6, Note. Bids received from the Bank of America
billion in debt and debt payments of $500 million 2001. ranged from $56–$60 of the par value of the Note.
in February 2001 and $1.6 billion in March 2001. Bids received from Merrill Lynch ranged from $55–
PG&E, having only $500 million in cash reserves
8. MetLife represents that because $60 of the par value of the Note. MetLife further
and little to no ability to borrow following rating PG&E had declared bankruptcy and states that all of these bids were below the price that
downgrades, filed for bankruptcy on April 6, 2001. purchasers would not pay face value for it paid for the Note.

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(d) As manager of the Account, provide such benefits to its employees (f) The Plans only contract with
MetLife determined, at the time of such (the Plans),26 provided the following insurers with a rating of A or better from
transaction, that the Sale was conditions are met: A. M. Best Company (Best’s). The
appropriate for, and in the best interests (a) Agrinational— reinsurance arrangement between the
of, the Account, the Plans investing (1) Is a party in interest with respect insurers and Agrinational will be
therein and their participants and to the Plans by reason of a stock or indemnity insurance only, i,e., the
beneficiaries. partnership affiliation with Archer that insurer will not be relieved of liability
(e) MetLife took all appropriate is described in section 3(14) (E) or (G) to the Plans should Agrinational be
actions necessary to safeguard the of the Act; unable or unwilling to cover any
interests of the Account and the Plans (2) Is licensed to sell insurance or liability arising from the reinsurance
in connection with the Sale. conduct reinsurance operations in at arrangement;
(f) If the exercise of any of MetLife’s least one State as defined in section (g) Agrinational retains an
rights, claims or causes of action in 3(10) of the Act; independent fiduciary (the Independent
connection with its ownership of the (3) Has obtained a Certificate of Fiduciary), at Archer’s expense, to
Note results in MetLife recovering from Authority from the Insurance analyze the transaction and render an
PG&E an aggregate amount that is Commissioner of its domiciliary state opinion that the requirements of
greater than the sales price for such which has neither been revoked nor sections (a) through (f) have been
Note, MetLife will refund such excess suspended; complied with. For purposes of the
amount to the Account. (4)(A) Has undergone an examination proposed exemption, the Independent
Notice to Interested Persons by an independent certified public Fiduciary is a person who:
accountant for its last completed taxable (1) Is not directly or indirectly,
MetLife will provide notice of the year immediately prior to the taxable through one or more intermediaries,
proposed exemption to all interested year of the reinsurance transaction; or controlling, controlled by, or under
persons by first class mail within 30 (B) Has undergone a financial common control with Archer or
days of the date of publication of the examination (within the meaning of the Agrinational (this relationship
notice of proposed exemption in the law of its domiciliary State, Vermont) by hereinafter referred to as an ‘‘Affiliate’’);
Federal Register. The notice will the Insurance Commissioner of the State (2) Is not an officer, director,
include a copy of the proposed of Vermont within 5 years prior to the employee of, or partner in, Archer or
exemption, as published in the Federal end of the year preceding the year in Agrinational (or any Affiliate of either);
Register, and a supplemental statement, which the reinsurance transaction (3) Is not a corporation or partnership;
as required pursuant to 29 CFR occurred; and in which Archer or Agrinational has an
2570.43(b)(2), which will inform (5) Is licensed to conduct reinsurance ownership interest or is a partner;
interested persons of their right to transactions by a State whose law (4) Does not have an ownership
comment on and/or to request a hearing requires that an actuarial review of interest in Archer or Agrinational, or
with respect to the proposed exemption. reserves be conducted annually by an any of either’s Affiliates;
Comments regarding the proposed independent firm of actuaries and (5) Is not a fiduciary with respect to
exemption and requests for a public reported to the appropriate regulatory the Plans Prior to the appointment; and
hearing are due within 60 days of the authority; (6) Has acknowledged in writing
date of publication of the notice of (b) The Plans pay no more than acceptance of fiduciary responsibility
pendency in the Federal Register. adequate consideration for the and has agreed not to participate in any
For Further Information Contact: Ms. insurance contracts; decision with respect to any transaction
Anna M.N. Mpras of the Department, (c) No commissions are paid by the in which the Independent Fiduciary has
telephone (202) 693–8565. (This is not Plans with respect to the direct sale of an interest that might affect its best
a toll-free number.) such contracts or the reinsurance judgment as a fiduciary.
