Individual Exemption Involving General Motors Company, General Motors Holdings LLC, and General Motors LLC, Located in Detroit, MI |
|---|
Topics: General Motors
|
Ivan Strasfeld
October 13, 2010
[Federal Register: October 13, 2010 (Volume 75, Number 197)]
[Notices]
[Page 62879-62889]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13oc10-92]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption No. 2010-30; Application No. L-11568]
Individual Exemption Involving General Motors Company, General
Motors Holdings LLC, and General Motors LLC, Located in Detroit, MI
AGENCY: Employee Benefits Security Administration, U.S. Department of
Labor.
ACTION: Grant of individual exemption.
-----------------------------------------------------------------------
SUMMARY: This document contains an exemption from certain prohibited
transaction restrictions of the Employee Retirement Income Security Act
of 1974 (the Act or ERISA). The transactions involve the UAW GM Retiree
Medical Benefits Plan (the New UAW-GM Retirees Plan) and its associated
UAW Retiree Medical Benefits Trust (the VEBA Trust) (collectively the
New Plan).\1\ The exemption will affect the New Plan, and its
participants and beneficiaries.
---------------------------------------------------------------------------
\1\ In the notice of proposed exemption published with respect
to the exemption granted herein (74 FR 47963, September 18, 2009),
the Department referred to UAW GM Retiree Medical Benefits Plan as
``the New GM VEBA Plan'' and collectively referred to the New GM
VEBA Plan and the VEBA Trust as the ``VEBA.'' At the request of the
Applicant, the Department has substituted the terms ``the New UAW-GM
Retirees Plan'' and ``the New Plan,'' respectively, therefor.
---------------------------------------------------------------------------
DATES: Effective Date: This exemption is effective as of July 10, 2009.
SUPPLEMENTARY INFORMATION: On September 18, 2009, the Department
published in the Federal Register a notice of proposed individual
exemption from the restrictions of sections 406(a)(1)(A), 406(a)(1)(B),
406(a)(1)(D), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407(a)
of ERISA (the Notice).\2\ The proposed exemption was requested in an
application filed by General Motors Corporation (Old GM) pursuant to
section 408(a) of ERISA and in accordance with the procedures set forth
in 29 CFR 2570, Subpart B (55 FR 32836, August 10, 1990). Subsequent to
the submission of its application, Old
[[Page 62880]]
GM sold substantially all of its assets to General Motors Company (New
GM).\3\
---------------------------------------------------------------------------
\2\ 74 FR 47963.
\3\ Effective December 31, 1978, section 102 of Reorganization
Plan No. 4 of 1978 (43 FR 47713, October 17, 1978), transferred the
authority of the Secretary of the Treasury to issue exemptions of
the type requested to the Secretary of Labor. Accordingly, this
final exemption is being issued solely by the Department.
---------------------------------------------------------------------------
Background
On July 5, 2009, the U.S. Bankruptcy Court for the Southern
District of New York approved a sale under Section 363 of Title 11 of
the U.S. Code by which New GM succeeded to certain assets and
liabilities of Old GM (the Section 363 Sale). The bankruptcy court also
approved an agreement, known as the Modified Settlement Agreement,
between Old GM and the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW), which
governed the provision of post-retirement medical benefits by New GM to
certain employees and retirees. Pursuant to the Modified Settlement
Agreement, New GM was required to transfer the following to the New
Plan: (i) New GM common stock (the New GM Common Stock) representing
17.5% of New GM's common equity, (ii) $6.5 billion of New GM preferred
stock (the Preferred Stock), (iii) a note with a principal amount of
$2.5 billion (the Note), (iv) warrants entitling the New Plan to
acquire an additional 2.5% of New GM Common Stock (the Warrants) and
(v) assets of two pre-existing VEBAs, the Mitigation VEBA and the UAW-
Related Account of the GM Internal VEBA, established by Old GM.
Old GM submitted an application for relief from the prohibited
transaction provisions of ERISA for two sets of transactions. The first
set of transactions involves the transfer of the securities described
above to the New Plan and the subsequent holding and management of such
securities. The second set of transactions involves asset transfers to
and from the New Plan necessitated by the transition of benefit payment
responsibility from certain predecessor plans (the Old GM Plan and the
New GM Plan) to the New Plan,\4\ or due to mistaken deposits into the
New Plan.
---------------------------------------------------------------------------
\4\ As described in the Notice, the Old GM Plan provided
benefits to, among others, individuals who ultimately became covered
by the New Plan. The New GM Plan provided benefits to most of those
same individuals from the date of the Section 363 Sale to the date
of implementation of the New Plan.
---------------------------------------------------------------------------
Written Comments and Hearing Requests
In the Notice, the Department invited interested persons to submit
written comments and requests for a hearing on the proposed exemption.
All comments and requests for a hearing were due November 2, 2009.
During the comment period, the Department received more than 200
telephone calls, approximately 100 letters, emails and faxes, and 15
requests for a public hearing from New Plan participants. The
Department additionally received written comments from General Motors
LLC,\5\ the committee that is the plan administrator and named
fiduciary of the New Plan (the Committee), and the Independent
Fiduciary retained to manage the New GM securities held by the New
Plan.\6\
---------------------------------------------------------------------------
\5\ As described in more detail below, General Motors LLC is a
newly-created indirect wholly-owned subsidiary of New GM.
\6\ The Committee sought and received a one-week extension of
the comment period, to November 9, 2009. On March 16, 2010, with the
Department's permission, the Committee filed an additional comment.
On April 12, 2010, New GM submitted a response to the Committee's
March 16, 2010 comment. During this time frame, the Department also
accepted additional submissions from plan participants.
---------------------------------------------------------------------------
Participant Comments
The great majority of participants who contacted the Department
either by telephone or written comment (commenters) expressed
difficulty in understanding the Notice or the effect of the exemption
on the commenters' benefits. A few commenters supported the exemption.
Many other commenters raised questions and concerns regarding the
transactions described in the Notice.
Specifically, some of the commenters were opposed to the transfer
of the New GM securities to the New Plan due to the uncertain value and
current lack of marketability of the securities. Some commenters were
concerned that the New Plan would not be able to provide benefits for
the duration of their lifetimes. A number of commenters raised concerns
that are beyond the scope of the exemption. These concerns included the
perceived unfair treatment of retirees within the UAW; lack of
participation afforded to retirees in the process of approving the
Modified Settlement Agreement; the validity of Old GM's bankruptcy; and
concerns about the rising costs of maintaining healthcare coverage
under the New Plan. The commenters who requested a public hearing
shared these same concerns. However, none of the commenters offered any
information regarding the substance of the subject transactions.
In responding to commenters' concerns as to the funding of the New
Plan, General Motors LLC notes that the funding of the New Plan was
determined after lengthy, arms-length negotiations that included GM and
the UAW as both the representative of the active employees and as the
authorized representative under Section 1114 of the U.S. Bankruptcy
Code of those persons receiving retiree health care benefits. Class
Counsel for the retirees also played a role in these negotiations and
acknowledged and confirmed his agreement to the terms of the Modified
Settlement Agreement. In addition, representatives of the U.S. Treasury
participated in the negotiations. Further, General Motors LLC points
out that the Modified Settlement Agreement was approved by an order of
the federal bankruptcy court, which stated that the terms and
conditions of the Modified Settlement Agreement (including but not
limited to those relating to the funding of the New Plan) were ``fair,
reasonable, and in the best interests of the retirees.''
