Investment Funds and ERISA Controlled Groups – Egregious Aggregation?
Pension & Benefits Reporter, Vol. 35, No. 33, pp. 1929-1934, 2008
6 Pages Posted: 20 Feb 2010 Last revised: 21 Mar 2010
Date Written: August 19, 2008
Venture capital and other private equity funds have proliferated in recent decades, as the trend towards the pooling of investments by investment professionals has continued to grow. A lurking question that has long bubbled under the surface is whether, if a fund's ownership exceeds certain thresholds, the fund and its target acquisitions are aggregated as a single employer for certain purposes under the employee benefits provisions of the Internal Revenue Code of 1986, as amended, and under the Employee Retirement Income Security Act of 1974, as amended. The ERISA Title IV issues have attracted some particular attention over the last year, with the issuance of a certain letter from the PBGC's Appeals Board dated September 26, 2007. The 2007 PBGC letter holds that the private equity fund there at issue was a trade or business, and that its (sufficiently owned) subsidiaries were considered to be a single employer under Title IV. The PBGC determined that the fund was therefore jointly and severally liable for the underfunded liabilities of a pension plan sponsored by one of its portfolio companies. The author questions the bases given by the PBGC to reach that conclusion, and discusses certain possible impacts of the PBGC's approach.
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