Archer Daniels Midland Company (Archer) thereof; For purposes of this definition of an
Located in Decatur, Illinois (d) In the initial year of any contract ‘‘Independent Fiduciary,’’ no
[Application No. D–11068] involving Agrinational, there will be organization or individual may serve as
immediate and objectively determined an Independent Fiduciary for any fiscal
Proposed Exemption year if the gross income received by
benefit to the Plans’ participants and
The Department is considering such organization or individual (or
beneficiaries in the form of increased
granting an exemption under the partnership or corporation of which
benefits;
authority of section 408(a) of the Act (e) In subsequent years, the formula such individual is an officer, director, or
and in accordance with the procedures used to calculate premiums by 10 percent or more partner or
set forth in 29 CFR part 2570, subpart Minnesota Life or any successor insurer shareholder) from Archer, Agrinational,
B (55 FR 32836, 32847, August 10, will be similar to formulae used by or their Affiliates (including amounts
1990). If the exemption is granted, the other insurers providing comparable received for services as Independent
restrictions of section 406(a) and (b) of coverage under similar programs. Fiduciary under any prohibited
the Act shall not apply to the Furthermore, the premium charge transaction exception granted by the
reinsurance of risks and the receipt of calculated in accordance with the Department) for that fiscal year exceeds
premiums therefrom by Agrinational formula will be reasonable and will be 5 percent of that organization or
Insurance Company (Agrinational) in comparable to the premium charged by individual’s annual gross income from
connection with insurance contracts the insurer and its competitors with the all sources for such fiscal year.
sold by Minnesota Life Insurance same or a better rating providing the
In addition, no organization or
Company (Minnesota Life), or any same coverage under comparable
individual who is an Independent
successor insurance company to programs;
Fiduciary, and no partnership or
Minnesota Life which is unrelated to corporation of which such organization
Archer, to provide basic and 26 Each Plan will be considered an ‘‘employee or individual is an officer, director, or
supplemental life insurance benefits to welfare benefit plan’’ as defined in section 3(1) of 10 percent or more partner or
participants in Archer’s programs to the Act. shareholder, may acquire any property

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from, sell any property to, or borrow transporting, merchandising and storing with Connecticut General Life Insurance
funds from Archer, Agrinational, or agricultural commodities and products. Company, and, most recently, with
their Affiliates during the period that These operations and processes produce Minnesota Life. However, Archer
such organization or individual serves products which have primarily two end recently formulated a plan to utilize
as Independent Fiduciary, and uses: Food or feed ingredients. Each Agrinational for the reinsurance of
continuing for a period of six months commodity processed is itself a feed benefits and has made or will make
after such organization or individual ingredient as are the by-products substantial improvements to the Plans
ceases to be an Independent Fiduciary, produced during the processing of each in anticipation of that transaction.