General Motors Comments
General Motors LLC submitted a comment disclosing certain corporate
changes since the date of the exemption application. According to the
comment, on August 11, 2009, New GM created three new entities under
Delaware law: (1) General Motors Holding Company (``Holdco''), a
corporation formed as a direct and wholly-owned subsidiary of New GM,
(2) General Motors Holdings LLC (``Holdings''), a limited liability
company formed as a direct and wholly-owned subsidiary of Holdco; and
(3) GM Merger Subsidiary, Inc. (``Merger Subsidiary''), a corporation
formed as a direct and wholly-owned Delaware corporate subsidiary of
Holdings.
The comment disclosed that during the period October 15, 2009,
through November 2, 2009, New GM underwent a corporate reorganization.
On October 15, 2009, Merger Subsidiary merged with and into New GM,
with New GM as the surviving corporation, as a wholly-owned subsidiary
of Holdings. On October 16, 2009, New GM converted to a limited
liability company under the name General Motors LLC. Immediately
thereafter, Holdco changed its name to General Motors Company (New GM).
On October 19, 2009, General Motors LLC assigned its indebtedness to
the U.S. Treasury and the New Plan to Holdings.\7\
---------------------------------------------------------------------------
\7\ According to the comment, these corporate changes were
accompanied by the requisite resolutions, stockholder consents,
certificate of incorporation and by-law changes, stock conversions
etc. as applicable. Each share of pre-reorganization New GM Common
Stock was converted into a right to acquire a share of common stock
issued by post-reorganization New GM, with the same features.
---------------------------------------------------------------------------
[[Page 62881]]
General Motors LLC provided the following graphic illustration of
the merger process:
[GRAPHIC] [TIFF OMITTED] TN13OC10.111
In this regard, General Motors LLC provided certain revisions to
its representations. First, the applicant is now identified as General
Motors LLC, although the comment stated that General Motors LLC would
not object if the exemption were issued to New GM, Holdings and General
Motors LLC collectively. Second, the Note issued to the New Plan by New
GM became an obligation of Holdings. Accordingly, with regard to the
exemption for the acquisition and holding of the Note, the direct
parties to the transactions are Holdings and the New Plan. With regard
to the exemptions for the acquisition and holding of the New GM Common
Stock, the Preferred Stock, and the Warrants, the direct parties are
New GM and the New Plan. With regard to the exemption for the
transition payments, the direct parties to the transactions are General
Motors LLC, Old GM (i.e, General Motors Corporation, which has changed
its name to Motors Liquidation Company), the Old GM Plan, the New GM
Plan and the New Plan.
General Motors LLC provided the following explanation of the reason
for the corporate reorganization:
The decision to create Holdings as an intermediate corporate
layer and place the debt obligations in Holdings was prompted by a
suggestion from [the United States Treasury]. Given the holding
company structure, the ``issuer'' of the other securities--the
Common Stock, Preferred Stock, and the Warrants--must be [New GM],
the holding company. [General Motors LLC], the third-tier
subsidiary, is an LLC and not a suitable issuer of securities that
are intended to be widely held and publicly traded. In addition, the
100% ownership in the chain would not be possible if the Common
Stock were not issued by New GM. Moreover, the stock is far more
desirable if issued by the top-tier company in the structure than if
issued by a second-tier or third-tier company. For the debt,
however, the reason for making Holdings the obligor (as opposed, for
example, to [New GM]) was to place the obligor as close to the
underlying assets as possible. And [General Motors LLC] itself could
not be the obligor because the guarantors on the Notes are not only
[General Motors LLC] and its U.S. subsidiaries, but also the non-
U.S. auto subsidiaries of Holdings. Further, it is contemplated that
Holdings will be the obligor on any future financings.
General Motors LLC further represented that ``the rights of [the
New Plan] under the Amended and Restated Secured Note Agreement of
August 14, 2009 (``Note'') remain just as they were under the Secured
Note Agreement of July 10, 2009 (``Original Note'') before the
reorganization occurred, notwithstanding the substitution of General
Motors Holdings LLC (``Holdings'') for General Motors Company as
obligor on the Note * * * The terms of the Note remain the same in all
material respects as they were under the Original Note.''
General Motors LLC also requested some minor wording changes to the
operative language of the exemption, to which the Department agreed.
Specifically, the Department revised:
Section I(a) to add a new subsection (1)(v) to separately
set forth relief for the acquisition of New GM Common Stock pursuant to
the exercise of the Warrants or through a corporate transaction, for
avoidance of confusion, and to delete subsection (2) as duplicative of
the new subsection (1)(v), and to renumber the remaining subsections;
Section II(c) to state that the Independent Fiduciary must
determine that the transaction is ``protective of the rights of
participants and beneficiaries * * *'' in order to more closely track
ERISA section 408(a); and
Section III(b) to add the words ``as applicable'' after
the word ``administrator(s)'' and the words ``if any'' after the phrase
``the dollar amount of mispayments made.'' \8\
---------------------------------------------------------------------------
\8\ The Department has determined to add the words ``if any''
after the phrase ``the dollar amount of mispayments made'' in
Section III(a) as well.
---------------------------------------------------------------------------
Additionally, the Department deleted the first clause of section
V(b) (``(1) Except as provided in section (2) of this paragraph''), as
unnecessary in light of the fact that there is no section V(b)(2). At
General Motors LLC's request, the Department further revised section V
of the final exemption. The section, which addresses recordkeeping, was
tailored to take into account the fact that multiple parties have
recordkeeping responsibilities under the exemption.
Finally, on March 12, 2010, General Motors LLC represented to the
Department that all assets described in the application as transferring
to the GM Separate Retiree Account \9\ of the VEBA Trust had been
transferred, with the exception of approximately $20.7 million of cash
in the GM Internal VEBA, held back for the payment of expenses
(primarily, investment
[[Page 62882]]
manager fees and expenses for custody, legal, and Promark Global
Advisors, Inc. (Promark) services) accrued before the GM Internal VEBA
assets were transferred.\10\ Regarding this hold-back, General Motors
LLC expects to furnish an initial reconciliation to the VEBA Trust by
mid-summer 2010. The Department notes that the Applicant disclosed in
its initial application that this hold-back would occur.
---------------------------------------------------------------------------
\9\ The GM Separate Retiree Account is the separate retiree
account of the VEBA Trust designed to segregate payments to the VEBA
Trust attributable to GM pursuant to the Modified Settlement
Agreement.
\10\ With respect to the payment by the GM Internal VEBA of
expenses for the services of Promark, an affiliate of New GM,
General Motors LLC clarified that Promark charges for its services
only direct expenses permitted under the Department's regulations at
29 CFR Sec. Sec. 2550.408b-2(e)(3) and .408c-2(b)(3). The
Department notes that this exemption does not provide relief for any
services provided to the GM Internal VEBA by Promark, nor to the
payment of compensation for such services. Lastly, we note that
section 408(b)(2) of ERISA does not provide relief for acts
described in ERISA section 406(b).
---------------------------------------------------------------------------
Committee Comments
The Committee, which is the named fiduciary of the New Plan,
submitted a comment suggesting certain modifications to the Summary of
Facts and Representations of the Notice and to the operative language
of the proposed exemption, and requesting certain clarifications from
the Department. The Committee's comments were submitted after
consultation with the Independent Fiduciary.
Number of Investment Banks
As set forth in the Notice, the VEBA Trust has three separate
retiree accounts (the Separate Retiree Accounts) designed to segregate
payments to the VEBA Trust attributable to GM, Ford and Chrysler,
pursuant to the terms of each company's settlement agreement with the
UAW and each respective class. In this regard, the Committee
represented that, in the event that a single Independent Fiduciary
represents two or more Separate Retiree Accounts:
A separate investment bank will be retained with respect to each
of the three plans comprising the VEBA Trust. The investment bank's
initial recommendations will be made solely with the goal of
maximizing the returns for the single plan that owns the securities
for which the investment bank is responsible.
