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Application Nos. and Proposed Exemptions; D-11603-07, Chrysler Group LLC and Daimler AG; et al.

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American Government Topics:  Chrysler LLC, Daimler AG

Application Nos. and Proposed Exemptions; D-11603-07, Chrysler Group LLC and Daimler AG; et al.

Ivan Strasfeld
September 16, 2010

[Federal Register: September 16, 2010 (Volume 75, Number 179)]
[Notices]               
[Page 56568-56578]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16se10-94]                         

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[D-11400; D-11585; D-11603-07]

 
Application Nos. and Proposed Exemptions; D-11400, Wasatch 
Advisors, Inc.; D-11585, Retirement Plan for Employees of the 
Rehabilitation Institute of Chicago (the Plan); D-11603-07, Chrysler 
Group LLC and Daimler AG; et al.

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. --------, stated in each Notice of 
Proposed Exemption. Interested persons are also

[[Page 56569]]

invited to submit comments and/or hearing requests to EBSA via e-mail 
or FAX. Any such comments or requests should be sent either by e-mail 
to: moffitt.betty@dol.gov, or by FAX to (202) 219-0204 by the end of 
the scheduled comment period. The applications for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210.

    Warning: If you submit written comments or hearing requests, do 
not include any personally-identifiable or confidential business 
information that you do not want to be publicly-disclosed. All 
comments and hearing requests are posted on the Internet exactly as 
they are received, and they can be retrieved by most Internet search 
engines. The Department will make no deletions, modifications or 
redactions to the comments or hearing requests received, as they are 
public records.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue exemptions of the type requested to 
the Secretary of Labor. Therefore, these notices of proposed exemption 
are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Non-Automotive Content Removed

Chrysler Group LLC and Daimler AG, Located in Auburn Hills, Michigan 
and Stuttgart, Germany, Respectively

Exemption Application Number D-11603-07.

Proposed Exemption

    The Department is considering granting an exemption under the

[[Page 56576]]

authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA or the Act), and section 4975(c)(2) of 
the Internal Revenue Code of 1986, as amended (the Code), and in 
accordance with the procedures set forth in 29 CFR Part 2570, Subpart B 
(55 FR 32836, 32847, August 10, 1990).\14\
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    \14\ For purposes of this proposed exemption, references to 
section 406 of ERISA should be read to refer as well to the 
corresponding provisions of section 4975 of the Code.
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Section I--Chrysler Group Transactions
    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(A) and 406(b)(1) and (2) of ERISA and the sanctions resulting 
from the application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) and (E) of the Code, shall not apply to the contribution 
(the Contribution) of notes issued by Daimler AG (the Daimler Notes) by 
Chrysler Group LLC (Chrysler Group) to certain employee benefit plans 
sponsored by the Chrysler Group (the Plans), provided that the 
conditions set forth in section III have been met.
Section II--Daimler AG Transactions
    If the proposed exemption is granted, the restrictions of section 
406(a)(1)(A) and (B) of ERISA, and the sanctions resulting from the 
application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) and (B) of the Code, shall not apply to the issuance by 
Daimler of the Daimler Notes for purposes of the Contributions pursuant 
to an agreement that was previously entered into while Daimler was a 
party-in-interest to the Plans, provided that the condition set forth 
in section IV is met.

Section III--Conditions Applicable to Section I

    (a) The terms of each Contribution are consistent with the terms 
set forth in a settlement agreement (the Settlement Agreement), 
effective as of June 5, 2009, between/among CG Investment Group, LLC, 
CG Investor, LLC, Chrysler Holding LLC, CARCO Intermediate HOLDCO I 
LLC, Chrysler LLC, Daimler AG, Daimler North America Finance 
Corporation, Daimler Investments US Corporation, and the Pension 
Benefit Guaranty Corporation (the PBGC). Notwithstanding the above, and 
also for purposes of condition (c) below, the terms of the 
Contributions shall not be viewed as being inconsistent with the terms 
of the Settlement Agreement solely because the Contributions take into 
account the March 1, 2010 merger (the Merger) of the Global Engineering 
Manufacturing Alliance UAW Pension Plan into the Pension Agreement 
between Chrysler Group LLC and the UAW, which occurred after the 
effective date of the Settlement Agreement;
    (b) The fair market value of each Daimler Note will be determined 
as of the date of the Contributions, by a qualified independent 
appraiser;
    (c) The fair market value of each Daimler Note contributed to a 
Plan will represent an amount that equates to the amount contemplated 
for such Plan under the Settlement Agreement;
    (d) Each Daimler Note will represent not more than 20% of the total 
fair market value of the Plan that receives such Note at the time of 
its Contribution;
    (e) Each Plan may immediately sell the Daimler Note it receives 
pursuant to a Contribution, except that neither Chrysler Group nor any 
of its affiliates or subsidiaries may be a party to such sale. 
Notwithstanding the above, restrictions may be imposed on a Plan's 
ability to sell its Daimler Note if such restrictions are required 
under State or Federal securities laws or otherwise required by the 
terms of such Daimler Note;
    (f) The Plans do not waive any rights or claims in connection with 
the Contributions;
    (g) The Plans do not pay any fees, costs, or other charges in 
connection with the Contributions; and
    (h) Chrysler Group shall provide the PBGC with written evidence 
that Chrysler Group: (1) Contributed the Daimler Notes to the Plans; 
and (2) gave the Plans' trustee instructions regarding the allocation 
of the Daimler Notes. Such written evidence must be provided within 
five business days after the receipt by Chrysler Group of such Notes.