or negotiates any such transaction commodity. Archer complements its 5. Specifically, the new benefits are as
during the period that such organization own resources with a world-wide follows:
or individual serves as Independent network of affiliates engaged in (i) With respect to the life insurance
Fiduciary. processing, transportation, storage and program for salaried employees, the
sales. Archer was incorporated under maximum benefit under the Basic
Preamble Program has been increased from one-
the laws of the State of Delaware in
On August 7, 1979, the Department 1923 as successor to the Daniels Linseed times base salary up to $100,000 to one-
published a class exemption (Prohibited Co., which was founded in 1902. times base salary up to $1,000,000. In
Transaction Exemption 79–41 (PTE 79– 2. Agrinational is a wholly-owned addition, the Basic Program will add an
41), 44, FR 46365) which permits subsidiary of Archer. Agrinational was accelerated death benefit feature (which
insurance companies that have incorporated in Vermont on September would provide benefits to the terminally
substantial stock or partnership 10, 1987, and on September 21, 1987, ill) to the policy covering all
affiliations with employers establishing the Commissioner of Banking and participants. Finally, a non-contributory
or maintaining employee benefit plans Insurance for the State of Vermont Accidental Death and Dismemberment
to make direct sales or life insurance, granted it a Certificate of Authority to benefit will be added to the Basic
health insurance or annuity contracts transact the business of a captive Program covering up to three times the
with fund such plans if certain insurance company in the State of basic life insurance benefit, subject to a
conditions are satisfied. Vermont. The only restrictions placed schedule of amounts. All premiums
In PTE 79–41, the Department states by the State of Vermont on the type of under the Basic Program are fully paid
its views that if a plan purchases an insurance that Agrinational may write by Archer. In addition, the maximum
insurance contract from a company that pertain to personal motor vehicle or benefit under the Supplemental
is unrelated to the employer pursuant to homeowner’s insurance and to excess Program, which is employee paid, has
an arrangement or understanding, workers’ compensation insurance under been increased from up to four times
written or oral, under which it is certain circumstances, and thus are not salary with a cap of $1,000,000 to up to
expected that the unrelated company relevant to the exemption proposed five times salary with a cap of
will subsequently reinsure all or part of herein. $2,000,000. Dependent life insurance for
the risk related to such insurance with 3. At year end 2000, Agrinational had the employee’s spouse and children has
an insurance company which is a party capital in the amount of $10,000,000, been added on a voluntary basis.
in interest with respect to the plan, the retained earnings in the amount of Portability of coverage has been added
purchase of the insurance contract $22,731,920 and earned premium in the to all policies, so that coverage may
would be a prohibited transaction under amount of $17,176,878. Agrinational continue at the group rates if a covered
the Act. presently provides insurance and employee leaves employment. Finally, a
The Department further stated that as reinsurance coverage for property, waiver of premium provision has been
of the date of publication of PTE 79–41, casualty and marine risks of Archer and added to the Supplemental and
it had received several applications for its subsidiaries world-wide. In addition, dependent coverage so in the event of
exemption under which a plan or its Agrinational participates as a quota the disability of the employee, coverage
employer would contract with an share reinsurer of various insurance will continue without the payment of
unrelated company for insurance, and company treaties that contain risks the premium. The new and/or enhanced
the unrelated company would, pursuant unrelated to Archer and its subsidiaries. benefits in the Supplemental Program
to an arrangement or understanding, The independent certified public are voluntary and the premiums are
reinsure part or all of the risk with (and accounting firm of Ernst & Young, LLP fully paid by the participants who elect
cede part or all of the premiums to) an (EY), which prepared Agrinational’s them.