In its initial discussions with the Department, the Committee made
the argument that the arrangement for retention of separate investment
banks would minimize the likelihood of an immediate transactional
conflict inherent wherein one Independent Fiduciary managing more than
one Separate Retiree Account would be immediately confronted by the
need to dispose of the securities of each company.
The Committee has retained Fiduciary Counselors Inc. (FCI) as the
Independent Fiduciary with respect to the securities held in the GM
Separate Retiree Account, and has currently retained separate
independent fiduciaries with respect to the Chrysler and Ford Separate
Retiree Accounts. As noted, however, it is conceivable at some future
date any or all three Independent Fiduciary engagements may be
consolidated and the foregoing conditions would then come into play. In
such event, the Committee argues that the requirement for different
investment banks for each Separate Retiree Account would not be in the
interest of the New Plan and would not advance the goal of reducing
potential fiduciary conflicts. The Committee contends that the need to
retain multiple investment banks should be at the discretion of the
Independent Fiduciary and the investment banks themselves, or that such
a requirement should be limited to investment banks performing a
traditional underwriting role and being paid on a transactional basis,
not those retained for ongoing valuation or investment consulting
services.\11\
---------------------------------------------------------------------------
\11\ The Committee suggests that an investment bank performing
valuation or investment consulting and advisory services will often
be paid a flat or asset-based fee, while an investment bank
performing underwriting and brokerage services will be paid a
transaction-based fee as a percentage of the overall sale.
Additionally, the Committee notes that it is not anticipated that
the Independent Fiduciary likely would retain a separate consulting
and advisory firm for day-to-day advice (unless appropriate).
---------------------------------------------------------------------------
The Committee points out that, as a threshold matter, the term
``investment bank'' or ``investment banker'' is not a precise term, but
refers to a range of services including investment valuation,
investment consulting and advice, and brokerage or underwriting
performed under the authority and supervision of one or more regulators
(including, but not limited to the Federal Reserve and/or the
Securities and Exchange Commission). The Committee maintains that
typically, though not necessarily, an investment bank engaged to
provide a regular valuation will not be the same as an investment bank
engaged to assist the Independent Fiduciary in connection with a large
private sale or an initial public offering, and even in the latter
event, different investment banks may be employed for different markets
(public versus private, international versus domestic, institutional
versus retail).
The Committee suggests that, particularly in the case of an
investment bank engaged only to provide valuation or investment advice,
the Independent Fiduciary may conclude that there is no potential
conflict in retaining a single investment bank with respect to two or
more Separate Retiree Accounts. Furthermore, the Committee believes
that retaining a single investment bank may in fact provide potential
benefits in the form of experience, cost savings, and communication.
The Committee proffers that GM, Chrysler, and Ford are at vastly
different stages of marketability, are competing for capital in
different markets (including public versus private), and are not
competing against each other so much as they are part of a huge global
automobile market with many other competitors.\12\ The Committee notes
that a conflict could arise in the unlikely event that the Independent
Fiduciary proposes to sell large blocks of stock of two or more car
companies in the same market at the exact same time. In that case, the
Committee suggests that the Independent Fiduciary would probably
(though not necessarily) engage separate investment bankers at that
time to underwrite the sales. Furthermore, the Committee contends that
it would maintain safeguards to mitigate the risk of conflicts. For
example, the Committee notes that it would still appoint a conflicts
monitor and perform its own monitoring of the Independent Fiduciary,
and it would continue to raise any questions about potential conflicts.
---------------------------------------------------------------------------
\12\ According to the Committee, the most likely reason that an
investment bank would propose going to market under this scenario is
if the overall market itself is booming, such that there is ample
appetite for the securities. In the event that a plan needs
liquidity in a falling market, the Committee is more likely to
explore other options, including reducing benefits or seeking
alternative sources of capital such as through borrowing.
---------------------------------------------------------------------------
Accordingly, the Committee proposes to replace the above-referenced
text with the following representation:
In the event that a single Independent Fiduciary is retained to
represent two or more plan Accounts, and it proposes to sell
securities from two or more such Accounts at the same time, a
separate investment bank (if any) will be retained for each Account
with respect to the marketing or underwriting of the securities. For
this purpose, an investment bank will be considered as having been
retained to market or underwrite securities if it is compensated on
the success of the offering and/or as a percentage of the offering
or sales proceeds. The foregoing does not preclude the engagement of
a single investment bank to provide valuation services or long-term
investment consulting on behalf of two or more plan Accounts,
provided that (1) the fees of the investment bank are not contingent
upon the success or size of an offering or sale, and (2) for each
plan Account, the investment bank's recommendations are made solely
with the
[[Page 62883]]
goal of maximizing the returns for such Account.
In addition, the Committee explains that there may be some
confusion as to whether two different Independent Fiduciaries may
retain the same investment bank. The Committee states that there should
be no limitations on the number of investment banks that the
Independent Fiduciary must retain other than general fiduciary
principles. According to the Committee, although it is unlikely that an
Independent Fiduciary would consider, or that an investment bank would
accept, an engagement that might involve marketing securities of two
different companies in the same market at the same time, it would not
be unusual, for instance, to retain the same investment bank to make a
private offering of securities in the domestic market and a public
offering of different securities in a foreign market, where such
investment bank is best qualified to do so.
Accordingly, the Committee suggests that the proposed exemption be
modified to include the following:
To the extent two Accounts are represented by different
Independent Fiduciaries, nothing herein shall prohibit the
Independent Fiduciaries from retaining the same investment bank with
respect to the Accounts which they manage if they determine that it
is in the interest of their respective Accounts to do so.
The Committee further notes that the Independent Fiduciary may not
in all cases have discretion over the selection of the investment
bank(s) that may participate in an underwriting/sale of New GM
securities. The Committee points to section 2.1.4 of the Equity
Registration Rights Agreement, which provides that the U.S. Treasury
generally has the right to select the lead underwriter in the case of a
demand registration (and New GM the right to select co-managing
underwriters) and section 2.2.3 of the Equity Registration Rights
Agreement, which provides that New GM generally has the right to select
the investment bank(s) in the case of a piggyback offering. In any such
case where the Independent Fiduciary is not selecting the investment
bank(s), in the Committee's view, none of the exemption conditions
regarding investment banks should apply.
The Department concurs with the Committee that, in the event that
one Independent Fiduciary represents two or more Separate Retiree
Accounts, and it proposes to sell securities from two or more such
Accounts at the same time, then a separate investment bank (if any)
will be retained for each Separate Retiree Account with respect to the
marketing or underwriting of the securities. Notwithstanding the above,
nothing in the final exemption would preclude the Independent Fiduciary
of two or more Separate Retiree Accounts from retaining the same
investment banker to provide valuation services or long-term investment
consulting on behalf of two or more of such Separate Retiree
Accounts.\13\ Furthermore, with respect to the Committee's suggestion
that, to the extent that two Separate Retiree Accounts are represented
by different Independent Fiduciaries, nothing herein shall prohibit the
Independent Fiduciaries from retaining the same investment bank with
respect to the Separate Retiree Accounts which they manage if they
determine that it is in the interest of their respective Separate
Retiree Accounts to do so, the Department is of the view that a
separate investment bank (if any) must be retained to represent each
such Separate Retiree Account with respect to the marketing or
underwriting of the securities.