Section IV--Conditions Applicable to Section II

    (a) Daimler's entering into the Daimler Notes is not part of an 
arrangement, agreement, or understanding designed to benefit Daimler.
    Effective Date: If granted, this proposed exemption will be 
effective as of September 16, 2010.

Summary of Facts and Representations

    1. The applicants are Chrysler Group LLC, (Chrysler Group) and 
Daimler AG (Daimler). Chrysler Group is the entity that acquired 
certain of the assets of Chrysler LLC (Chrysler LLC) on June 10, 2009 
in a transaction approved by the United States Bankruptcy Court. 
Chrysler Group sponsors various defined benefit plans (the Plans) which 
cover employees of Chrysler Group and its affiliates.\15\ Chrysler 
Group describes the Plans as: (1) The Chrysler Group LLC Pension Plan, 
with 38,635 participants and beneficiaries and approximately 
$2,712,643,000 in total assets as of April 14, 2010; (2) the JEEP 
Corporation-UAW Retirement Income Plan, with 8,705 participants and 
beneficiaries and approximately $774,824,500 in total assets as of 
April 14, 2010; (3) the Pension Agreement between Chrysler Group and 
the UAW, with 131,604 participants and beneficiaries and approximately 
$11,600,000,000 in total asset as of April 14, 2010; and (4) the 
American Motors Union Retirement Income Plan, with 10,496 participants 
and beneficiaries and approximately $701,639,500 in total assets as of 
April 14, 2010.
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    \15\ Hereinafter, unless expressly stated otherwise, the term 
``Chrysler Group'' shall mean Chrysler LLC (for events that occurred 
prior to June 10, 2009) or Chrysler Group (for events that occur 
after June 9, 2009).
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    2. Daimler is an automotive manufacturer with its corporate 
headquarters located in Stuttgart, Germany. Daimler states that, at the 
time the arrangements described below were negotiated, agreed to, and 
entered into, Daimler was a ``party in interest'' to the Plans, as such 
term is defined in section 3(14) of ERISA. In this regard, during that 
period, Daimler had a 19.9% ownership interest in Chrysler LLC: The 
sponsor of the Plans.\16\
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    \16\ The Applicants represent that, effective as of June 4, 
2009, Daimler redeemed its interest in Chrysler LLC, and, as of that 
date, Daimler was no longer a party in interest to the Plans.
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    3. Chrysler Group and Daimler (collectively, the Applicants) state 
that, on May 13, 2007, Daimler entered into an agreement with the PBGC 
(the 2007 PBGC Agreement), whereby Daimler agreed to guarantee up to $1 
billion of unfunded liabilities of the Plans if: (i) One or more of the 
Plans were terminated in an involuntary or a distress termination; and 
(ii) upon the occurrence of specified events, including certain 
``change of control'' transactions. In a Binding Term Sheet dated April 
27, 2009 (the Binding Term Sheet), the PBGC agreed to reduce the amount 
of this guarantee to $200 million and, in connection therewith, Daimler 
agreed to pay $600 million directly to the Plans.\17\ The Binding Term 
Sheet provides that these payments are to be made in three equal 
installments of $200 million each, with the second and third 
installments to be made on the first and second anniversaries of the 
date of a final settlement agreement. The Binding Term sheet provided 
further that Chrysler LLC would have no right, title