insurance company affiliated with the most recent audited financial statement, (ii) With respect to the life insurance
employer maintaining the plan. The has served as Agrinational’s auditor program for hourly employees who are
Department felt that it would not be since its incorporation. EY will examine not covered by a collective bargaining
appropriate to cover the various types of Agrinational’s reserves on an annual agreement, the new non-contributory
reinsurance transactions for which it basis in connection with the employee Accidental Death and Dismemberment
had received applications within the benefit business to be reinsured by benefit will be added to the Basic
scope of the class exemption, but would Agrinational to ensure that appropriate Program covering up to three times the
instead consider such applications on reserve levels are maintained. basic life insurance benefit, subject to a
the merits of each individual case. 4. Archer maintains the ADM schedule of amounts. All premiums
Omnibus Health and Welfare Plan for under the Basic Program are fully paid
Summary of Facts and Representations Salaried Employees and the ADM by Archer. In addition, the Basic
1. Archer is engaged in the business Omnibus Health and Welfare Plan for Program will add the accelerated death
of procuring, transporting, storing, Hourly Employees (i.e., the Plans) for benefit feature (which would provide
processing and merchandising substantially all of its salaried and benefits to the terminally ill) to the
agricultural commodities and products. hourly employees. The Plans provide policy covering all hourly employees
It is one of the world’s largest producers both basic (the Basic Program) and who are not covered by a collective
of oilseeds, corn and wheat. Archer also supplemental (the Supplemental bargaining agreement. With respect to
processes cocoa beans, milo, oats, barley Program) life insurance programs. The these employees, the Supplemental
and peanuts. Other operations include Plans have been historically insured Program, which is employee paid, has

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been increased from various levels to up Minnesota Life and Agrinational. The (e) He was not a fiduciary with
to five times base pay with a cap of reinsurance agreements between respect to the Plans prior to his
$2,000,000, and dependent life Minnesota Life and Agrinational will be appointment for this transaction;
insurance for the employee’s spouse and indemnity reinsurance only, so that (f) He has acknowledged in writing on
children has been added on a voluntary Minnesota Life will not be relieved of its behalf of Milliman its acceptance of
basis; and liability to the Plans should fiduciary obligations and has agreed not
(iii) With respect to the life insurance Agrinational be unwilling or unable to to participate in any decision with
program for hourly employees who are cover any liability arising from the respect to any transaction in which
covered by a collective bargaining reinsurance arrangement. either he or Milliman has an interest
agreement, Archer cannot unilaterally The Plans will pay no more than that might affect their fiduciary duty;
implement similar improvements to adequate consideration for the (g) The gross income received by Mr.
those which will be made to the insurance contracts with Minnesota Life Waldron and Milliman separately and
Programs for salaried employees and or any successor insurer. The formula combined from Archer, Agrinational,
hourly employees not covered by a used to calculate premiums by Minnesota Life, or their Affiliates
collective bargaining agreement. Minnesota Life or any successor (including amounts received for services
However, Archer will implement such insurer 27 will be similar to formulae as Independent Fiduciary under any
improvements if agreed to by the unions used by other insurers providing life prohibited transaction exemption
representing the hourly employees. insurance coverage under similar granted by the Department), does not
In addition, Archer recently has programs. Furthermore, the premium exceed 5 percent of Mr. Waldron’s or
enhanced benefits for employees by charge calculated in accordance with Milliman’s gross annual income from all
making two new benefit programs the formula will be reasonable and will sources for any fiscal year; and
available for its salaried employees and be comparable to the premium charged (h) Neither Milliman nor Mr. Waldron
for its hourly employees who are not by the insurer providing coverage under has acquired any property from, sold
covered by a collective bargaining the Plans and its competitors with the property to, or borrowed funds from
agreement. Archer will also implement same or a better rating providing the Archer, Agrinational, or Minnesota Life
these programs for hourly employees same coverage under comparable or their Affiliates.
covered by a collective bargaining programs. 9. Mr. Waldron represents that
agreement if agreed to by the unions 7. In connection with this exemption Agrinational is licensed to do business
representing such employees in request, Agrinational has engaged the in the State of Vermont and has been
collective bargaining. The first of the services of Milliman USA (Milliman), conducting business since 1987 insuring
new benefits is a legal services program, (formerly Milliman and Robertson, Inc.) and reinsuring property, casualty and
which provides certain legal services as the Independent Fiduciary for the marine business. Agrinational’s reserves
through Hyatt Legal Plans, Inc., for a set Plans. Milliman is an international firm for the past two (2) years have been
premium each month. The premiums of consultants and actuaries with reviewed by the actuarial services group
are paid by the employees through expertise in all facets of employee of EY, which is a firm independent of
amounts deducted from their benefits, including insurance. Charles Agrinational and Archer. Mr. Waldron
paychecks. The second new program is M. Waldron, FSA (Mr. Waldron), a has reviewed the report on the reserves
an auto and home insurance program, Principal and Consulting Actuary and is satisfied that there are no issues
which offers eligible employees group employed by Milliman, has signed the to be resolved. In addition, Mr. Waldron
rates for automobile, home and other Independent Fiduciary representations represents that future reserves will be
personal property through Hanover on behalf of Milliman. Milliman’s reviewed by a qualified actuary
Insurance Company. The premiums for consultants are frequently retained to approved by the State of Vermont. Mr.