---------------------------------------------------------------------------
\13\ In reaching this conclusion, it is the Department's
understanding, based on the Committee's representations, that the
fees paid to a single investment bank to provide valuation services
or long-term investment consulting on behalf of two or more Separate
Retiree Accounts will not be contingent upon the success or size of
an offering or sale, and for each Separate Retiree Account, the
investment bank's recommendations are made solely with the goal of
maximizing the returns for such Account.
---------------------------------------------------------------------------
Lastly, the Department concurs with the Committee that the
restrictions applicable to investment banks would not apply in the
event that the Independent Fiduciary does not have discretion with
respect to the selection of an investment banker. In the Department's
view, the likelihood of conflicts in the case where an investment bank
is selected by the U.S. Treasury or New GM is lower than in a situation
where an offering of New GM securities is underwritten by an investment
bank retained to sell the securities of one or more of the other
Separate Retiree Accounts, because the interests of the New Plan appear
to align more closely with the interests of New GM in the marketing and
selling of the underwritten securities. Therefore, subject to these
limitations, the Department concurs with the Committee's requested
clarifications.
Reporting Deviations From an Investment Bank's Recommendations
If a single Independent Fiduciary is retained with respect to more
than one Separate Retiree Account, the Summary of Facts and
Representations of the Notice provides that the Independent Fiduciary
shall report each instance in which it proposes to ``deviate'' from a
``recommendation'' of the investment bank. The Committee initially
represented to the Department that such arrangement would help to
minimize the likelihood of a conflict inherent in retaining one
Independent Fiduciary to manage the securities of more than one
Separate Retiree Account.
However, the Committee now proffers that this requirement may not
be practical, in light of information gained during the process of
interviewing and selecting the Independent Fiduciaries in connection
with the GM, Chrysler and Ford exemption applications. The Committee
notes that, typically, an investment bank will not ``recommend'' a
single, specific course of action, but through a dialogue with the
Independent Fiduciary will present, discuss, modify and refine various
options and scenarios that the Independent Fiduciary ultimately will
use in making its decisions as a fiduciary. Thus, the Committee argues
that it would not be feasible for the Independent Fiduciary to report
back to the Committee when it proposes to deviate from a specific
recommendation, given that interactions between the Independent
Fiduciary and an investment bank generally lack a single, identifiable
``recommendation'' (either orally or in writing) that the Independent
Fiduciary does or does not intend to follow.
Moreover, the Committee contends that some investment banker
recommendations are unlikely ever to raise conflict issues. For
instance, the Committee notes that an investment bank may develop a
preliminary valuation of certain GM securities of $xx, and after
thorough consideration, the Independent Fiduciary may determine that
such securities are actually worth $yy. In such event, the Committee
asserts that the Independent Fiduciary's valuation might be viewed as a
``deviation'' from the initial recommendation but is unlikely to raise
any conflict vis-[agrave]-vis any securities held by the VEBA Trust.
The Committee is also concerned that the requirement for the
Committee to review the reported deviations will cause the Committee to
interpose itself between the two parties before such parties have
reached a consensus. In this event, the Committee is concerned that it
may have an implied obligation to substitute its judgment for that of
the Independent Fiduciary.
The Department concurs with the Committee's comment that their
initial representation that the Independent Fiduciary would report any
deviations from the recommendation of the
[[Page 62884]]
investment bank raises operational issues. Nevertheless, the Department
notes that the Independent Fiduciary and the Committee are not relieved
from their fiduciary duties under ERISA in carrying out their
respective responsibilities. There may be circumstances where the
Independent Fiduciary has a responsibility under ERISA to inform the
conflicts monitor or the Committee of a deviation from the investment
bank's recommendations, and the Committee, as part of its oversight
responsibility, may need to take appropriate action based on such
disclosure. Subject to the caveat above, the Department takes note of
these clarifications and updates to the Summary of Facts and
Representations of the Notice.
Conditions Applicable in the Event That the Committee Appoints a Single
Independent Fiduciary
The Committee requested confirmation that certain terms and
conditions described in the Summary of Facts and Representations of the
Notice and incorporated into Sections II(b)(1) through (3) of the
proposed exemption would apply only if and to the extent that the same
Independent Fiduciary is appointed to represent two or more Separate
Retiree Accounts.
Sections II(b)(1) through (3) of the proposed exemption provide
that the Committee will take certain steps to mitigate potential
conflicts of interest, including the appointment of a conflicts
monitor, the adoption of procedures to facilitate prompt replacement of
the Independent Fiduciary due to a conflict of interest, the adoption
of a written policy by the Independent Fiduciary regarding conflicts,
and the periodic reporting of actual or potential conflicts.
Additionally, the Summary of Facts and Representations provides that a
separate investment bank will be retained with respect to each Separate
Retiree Account, and in the event that the Independent Fiduciary
deviates from the ``initial recommendations'' of an investment bank,
``it would find it necessary to explain why it deviated from a
recommendation.''
The Department concurs with the Committee, that the terms and
conditions described above will apply only if and to the extent that
the same Independent Fiduciary is appointed to represent two or more
Separate Retiree Accounts. Notwithstanding the above, nothing in the
final exemption would preclude the Committee from adopting procedures
similar to those described in Sections II(b)(1) through (3) of the
proposed exemption in furtherance of its oversight responsibilities.
However, the Department believes that the requirement that the
Independent Fiduciary retain separate investment banks with respect to
each Separate Retiree Account, subject to the limitations described
above, applies regardless of how many Separate Retiree Accounts are
represented by the same Independent Fiduciary.
Investment Bank's Acknowledgement That the New Plan Is Its Ultimate
Client
Section II(e) of the proposed exemption provides that ``any
contract between the Independent Fiduciary and an investment banker
includes an acknowledgement by the investment banker that the
investment banker's ultimate client is an ERISA Plan.'' In assisting
the Department in formulating the conditions of the proposed exemption,
the Committee represented to the Department that such acknowledgement
would be helpful in the event that the Committee is forced to replace
the Independent Fiduciary (such as in the event of an irreconcilable
conflict). The Committee reasoned that this requirement would ensure
that, in the event the Independent Fiduciary was replaced, the
investment banker would continue to represent the New Plan and work
with the replacement Independent Fiduciary.
After conducting interviews and consulting with numerous parties in
its search for an independent fiduciary to manage the securities
received by the New Plan, the Committee has raised concerns regarding
such condition. The Committee has requested that the Department confirm
that this condition will not cause the investment bank to become a
fiduciary or otherwise obligate the investment bank or the Independent
Fiduciary to provide to the Committee any of the investment bank's work
product except upon request, nor will it obligate the Committee to
request or review any such work product. The Committee contends that
the Independent Fiduciary is both a named fiduciary and an investment
manager, thus it should be free within the parameters of its contract
to determine what information it shares with the Committee.
The Department confirms that the requirement that the investment
banker acknowledge that its ultimate client is the New Plan will not,
by itself, make the investment banker a fiduciary of the New Plan.
Rather, whether an investment banker referred to in Section II of the
exemption becomes a fiduciary as a result of its provision of services
depends on whether it meets the definition of a ``fiduciary'' as set
forth in section 3(21) of ERISA and the regulations promulgated
thereunder.
Obligation of the Committee To Review the Investment Banker Reports
As described in the Summary of Facts and Representations of the
Notice, several safeguards are provided to reduce the risk of conflict
in the event that a single independent fiduciary is retained with
respect to more than one Separate Retiree Account. Specifically, in
assisting the Department to formulate these procedures, the Committee
had suggested that a ``conflicts monitor'' would develop a process for
identifying potential conflicts. As a result, the Department added
Section II(b)(1)(ii) of the proposed exemption, which provides that a
conflicts monitor appointed by the Committee ``regularly review the * *
* investment banker reports * * * to identify the presence of factors
that could lead to a conflict[.]''