[[Page 56577]]

or interest in the payments, which were intended to belong exclusively 
and unconditionally to the Plans.
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    \17\ The Applicants represent that Daimler also obtained 
releases for certain claims that are not relevant to the 
transactions described herein.
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    4. Chrysler Group represents that, on June 5, 2009, Chrysler LLC 
and various of its shareholders, Daimler and various of its affiliates, 
incorporated the terms of the Binding Term Sheet into a settlement 
agreement (the Settlement Agreement) with the Pension Benefit Guaranty 
Corporation (the PBGC). Chrysler Group states that the Settlement 
Agreement expressly supersedes the Binding Term Sheet. Under the terms 
of the Settlement Agreement, the PBGC agreed to release Daimler from 
its $1 billion guaranty and, in exchange, Daimler agreed to pay $600 
million in three $200 million installments to Chrysler Group (the 
Installment Payments).\18\ Chrysler Group represents that Daimler made 
the first $200 million Installment Payment to Chrysler Group, in cash, 
on June 15, 2009; and Chrysler Group, upon receipt of this payment, 
immediately contributed $200 million in cash to the Plans. Chrysler 
Group represents further that Daimler made a second $200 million 
Installment Payment to Chrysler Group, in cash, on June 7, 2010; and 
Chrysler Group, upon receipt of this payment, immediately contributed 
$200 million in cash to the Plans. Chrysler Group represents that, to 
date, of the $400 million in cash transferred from Chrysler Group by 
the Plans: (1) The JEEP Corporation-UAW Retirement Income Plan received 
approximately $62.8 million; (2) the Pension Agreement between Chrysler 
Group and the UAW received approximately $327.2 million; and (3) the 
American Motors Union Retirement Income Plan received approximately 
$9.6 million. Chrysler Group represents that these amounts were 
determined in accordance with the terms set forth in the Settlement 
Agreement (after taking into account the merging two employee benefit 
plans covered by the Settlement Agreement). Chrysler Group states that 
such apportionment reflects the terms of the Settlement Agreement, and 
takes into account, among other things, certain funding characteristics 
of the Plans.
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    \18\ Hereinafter, the term ``Chrysler Group'' shall refer also 
to Chrysler LLC.
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    5. The Settlement Agreement provides that the third Installment 
Payment may be achieved in one of two ways: (1) In the form of a $200 
million cash payment by Daimler to Chrysler Group by June 7, 2011 (the 
Installment Due Date), after which Chrysler Group must immediately 
transfer $200 million in cash to the Plans; or (2) by means of four 
notes issued by Daimler (the Daimler Notes) and delivered to Chrysler 
Group, pursuant to an arrangement whereby Chrysler is obligated to 
immediately contribute the Notes (the Contributions) to the Plans.
    6. Chrysler Group states that the Contributions could be viewed as 
violating sections 406(a)(1)(A) and 406(b)(1) and (b)(2) of ERISA since 
the Contributions would involve an in-kind contribution by Chrysler 
Group to the Plans, which are defined benefit plans. In addition, 
Daimler notes that, when the parties entered into the Binding Term 
Sheet and negotiated the Settlement Agreement, Daimler was a party in 
interest to the Plans. Daimler believes that its agreement to issue the 
Daimler Notes as well as the actual entering into of the Daimler Notes 
under an arrangement whereby the Daimler Notes will be Contributed by 
Chrysler Group to the Plans, as such acts are contemplated by the 
Binding Term Sheet and the Settlement Agreement, could therefore be 
viewed as an impermissible extension of credit or sale or exchange in 
violation of sections 406(a)(1)(A) and (B) of ERISA.
    7. Chrysler Group views the deliverance of the Daimler Notes to 
Chrysler Group for purposes of the Contributions as being more 
beneficial to the Plans than the alternative, which is a cash payment 
by Daimler to Chrysler Group on the Installment Due Date. In this 
regard, Chrysler Group represents that, once a Daimler Note is 
transferred by the Chrysler Group to a Plan, as is required under the 
Settlement Agreement, the obligation under the Note would run directly 
from Daimler to the Plan. Chrysler Group states that this arrangement 
significantly reduces the ability of Chrysler Group's creditors to 
reach the third Installment Payment. Additionally, once a Daimler Note 
is transferred to a Plan, the Plan could immediately sell the Note to 
parties other than Chrysler Group, subject to certain restrictions 
required by applicable securities laws. Accordingly, a Plan may receive 
the proceeds from the sale of a Daimler Note prior to the Installment 
Due Date.
    8. Chrysler Group represents that the Contributions would be 
structured in a manner that is protective of the Plans. In this regard, 
following a Contribution, a Daimler Note will represent not more than 
20 percent of the total fair market value of each Plan that receives 
such Note. Additionally, the Plans will not pay any fees, costs, or 
other charges in connection with the Contributions. Chrysler Group 
represents further that the fair market value of each Daimler Note will 
be determined as of the date of the Contribution, by a qualified 
independent appraiser. In this regard, Chrysler Group has selected 
PriceWaterhouseCoopers (PWC) to determine the fair market value of the 
Daimler Notes. Chrysler Group represents that PWC is independent of 
Chrysler Group, having received less than one percent of its revenue 
from Chrysler Group over the last two fiscal years. In addition, 
Chrysler Group states that PWC anticipates receiving less than one 
percent of its revenue from Chrysler Group during the current fiscal 
year.
    9. Chrysler Group states that the exemption, if granted, will be 
administratively feasible because it involves a finite one-time 
transaction, and Daimler has no ownership in or on-going relationship 
with Chrysler Group or any of its affiliates. According to Chrysler 
Group, the internal fiduciaries of the Plans would have no hesitation 
to enforce the claims of the Plans in the unlikely event that Daimler 
failed to make a payment on the Daimler Note, and the internal 
fiduciaries would have no conflict of interest that could cloud their 
judgment in this regard. Chrysler Group states also that the PBGC, as a 
party to the Settlement Agreement, has the full right on its own 
initiative to enforce the terms of the Settlement Agreement, including 
the obligation of Daimler to make the third $200 million Installment 
Payment to the Plans.
    10. Chrysler Group represent that, in addition to the safeguards 
described above, the Plans will not waive any rights or claims in 
connection with the Contributions. With respect to the issuance by 
Daimler of the Daimler Notes pursuant to an arrangement set forth while 
Daimler was a party-in-interest to the Plans, Daimler states that 
Daimler's entering into the Daimler Note will not be part of an 
arrangement, agreement, or understanding designed to benefit Daimler.
    11. Chrysler Group states that the proposed transactions meet the 
requirements set forth in section 408(a) of ERISA since, among other 
things:
    (a) The terms of each Contribution will be consistent with the 
terms of the Settlement Agreement, after taking into account the 
Merger;
    (b) The fair market value of each Daimler Note will be determined 
as of the date of the Contribution, by a qualified independent 
appraiser;
    (c) The fair market value of each Daimler Note contributed to a 
Plan will represent an amount that equates to the amount contemplated 
for such Plan under the Settlement Agreement, after taking into account 
the Merger;
    (d) Each Daimler Note will represent not more than 20% of the total 
fair