this program are also paid by the advise corporations on the insurance Waldron has confirmed that
employees. arrangements underlying their benefit Agrinational has undergone an
6. The life insurance Plans are now programs and have considerable examination by EY, an independent
insured by Minnesota Life, which expertise in the area of reinsurance and certified public accountant, for its last
currently has a rating of A++ from captive insurers. completed taxable year.
Best’s. The applicant represents that if 8. For purposes of demonstrating 10. Mr. Waldon has concluded that, as
the Plans choose another insurer in the independence, Mr. Waldron has a result of the reinsurance agreement
future, that insurer will have a rating of represented that: described in representation 6, above, the
A or better from Best’s. The applicant (a) Neither he nor Milliman is an Plans’ risks will be 100% covered by
anticipates that upon the granting of the Affiliate of Archer, Minnesota Life or Minnesota Life, a carrier rated A++ by
exemption proposed herein, Minnesota Agrinational; Best’s, even if Agrinational were unable
Life will enter into reinsurance (b) He is not an officer, director, or unwilling to cover the Plans’
agreements with Agrinational. employee of, or partner in Archer, liabilities it is assuming as a result of
Minnesota Life was recently acquired by Agrinational or Minnesota Life; the reinsurance agreement. Mr. Waldon
Liberty Mutual Insurance Company (c) Milliman is not a corporation in represents that he has reviewed the
(Liberty), an A+ rated (by Best’s) carrier which Archer, Agrinational or any of terms of the proposed reinsurance
located in Boston, Massachusetts. the other insurers involved in the agreement between Minnesota Life and
Liberty is rated by Moody’s as Aa3 proposed transaction has an ownership Agrinational. Mr. Waldron states that
(Excellent) and by Standard & Poor’s as interest or is a partner; the agreement provides for the risk
AA¥ (Very Strong). (d) Neither he nor Milliman has an retained by Agrinational to revert back
Minnesota Life will continue to insure ownership interest in Archer, to Minnesota Life at no further cost to
the Plan, with the enhanced new Agrinational, or Minnesota Life, or in the Plans should Agrinational be unable
benefits. However, Minnesota Life will any Affiliate of those firms; or unwilling to pay the benefits.