After conducting interviews with candidates for the Independent
Fiduciary position, the Committee has raised a concern regarding the
conflicts monitor's duties. The Committee has requested confirmation
that Section II(b)(1)(ii) does not independently impose any obligation
on the Committee to provide (or request) ``investment banker reports''
as a matter of course (i.e., beyond ERISA's general fiduciary
requirements). In its comment letter, the Committee notes that it may
be appropriate for the conflicts monitor or the Committee (or any
subcommittee with delegated authority) to review investment banker
reports when provided to them by the Independent Fiduciary, or to
request such reports under certain circumstances. However, the
Committee maintains that such reports may contain information that is
confidential or proprietary, or preliminary, or simply irrelevant to
its responsibilities. Furthermore, according to the Committee, it is
not clear what constitutes a ``report,'' with the result that informal
notes and/or emails may fall under the definition.
The Department concurs with the Committee that Section II(b)(1)(ii)
of the exemption does not independently impose an affirmative
obligation on the Committee to provide (or request) ``investment banker
reports'' as a matter of course beyond ERISA's general fiduciary
requirements.
Definition of ``Securities''
The Committee sought written clarification and confirmation from
the Department as to the scope of the exemptive relief provided under
the proposed exemption with respect to
[[Page 62885]]
certain transactions involving securities held by the New Plan.
Section I(a)(1)-(3) of the proposed exemption provides relief from
the restrictions of sections 406(a)(1)(A) 406(a)(1)(B), 406(a)(1)(E),
406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of ERISA for the New Plan's
acquisition and holding of the New GM Common Stock, the Preferred
Stock, the Note, the Warrants, and additional shares of New GM Common
Stock acquired pursuant to exercise of the Warrants (collectively
defined as the Securities) if the proposed exemption is granted by the
Department. Additionally, Section I(a)(4) of the proposed exemption
provides relief for the disposition of the Securities by the
Independent Fiduciary, if the exemption is granted.\14\ The term
``Securities'' is defined in Section VI(o) as ``(i) The New GM Common
Stock; (ii) the Preferred Stock; (iii) the Note; (iv) the Warrants; and
(v) additional shares of New GM Common Stock acquired pursuant to
exercise of the Warrants.'' The term Warrants is defined in Section
VI(q) as ``warrants to acquire shares of New GM Common Stock, par value
$0.01 per share, issued by New GM.'' The Committee questions whether
the relief proposed would include securities of New GM such as
warrants, common stock, notes and other New GM securities (Other GM
Securities) that are acquired and held by the New Plan as a result of
disposition of some or all of the Securities by the Independent
Fiduciary, in a transaction in which the consideration the New Plan
receives consists in whole or in part of Other GM Securities or in
exchange for some or all of the Securities currently held by the New
Plan.\15\ For example, the Committee states that the Independent
Fiduciary may find it in the interest of the New Plan and its
participants and beneficiaries to sell Warrants to New GM in exchange
for cash and replacement warrants of shorter/longer duration or with a
different strike price.\16\ The Committee also sought to clarify
whether the exemption would cover (i) New GM Common Stock acquired
through exercise of Warrants, and (ii) other securities of New GM in
exchange for all or some of the Securities then held by the New Plan
due to a corporate transaction or restructuring of GM. The Committee
notes that the Independent Fiduciary does not have the authority to
vote the New GM Common Stock, and therefore, the Independent Fiduciary
may have little, if any, ability to affect the negotiation and ultimate
approval of any such corporate transaction.
---------------------------------------------------------------------------
\14\ As noted above, at the request of New GM and in the
interests of clarity, the Department has in this final exemption
merged Section I(a)(1) and (2) of the proposed exemption, and
renumbered the remaining subsections of Section I(a). Therefore,
Section I(a)(4) of the proposed exemption has been renumbered
Section I(a)(3) in this final exemption.
\15\ The Committee states that any such transaction would be
entered into only after the Independent Fiduciary has met all the
conditions precedent to entering into such a transaction as set
forth in Section II of the exemption, including, but not limited to
determining that the transaction is feasible, in the interests of
the New Plan, and protective of the rights of the participants and
beneficiaries of the New Plan. The Committee also represents that
the Independent Fiduciary would obtain a valuation of any securities
involved in the transaction.
\16\ The Committee notes that it is not suggesting that
transactions which would fundamentally alter the terms of the
Modified Settlement Agreement are being contemplated.
---------------------------------------------------------------------------
In response to the above-reference comments, the Department
confirms that the exemption provides relief for other New GM-issued
warrants acquired in exchange for Warrants held by the New Plan at the
direction of the Independent Fiduciary, and such relief also extends to
additional shares of New GM Common Stock or other New GM-issued
warrants acquired in exchange for New GM Common Stock or Warrants held
by the New Plan in connection with a restructuring, recapitalization,
merger or other corporate transaction involving New GM. The Department
has revised Section I(a)(1) and the definitions of Securities and
Warrants in Section VI of the final exemption to incorporate this
clarification. The Department further confirms that the exemption
provides relief for the acquisition, holding and disposition of
additional shares of New GM Common Stock acquired through exercise of
Warrants.
Old GM Bonds
In its March 16, 2010 comment, the Committee informed the
Department that a very small percentage of Old GM senior corporate debt
(Old GM Bonds) was transferred to the VEBA Trust as part of the
transfer of assets from the existing GM Internal VEBA. The Old GM Bonds
were held in a fund known as CCM Pension-C, L.L.C., managed by
Contrarian Capital Management, LLC (Contrarian). The VEBA Trust is the
sole limited partner in the fund with an approximately 99.4% interest
while Contrarian, as the general partner, holds a 0.6% interest. As of
March 31, 2010, the estimated overall net asset value of the fund was
$128,842,109. The Old GM Bonds were valued at $787,705 in total, and
therefore represented 0.61% of the portfolio. The Committee stated that
although attempts were made to determine the exact composition of
underlying assets of each fund held by the GM Internal VEBA, in some
cases complete portfolio information was not available until after the
closing of the transfer. The Committee subsequently informed the
Department that the Old GM Bonds were sold by Contrarian on April 16,
2010.
The Committee requested that relief be provided for the acquisition
and holding of the Old GM Bonds by the New Plan retroactive to January
1, 2010, through April 16, 2010. The Old GM Bonds were held in the GM
Separate Retiree Account of the VEBA Trust; at no time were they held
in the GM Employer Security Sub-Account thereof. The Committee made the
point that Contrarian, which it understands to be independent of
General Motors, acted as an independent fiduciary with respect to the
continued holding of the Old GM Bonds. The Committee further noted that
Contrarian alone made the decision to sell the Old GM bonds.
New GM responded to the Committee's comment by asserting that the
Old GM Bonds should not be considered employer securities for which
relief would be required under ERISA sections 406 and 407, as Old GM
has not had hourly employees at any time since the assets were
transferred to the New Plan, and New GM did not assume the Old GM Bonds
or any liability associated therewith in the Section 363 Sale.
Notwithstanding New GM's response, Old GM appears to be a party in
interest to the New Plan under ERISA section 3(14)(H) by virtue of its
ownership of 10% of more of the equity securities of New GM,\17\ and
the New Plan's holding of debt of Old GM is prohibited under ERISA
section 406(a)(1)(B). Accordingly, exemptive relief is required. As the
Department intended to provide relief necessary to maximize the funding
of the New Plan in accordance with the Modified Settlement Agreement,
the Department has modified Section I of the exemption to specifically
incorporate relief for the acquisition and holding of the Old GM Bonds
retroactive to January 1, 2010, through April 16, 2010.