[[Page 56578]]

market value of the Plan that receives such Note at the time of the 
Contribution;
    (e) With only limited exceptions, each Plan may immediately sell 
the Daimler Note it receives pursuant to a Contribution;
    (f) The Plans will not waive any rights or claims in connection 
with the Contributions;
    (g) The Plans will not pay any fees, costs, or other charges in 
connection with the Contributions; and
    (h) Chrysler Group will provide the PBGC with written evidence that 
Chrysler Group: (1) Contributed the Daimler Notes to the Plans; and (2) 
gave the Plans' trustee instructions regarding the allocation of the 
Daimler Notes. Such written evidence will be provided within five 
business days after the receipt by Chrysler Group of such Notes.
    12. Daimler states that the issuance by Daimler of the Daimler 
Notes pursuant to the Settlement Agreement meets the requirements set 
forth in section 408(a) of ERISA since Daimler's entering into the 
Daimler Note will not be part of an arrangement, agreement, or 
understanding designed to benefit Daimler.

Notice to Interested Persons

    Chrysler Group requests that notice be provided by posting a copy 
of the proposed exemption wherever employee notices are posted in the 
work places. In addition, Chrysler Group represents that it will work 
with the UAW, the union representing many of the participants in the 
Plans, to post a copy of the notice in the union halls and arrange for 
a copy of the proposal to be printed in the union newspapers. Chrysler 
Group will also arrange for a copy of the proposed exemption to be 
printed in the local newspapers covering the general vicinity of 
Chrysler Group's current and closed plants and facilities. The notices 
shall advise each recipient of the recipient's right to provide 
comments to the Department and/or to request a hearing with respect to 
the proposed exemption and the due date for any such comments/request.
    Such notice will be completed within 60 days of the issuance of the 
proposed exemption. Any written comments must be received by the 
Department from interested persons within 75 days of the publication of 
this proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Chris Motta of the Department, 
telephone (202) 693-8544. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the interest of 
the participants and beneficiaries of the plan and in a prudent fashion 
in accordance with section 404(a)(1)(b) of the Act; nor does it affect 
the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 10th of September 2010.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2010-23059 Filed 9-15-10; 8:45 am]
BILLING CODE 4510-29-P

This article was originally titled, "Application Nos. and Proposed Exemptions; D-11400, Wasatch Advisors, Inc.; D-11585, Retirement Plan for Employees of the Rehabilitation Institute of Chicago (the Plan); D-11603-07, Chrysler Group LLC and Daimler AG; et al."  Non-automotive content removed.



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