reinsure up to 100% of the risk with 27 The applicant states that any successor insurer
11. Mr. Waldron has represented that
Agrinational. The percentage of the risk would be a legal reserve life insurance company
he reviewed the Plans’ benefits before
to be insured will be specified in the with assets of such a size as to afford similar the reinsurance transaction and the
reinsurance agreements between protection and responsibility. benefits implemented in anticipation of

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10046 Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices

the reinsurance transaction. He has monitor compliance by the parties with because: (a) The Plans’ participants and
concluded that there is an immediate the terms and conditions of the beneficiaries are afforded insurance
benefit to the Plans’ participants from proposed reinsurance transaction, and protection by Minnesota Life, a carrier
the reinsurance transaction. Generally will take whatever action is necessary rated A++ by Best’s, at competitive
all participants in the Supplemental and appropriate to safeguard the market rates arrived at through arm’s-
Program receive increased benefits and interests of the Plans and of their length negotiations; (b) Agrinational,
options. For the Basic Program, participants and beneficiaries. which will enter into the reinsurance
generally all participants have received 14. The applicant represents that the agreements with Minnesota Life, is a
an accelerated death benefit coverage proposed reinsurance transaction will sound, viable insurance company which
and will receive Accidental Death and meet the following conditions of PTE has been in business since 1987; (c) the
Dismemberment Insurance up to three 79–41 covering direct insurance protections described in representation
times the basic life insurance benefit. transactions: 14, above, provided to the Plans and
Finally, there are increased basic life (a) Agrinational is a party in interest their participants and beneficiaries
insurance benefits for salaried with respect to the Plans (within the under the proposed reinsurance
employees with annual salaries meaning of section 3(14)(G) of the Act) transactions are based on those required
exceeding specified amounts (e.g., by reason of stock affiliation with for direct insurance by a ‘‘captive’’
$100,000). Archer, which maintains the Plans; insurer, under the conditions of PTE
12. Mr. Waldron makes the following (b) Agrinational is licensed to conduct 79–41 (notwithstanding certain other
representations concerning the reinsurance transactions by the State of requirements related to, among other
determination of the initial premium to Vermont. The law under which things, the amount of gross premiums or
the Plans under the proposed Agrinational is licensed requires that an annuity considerations received from
arrangement. The Plans contacted actuarial review of reserves be customers who are not related to, or
Minnesota Life and were quoted a rate conducted annually by an independent affiliated with the insurer); 29 (d) Mr.
based on Minnesota Life’s evaluation of firm of actuaries and reported to the Waldron, acting on behalf of Milliman
the risk. Archer received quotes from appropriate regulatory authority; as the Plans’ Independent Fiduciary, has
three different companies to provide (c) Agrinational has undergone an reviewed the proposed reinsurance
insurance coverage for the group life, examination by the independent transaction and has determined that the
supplemental life and dependent life certified public accountant firm of EY transaction is appropriate for, and in the
insurance programs. From these three for its last completed taxable year; best interests of, the Plans and that there
companies, Archer selected Minnesota (d) Agrinational has received a will be an immediate benefit to the
Life, which was the middle one in terms Certificate of Authority from its Plans’ participants as a result thereof by
of premium. Minnesota Life was 3% domiciliary state, Vermont, which has reason of an improvement in benefits
above the lowest cost and 7.5% below neither been revoked nor suspended; under the terms of the Plans; and (e)
the highest cost provider. The premium (e) The Plans will pay no more than Milliman will monitor compliance by
paid to Agrinational is based on a adequate consideration for the the parties with the terms and
reinsurance agreement where insurance. In addition, in the initial year conditions of the proposed reinsurance
Agrinational receives a portion of the of the proposed reinsurance transaction, transaction, and will take whatever
premium charged equal to the there will be an immediate and action is necessary and appropriate to
proportion of the risk that Agrinational objectively determined benefit to the safeguard the interests of the Plans and
covers. This is a typical reinsurance Plans’ participants and beneficiaries in of their participants and beneficiaries.
arrangement for life insurance products. the form of increased benefits; and For Further Information Contact: Gary
Mr. Waldron further represents that, (f) No commissions will be paid by H. Lefkowitz of the Department,
based upon his review, the premiums the Plans with respect to the
charged by Minnesota Life are similar to reinsurance arrangement with 29 The proposal of this exemption should not be
premiums charged by other insurers Agrinational, as described herein. interpreted as an endorsement by the Department
providing group life, supplemental life, In addition, the Plans’ interests will of the transactions described herein. The
and dependent life insurance under be represented by a qualified, Department notes that the fiduciary responsibility
provisions of Part 4 of Title I of the Act apply to
similar plans. The applicant represents independent fiduciary (i.e., Milliman or the fiduciary’s decision to engage in the reinsurance
that the Independent Fiduciary (i.e., its Successor), who has initially arrangement.