---------------------------------------------------------------------------
\17\ Old GM received 50,000,000 shares of New GM Common Stock,
or 10% of New GM's common equity, in the Section 363 Sale.
---------------------------------------------------------------------------
Independent Fiduciary Comment
Fiduciary Counselors Inc. (FCI) was selected as the Independent
Fiduciary for the New GM securities held by the New Plan. FCI repeated
concerns identified by the Committee with respect to the role of the
Independent Fiduciary and the investment bank in
[[Page 62886]]
the event that a single Independent Fiduciary is appointed for the
employer securities of more than one Separate Retiree Account
comprising the VEBA Trust. Specifically, FCI was concerned about the
requirement that a separate investment bank will be retained with
respect to each of the three plans. FCI indicated that requiring
separate investment banks in all circumstances could be unnecessarily
costly to the plans involved. It requested flexibility in deciding
whether to retain a separate investment bank, or in the event the
separate investment bank requirement was retained, that the Department
clarify that the Independent Fiduciary has the authority to determine
when it is necessary to retain an investment bank. According to FCI,
having an investment bank on retainer, when no transactions are
contemplated, would needlessly drive up the VEBA Trust's expenses. The
Department responded to some of FCI's concerns in its discussion of the
Committee's comment, above. The Department additionally confirms that
the exemption does not require that the Independent Fiduciary retain an
investment bank at all times.
FCI also expressed concern that, despite the VEBA Trust possessing
certain information rights under the various agreements, including the
right to financial statement information, it did not believe that it
would have access to all of the information necessary to evaluate and
value the New GM Securities during the period before the New GM
securities are publicly traded. FCI requested that the Department
include a requirement in the final exemption that New GM provide the
Independent Fiduciary with such information as the Independent
Fiduciary reasonably requests to fulfill its duties to the VEBA Trust
under the exemption, for so long as the New GM Securities are not
publicly traded. FCI indicated willingness to enter into appropriate
confidentiality agreements to protect any non-public information.
In the period since FCI submitted this comment, the Department
understands that New GM and FCI have negotiated at length in an effort
to reach agreement on the extent of the information that would be
provided by New GM to FCI for purposes of valuing the Securities. New
GM declined to provide certain of the requested information sought by
FCI on grounds of confidentiality and sensitivity of the information
sought. In the absence of agreement on the specific information to be
provided, the parties attempted to agree on a process by which an
independent third party would make a determination as to the necessity
for valuation purposes of the information being sought by FCI. The
parties entertained the possibility that one of the ``Big Four'' public
accounting firms would make such determination but could not agree on
the scope of the assignment.
In response to FCI's comment, the Department has determined to
include a condition in the final exemption which specifically addresses
the disclosure of financial information by New GM for FCI's use in
valuing the New GM Securities. In this regard, the Department has
determined that it would be appropriate for one of the ``Big Four''
public accounting firms to determine whether the information sought by
the Independent Fiduciary is necessary, pursuant to applicable
accounting standards, for valuing securities of a privately-held
company. Under this requirement, in the event that New GM declines to
provide financial information requested by the Independent Fiduciary
for valuation purposes, New GM will engage, at its expense, one of the
``Big Four'' public accounting firms that is acceptable to the
Independent Fiduciary (Accountant) to determine whether the information
sought by the Independent Fiduciary is necessary for valuation
purposes. The Department expects that the Accountant will base its
conclusion on whether or not the information in question would be
necessary to provide an opinion as to the fair value of the Securities
as of the relevant date, consistent with ASC 820 on Fair Value
Measurements and the AICPA Statement on Valuation Services. New GM will
provide such information to the Independent Fiduciary as the Accountant
determines necessary for valuation purposes according to the standard
set forth above. The Department expects that the parties will work to
ensure that any dispute regarding the disclosure of information will be
resolved as expeditiously as possible in order to ensure that the
Independent Fiduciary has timely access to information deemed necessary
for valuation.
Finally, FCI noted that, prior to FCI's appointment as Independent
Fiduciary, New GM underwent a corporate reorganization and certain
adjustments were made in the New GM Securities to reflect the
reorganization of the GM controlled group. FCI requested that the
Department clarify that FCI, as Independent Fiduciary, has
responsibility only for transactions related to the New GM securities
that occurred after its appointment. The Department concurs with this
statement.
Conclusion
The Department has carefully considered the issues expressed by the
commenters both in written comments and telephone calls. After
consideration of all the participant comments and documentation
provided, the Department has concluded that no ``material factual
issues'' were identified by the commenters that would warrant a public
hearing under the Department's regulations at 29 CFR Sec. 2570.46.
After giving full consideration to the entire record, the Department
has determined to grant the exemption subject to the modifications and
clarifications described herein. For a more complete statement of the
facts and representations supporting the Department's decision to grant
this exemption, refer to the Notice, at 74 FR 47963 (September 18,
2009).
---------------------------------------------------------------------------
\18\ Because the New Plan will not be qualified under section
401 of the Internal Revenue Code of 1986, there is no jurisdiction
under Title II of the Act pursuant to section 4975 of the Code.
However, there is jurisdiction under Title I of the Act.
---------------------------------------------------------------------------
Exemption
Section I--Covered Transactions \18\
(a) The restrictions of sections 406(a)(1)(A), 406(a)(1)(B),
406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of ERISA shall
not apply, effective July 10, 2009, to:
(1) The acquisition by the UAW GM Retiree Medical Benefits Plan
(the New UAW-GM Retirees Plan) and its associated UAW Retiree Medical
Benefits Trust (the VEBA Trust) (the New Plan) of: (i) 87,500,000
shares of common stock of General Motors Company (New GM) (the New GM
Common Stock) representing 17.5% of New GM equity; (ii) $6.5 billion of
Series A Fixed Rate Cumulative Perpetual Preferred stock of New GM (the
Preferred Stock); (iii) a note issued by New GM and assigned to General
Motors Holdings LLC with a principal amount of $2.5 billion (the Note);
(iv) warrants to acquire New GM Common Stock representing 2.5% of New
GM equity (the Warrants); and (v) additional shares of New GM Common
Stock acquired pursuant to (A) the Independent Fiduciary's exercise of
the Warrants, and (B) an adjustment, substitution, conversion or other
modification of New GM Common Stock in connection with a
reorganization, restructuring, recapitalization, merger, or similar
corporate transaction, provided that each holder of New GM Common Stock
is treated in an identical manner (collectively, the Securities),
transferred by New GM and deposited in the GM Employer Security Sub-
[[Page 62887]]
Account of the GM Separate Retiree Account of the VEBA Trust.
(2) The holding by the New Plan of the Securities in the GM
Employer Security Sub-Account of the GM Separate Retiree Account of the
VEBA Trust; and
(3) The disposition of the Securities.
(b) The restrictions of sections 406(a)(1)(B), 406(a)(1)(D),
406(b)(1) and 406(b)(2) of ERISA shall not apply, effective July 10,
2009, to:
(1) The payment by Old GM, New GM, the Old GM Plan, the New GM Plan
or the New Plan of a benefit claim that was the responsibility and
legal obligation, under the terms of the applicable plan documents, of
one of the other parties listed in this paragraph; and
(2) The reimbursement by Old GM, New GM, the Old GM Plan, the New
GM Plan, or the New Plan, of a benefit claim that was paid by another
party listed in this paragraph, which was not legally responsible for
the payment of such claim, plus interest.
(c) The restrictions of sections 406(a)(1)(B), 406(a)(1)(D),
406(b)(1) and 406(b)(2) of ERISA shall not apply, effective July 10,
2009, to the return to New GM of assets deposited or transferred to the
New Plan by mistake, plus interest.