either Milliman or another qualified determined that the proposed Specifically, section 404(a)(1) of the Act requires,
fiduciary acting as a successor, as noted reinsurance transactions will be in the among other things, that a plan fiduciary act
best interests, and protective, of the prudently, solely in the interest of the plan’s
below) will confirm on an annual basis participants and beneficiaries, and for the exclusive
that each Plan is paying a rate Plans and their participants and purpose of providing benefits to participants and
comparable to that which would be beneficiaries. The Independent beneficiaries when making investment decisions on
charged by a comparably-rated insurer Fiduciary will also confirm on an behalf of the plan. In this regard, the Department
annual basis that the Plans are paying a is not providing any opinion as to whether a
for a program of the approximate size of particular insurance or investment product, strategy
the Plan with comparable claims rate comparable to that which would be or arrangement would be considered prudent or in
experience. charged by a comparably-rated insurer the best interests of a plan, as required by section
13. Milliman will represent the for a program of the approximate size of 404 of the Act. The determination of the prudence
interests of the Plans as the Independent the Plans with comparable claims of a particular product or arrangement must be
made by a plan fiduciary after appropriate
Fiduciary at all times.28 Milliman will experience. consideration to those facts and circumstances that,
15. In summary, the applicant given the scope of such fiduciary’s investment
28 In this regard, the applicant makes a
represents that the proposed duties, the fiduciary knows or should know are
representation regarding a successor independent reinsurance transactions will meet the relevant to the particular product or arrangement
fiduciary. Specifically, if it becomes necessary in involved, including the plan’s potential exposure to
the future to appoint a successor independent criteria of section 408(a) of the Act losses and the role a particular insurance or
fiduciary (the Successor) to replace Milliman and investment product plays in that portion of the
Mr. Waldron, the applicant will notify the have the responsibilities, experience and plan’s investment portfolio with respect to which
Department sixty (60) days in advance of the independence similar to those of Milliman and Mr. the fiduciary has investment duties and
appointment of the Successor. Any Successor will Waldron. responsibilities (see 29 CFR 2550.404a–1).

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Federal Register / Vol. 68, No. 41 / Monday, March 3, 2003 / Notices 10047

telephone (202) 693–8546. (This is not DEPARTMENT OF LABOR the entire record, the Department makes
a toll-free number.) the following findings:
Employee Benefits Security (a) The exemption is administratively
General Information Administration feasible;
(b) The exemption is in the interests
The attention of interested persons is
[Prohibited Transaction Exemption 2003– of the plan and its participants and
directed to the following:
03; Exemption Application No. D–11095 et beneficiaries; and
(1) The fact that a transaction is the al.] (c) The exemption is protective of the
subject of an exemption under section rights of the participants and
408(a) of the Act and/or section Grant of Individual Exemptions; beneficiaries of the plan.
4975(c)(2) of the Code does not relieve Reagent Chemical & Research, Inc.
a fiduciary or other party in interest or Reagent Chemical & Research, Inc.
Employees’ Profit Sharing Plan and Employees’ Profit Sharing Plan and
disqualified person from certain other Trust (the Plan)
provisions of the Act and/or the Code, Trust (the Plan); Located in Middlesex,
including any prohibited transaction AGENCY: Employee Benefits Security New Jersey
provisions to which the exemption does Administration, Labor. [Prohibited Transaction Exemption No.