(d) The restrictions of sections 406(a)(1)(B), 406(a)(1)(E),
406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of ERISA shall not apply,
effective January 1, 2010, through April 16, 2010, to the acquisition
and holding by the New Plan of Old GM senior corporate debt held in the
CCM Pension-C, L.L.C. fund managed by Contrarian Capital Management,
LLC.
Section II-Conditions Applicable to Section I(a)
(a) The Committee appoints a qualified Independent Fiduciary to act
on behalf of the New Plan for all purposes related to the transfer of
the Securities to the New Plan for the duration of the New Plan's
holding of the Securities. Such Independent Fiduciary will have sole
discretionary responsibility relating to the holding, ongoing
management and disposition of the Securities, except for the voting of
the New GM Common Stock. The Independent Fiduciary has determined or
will determine, before taking any actions regarding the Securities,
that each such action or transaction is in the interest of the New
Plan.
(b) In the event that the same Independent Fiduciary is appointed
to represent the interests of one or more of the other plans comprising
the VEBA Trust (i.e., the UAW Chrysler Retiree Medical Benefits Plan
and/or the UAW Ford Retiree Medical Benefits Plan) with respect to
employer securities deposited into the VEBA Trust, the Committee takes
the following steps to identify, monitor and address any conflict of
interest that may arise with respect to the Independent Fiduciary's
performance of its responsibilities:
(1) The Committee appoints a ``conflicts monitor'' to: (i) Develop
a process for identifying potential conflicts; (ii) regularly review
the Independent Fiduciary reports, investment banker reports, and
public information regarding the companies, to identify the presence of
factors that could lead to a conflict; and (iii) further question the
Independent Fiduciary when appropriate.
(2) The Committee adopts procedures to facilitate prompt
replacement of the Independent Fiduciary if the Committee in its sole
discretion determines such replacement is necessary due to a conflict
of interest.
(3) The Committee requires the Independent Fiduciary to adopt a
written policy regarding conflicts of interest. Such policy shall
require that, as part of the Independent Fiduciary's periodic reporting
to the Committee, the Independent Fiduciary includes a discussion of
actual or potential conflicts identified by the Independent Fiduciary
and options for avoiding or resolving the conflict.
(c) The Independent Fiduciary authorizes the trustee of the New
Plan to dispose of the New GM Common Stock (including additional shares
of New GM Common Stock acquired pursuant to exercise of the Warrants),
the Preferred Stock, and/or the Note, or exercise the Warrants, only
after the Independent Fiduciary determines, at the time of the
transaction, that the transaction is feasible, in the interest of the
New Plan, and protective of the rights of participants and
beneficiaries of the New Plan.
(d) The Independent Fiduciary negotiates and approves on behalf of
the New Plan any transactions between the New Plan and any party in
interest involving the Securities that may be necessary in connection
with the subject transactions (including but not limited to the
registration of the securities contributed to the New Plan).
(e) Any contract between the Independent Fiduciary and an
investment banker includes an acknowledgement by the investment banker
that the investment banker's ultimate client is an ERISA plan.
(f) The Independent Fiduciary discharges its duties consistent with
the terms of the New Plan, the trust agreement, the Independent
Fiduciary Agreement, and any other documents governing the employer
securities, such as the Registration Rights Agreement.
(g) The New Plan incurs no fees, costs or other charges (other than
described in the trust agreement and the Modified Settlement Agreement)
as a result of the transactions exempted herein.
(h) The terms of any transaction exempted herein are no less
favorable to the New Plan than the terms negotiated at arms' length
under similar circumstances between unrelated parties.
(i) New GM furnishes the financial information necessary for the
Independent Fiduciary to value the Securities for the period before the
New GM securities are publicly traded. Notwithstanding the foregoing,
if New GM declines to furnish the financial information requested by
the Independent Fiduciary, New GM will engage, at its own expense, one
of the ``Big Four'' public accounting firms that is acceptable to the
Independent Fiduciary (Accountant), to determine whether, pursuant to
applicable accounting standards, the requested information is necessary
for valuing securities of a privately-held company. New GM will furnish
such financial information to the Independent Fiduciary as the
Accountant deems necessary for the valuation.
Section III-Conditions Applicable to Section I(b)
(a) The Committee and the New Plan's third party administrator will
review the benefits paid during the transition period and determine the
dollar amount of mispayments made, if any, subject to the review of the
VEBA Trust's independent auditor. The results of this review will be
made available to Old GM and New GM.
(b) Old GM and New GM and their respective plans' third party
administrator(s), as applicable, will review the benefits paid during
the transition period and determine the dollar amount of mispayments
made, if any, subject to the review of the respective plans'
independent auditor. The results of this review will be made available
to the Committee.
(c) Interest on any reimbursed mispayment will accrue from the date
of the mispayment to the date of the reimbursement.
(d) Interest will be determined using the applicable OPEB discount
rate.\19\
---------------------------------------------------------------------------
\19\ OPEB means Other Post-Employment Benefits, and typically
includes retiree healthcare benefits, life insurance, tuition
assistance, day care, legal services and the like. The OPEB discount
rate is a rate used to discount projected future OPEB benefits
payment cash flows to determine the present value of the OPEB
obligation.
---------------------------------------------------------------------------
[[Page 62888]]
(e) If there is a dispute as to the amount of a reimbursement
requested, the parties will enter into a dispute procedure set forth in
section 26D of the Modified Settlement Agreement.
Section IV-Conditions Applicable to Section I(c)
(a) New GM must make a claim to the Committee regarding the
specific deposit or transfer made in error or made in an amount greater
than that to which the New Plan was entitled.
(b) The claim is made within the Verification Time Period, as
defined in Section VI(r).
(c) Interest on any mistaken deposit or transfer will accrue from
the date of the mistaken payment to the date of the repayment.
(d) Interest will be determined using the applicable OPEB discount
rate.
(e) If there is a dispute as to the amount of a mistaken payment,
the parties will enter into a dispute procedure set forth in section
26D of the Modified Settlement Agreement.
Section V-Conditions Applicable to Section I(a), (b) and (c)
(a) The Committee and the Independent Fiduciary maintain for a
period of six years from (i) the date the Securities are transferred to
the New Plan, and (ii) the date the shares of New GM Common Stock are
acquired by the New Plan through the exercise of the Warrants, the
records necessary to enable the persons described in paragraph (b)
below to determine whether the conditions of this exemption have been
met, except that (i) a separate prohibited transaction will not be
considered to have occurred if, due to circumstances beyond the control
of the Committee and/or the Independent Fiduciary, the records are lost
or destroyed prior to the end of the six-year period, and (ii) no party
in interest other than the Committee or the Independent Fiduciary shall
be subject to the civil penalty that may be assessed under ERISA
section 502(i) if the records are not maintained, or are not available
for examination as required by paragraph (b) below; and
(b) Except as provided in paragraph (c) below and notwithstanding
any provisions of subsections (a)(2) and (b) of ERISA section 504, the
records referred to in paragraph (a) above shall be unconditionally
available at their customary location during normal business hours to:
(1) Any duly authorized employee or representative of the
Department;
(2) New GM or any duly authorized representative of New GM;
(3) The UAW or any duly authorized representative of the UAW;
(4) In the case of records maintained by the Committee, the
Independent Fiduciary or any duly authorized representative of the
Independent Fiduciary;
(5) In the case of records maintained by the Independent Fiduciary,
the Committee or any duly authorized representative of the Committee;
and
(6) Any participant or beneficiary of the New Plan or any duly
authorized representative of such participant or beneficiary.
(c)(1) As to records maintained by the Independent Fiduciary
relating to the conditions applicable to Section I(a), the UAW,
Committee and any participant or beneficiary of the New Plan, including
any duly authorized representatives of each, shall not be authorized to
examine trade secrets of New GM, or New GM commercial or financial
information that is privileged or confidential, including but not
limited to records described as ``Confidential Information'' in the
Confidentiality Agreement between New GM and the New Plan, unless New
GM approves of their disclosure. Should New GM refuse to approve the
disclosure of such information, New GM shall, by the close of the
thirtieth (30th) day following the request, provide written notice
advising that person of the reason for the refusal and that the
Department may request such information.
(2) As to records maintained by the Committee, the Independent
Fiduciary, UAW, and any participant or beneficiary of the New Plan,
including any duly authorized representatives of each, shall not be
authorized to examine the trade secrets of New GM, or New GM commercial
or financial information that is privileged or confidential, unless New
GM approves of the disclosure. Should New GM refuse to approve the
disclosure of information pursuant to this paragraph, New GM shall, by
the close of the thirtieth (30th) day following the request, provide
written notice advising that person of the reason for the refusal and
that the Department may request such information.
Section VI--Definitions
(a) The term ``affiliate'' means: (1) Any person directly or
indirectly, through one or more intermediaries, controlling, controlled
by, or under common control with such other person; (2) Any officer,
director, partner, or employee in any such person, or relative (as
defined in section 3(15) of ERISA) of any such person; or (3) Any
corporation, partnership or other entity of which such person is an
officer, director or partner. (For purposes of this definition, the
term ``control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual.)
(b) The ``Committee'' means the eleven individuals consisting of
six independent members and five UAW appointed members who will serve
as the plan administrator and named fiduciary of the New Plan.
(c) The term ``New GM Common Stock'' means the shares of common
stock, par value $0.01 per share, issued by New GM.
(d) The term ``GM Employer Security Sub-Account of the GM Separate
Retiree Account of the VEBA Trust'' means the sub-account established
in the GM Separate Retiree Account of the VEBA Trust to hold New GM
securities on behalf of the New Plan.
(e) The term ``Implementation Date'' means December 31, 2009.
(f) The term ``Independent Fiduciary'' means a fiduciary that is
(i) independent of and unrelated to Old GM, New GM, the UAW, the
Committee, and their affiliates, and (ii) appointed to act on behalf of
the New Plan with respect to the holding, management and disposition of
the Securities. In this regard, the fiduciary will not be deemed to be
independent of and unrelated to Old GM, New GM, the UAW, the Committee,
and their affiliates if (1) Such fiduciary directly or indirectly
controls, is controlled by, or is under common control with Old GM, New
GM, the UAW, the Committee or their affiliates, (2) such fiduciary
directly or indirectly receives any compensation or other consideration
from Old GM, New GM, the UAW or any Committee member in his or her
individual capacity in connection with any transaction contemplated in
this exemption (except that an independent fiduciary may receive
compensation from the Committee or the New Plan for services provided
to the New Plan in connection with the transactions discussed herein if
the amount or payment of such compensation is not contingent upon or in
any way affected by the independent fiduciary's ultimate decision), and
(3) the annual gross revenue received by the fiduciary, in any fiscal
year, from Old GM, New GM, the UAW or a member of the Committee in his
or her individual capacity, exceeds 3% of the fiduciary's annual gross
revenue from all sources (for federal income tax purposes) for its
prior tax year.
[[Page 62889]]
(g) The term ``Modified Settlement Agreement'' means The UAW
Retiree Settlement Agreement between New GM and the UAW dated July 10,
2009.
(h) The term ``New GM'' means General Motors Company, the company
that acquired certain assets and liabilities of Old GM pursuant to the
Section 363 Sale.
(i) The term ``Note'' means the note issued by General Motors
Company and assigned to General Motors Holdings LLC with a principal
amount of $2.5 billion.
(j) The term ``New GM Plan'' means the retiree medical benefits
plan maintained by New GM that provides benefits to most of the same
individuals as are covered by the Old GM Plan, from the date of the
Section 363 Sale until the Implementation Date of the New Plan.
(k) The term ``Old GM'' means the company that remains in
bankruptcy protection after the Section 363 Sale.
(l) The term ``Old GM Plan'' means the retiree medical benefits
plan maintained by Old GM that provided benefits to, among others,
those who will be covered by the New Plan.
(m) The term ``Preferred Stock'' means shares of Series A Fixed
Rate Cumulative Perpetual Preferred Stock, par value $0.01 per share,
issued by New GM.
(n) The term ``Section 363 Sale'' means a sale under section 363 of
Title 11 of the U.S. Code, by which on July 10, 2009, New GM succeeded
to certain assets and liabilities of Old GM.
(o) The term ``Securities'' means (i) the New GM Common Stock; (ii)
the Preferred Stock; (iii) the Note; (iv) the Warrants; and (v)
additional shares of New GM Common Stock acquired in accordance with
the transactions described in Section I(a)(1)(v).
(p) The term ``UAW'' means the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America.
(q) The term ``Warrants'' means warrants to acquire shares of New
GM Common Stock, par value $0.01 per share, issued by New GM. For
purposes of this definition, the term ``Warrants'' includes additional
warrants to acquire New GM Common Stock acquired in partial or complete
exchange for, or adjustment to, the warrants described in the preceding
sentence, at the direction of the Independent Fiduciary or pursuant to
a reorganization, restructuring or recapitalization of New GM as well
as a merger or similar corporate transaction involving New GM (each, a
corporate transaction), provided that, in such corporate transaction,
similarly suited warrantholders, if any, will be treated the same to
the extent that the terms of such warrants and/or rights of such
warrantholders are the same.
(r) The term ``Verification Time Period'' means: (i) With respect
to all Securities other than the Note, the period beginning on the date
of publication of this final exemption in the Federal Register and
ending 60 calendar days thereafter; (ii) with respect to each payment
pursuant to the Note, the period beginning on the date of the payment
and ending 90 calendar days thereafter; (iii) with respect to the UAW-
Related Account of the Internal VEBA, the period beginning on the date
of publication of this final exemption in the Federal Register (or, if
later, the date of the transfer of the UAW-Related Account to the New
Plan) and ending 180 calendar days thereafter; and (iv) with respect to
the Mitigation VEBA, the period beginning on the date of publication of
this final exemption in the Federal Register and ending 60 calendar
days thereafter.
(s) The term ``New Plan'' means the UAW GM Retiree Medical Benefits
Plan (the New UAW-GM Retirees Plan) and its associated UAW Retiree
Medical Benefits Trust (the VEBA Trust).\20\
---------------------------------------------------------------------------
\20\ In the notice of proposed exemption, the term ``the VEBA''
was used to define collectively the UAW GM Retiree Medical Benefits
Plan (the New UAW-GM Retirees Plan) and its associated UAW Retiree
Medical Benefits Trust (the VEBA Trust).
---------------------------------------------------------------------------
(t) The term ``Registration Rights Agreement'' means the Equity
Registration Rights Agreement by and among New GM, the U.S. Treasury,
Canada, the VEBA Trust and Old GM, entered into on July 10, 2009.
FOR FURTHER INFORMATION CONTACT: Karen E. Lloyd, Office of Exemption
Determinations, Employee Benefits Security Administration, U.S.
Department of Labor, telephone (202) 693-8554. (This is not a toll-free
number.)
Signed at Washington, DC, this 6th day of October 2010.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2010-25686 Filed 10-12-10; 8:45 am]
BILLING CODE 4510-29-P