not apply and the general fiduciary ACTION: Grant of individual exemptions. 2003–03; Exemption Application No. D–
responsibility provisions of section 404 11095]
of the Act, which, among other things, SUMMARY: This document contains
Exemption
require a fiduciary to discharge his exemptions issued by the Department of
Labor (the Department) from certain of The restrictions of sections 406(a),
duties respecting the plan solely in the
the prohibited transaction restrictions of 406(b)(1) and (b)(2) of the Act and the
interest of the participants and
the Employee Retirement Income sanctions resulting from the application
beneficiaries of the plan and in a
Security Act of 1974 (the Act) and/or of section 4975 of the Code, by reason
prudent fashion in accordance with
the Internal Revenue Code of 1986 (the of section 4975(c)(1)(A) through (E) of
section 404(a)(1)(b) of the Act; nor does
Code). the Code, shall not apply to the
it affect the requirement of section
A notice was published in the Federal proposed sale of a 73.4815% tenancy-in-
401(a) of the Code that the plan must
Register of the pendency before the common interest (the Property Interest)
operate for the exclusive benefit of the by the Plan to Brian Skeuse, a vice
employees of the employer maintaining Department of a proposal to grant such
exemption. The notice set forth a president and shareholder of Reagent
the plan and their beneficiaries; Chemical & Research, Inc., and his
summary of facts and representations
(2) Before an exemption may be contained in the application for spouse, Jan Skeuse, parties in interest
granted under section 408(a) of the Act exemption and referred interested with respect to the Plan, provided that
and/or section 4975(c)(2) of the Code, persons to the application for a the following conditions are satisfied:
the Department must find that the complete statement of the facts and (a) The sale is a one-time cash
exemption is administratively feasible, representations. The application has transaction;
in the interests of the plan and of its (b) The Plan receives the greater of
been available for public inspection at
participants and beneficiaries, and either: (i) $180,029.68; or (ii) the current
the Department in Washington, DC. The
protective of the rights of participants fair market value for the Property
notice also invited interested persons to
and beneficiaries of the plan; Interest established at the time of the
submit comments on the requested
sale by an independent qualified
(3) The proposed exemptions, if exemption to the Department. In
appraiser; and
granted, will be supplemental to, and addition the notice stated that any (c) The Plan pays no commissions or
not in derogation of, any other interested person might submit a other expenses associated with the sale.
provisions of the Act and/or the Code, written request that a public hearing be For a more complete statement of the
including statutory or administrative held (where appropriate). The applicant facts and representations supporting the
exemptions and transitional rules. has represented that it has complied Department’s decision to grant this
Furthermore, the fact that a transaction with the requirements of the notification exemption, refer to the Notice of
is subject to an administrative or to interested persons. No requests for a Proposed Exemption published on
statutory exemption is not dispositive of hearing were received by the December 30, 2002 at 67 FR 79654.
whether the transaction is in fact a Department. Public comments were FOR FURTHER INFORMATION CONTACT:
prohibited transaction; and received by the Department as described Khalif Ford of the Department,
(4) The proposed exemptions, if in the granted exemption. telephone (202) 693–8540 (this is not a
granted, will be subject to the express The notice of proposed exemption toll-free number).
condition that the material facts and was issued and the exemption is being
representations contained in each granted solely by the Department Michigan Conference of Teamsters
application are true and complete, and because, effective December 31, 1978, Welfare Fund (the Plan); Located in
that each application accurately section 102 of Reorganization Plan No. Detroit, MI
describes all material terms of the 4 of 1978, 5 U.S.C. App. 1 (1996), [Prohibited Transaction Exemption 2003–04;
transaction which is the subject of the transferred the authority of the Secretary Exemption Application No. L–11058]
exemption. of the Treasury to issue exemptions of
the type proposed to the Secretary of Exemption
Signed at Washington, DC this 26th day of Labor. The restrictions of sections
February, 2003. 406(a)(1)(A) and (D) of the Act shall not
Ivan Strasfeld, Statutory Findings apply to the cash sale, by the Plan, of
Director of Exemption Determinations, In accordance with section 408(a) of certain parcels of real estate (the
Employee Benefits Security Administration, the Act and/or section 4975(c)(2) of the Property) to the Detroit Teamsters
Department of Labor. Code and the procedures set forth in 29 Temple Association (DTTA), a party in
[FR Doc. 03–4921 Filed 2–28–03; 8:45 am] CFR part 2570, subpart B (55 FR 32836, interest with respect to the Plan and a
BILLING CODE 4510–29–M 32847, August 10, 1990) and based upon lessee of a portion of such Property.

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