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Private Equity Funds May Be Liable for the Pension Related Liabilities of Portfolio Companies

On May 12, 2016 by Schnader

Alert Summary:

A March 28, 2016 decision of the United States District of Massachusetts supported the Pension Benefit Guaranty Corporation’s 2007 opinion (the “2007 PBGC Opinion”) that a private equity fund could be liable for U.S. pension liabilities.


Under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Internal Revenue Code of 1986, as amended (the “Code”), organizations of the same controlled group can be treated as a single employer liable for pension liabilities (including withdrawal liability) when:  (1) they have at least an 80% ownership interest in a pension-obligated employer, and (2) when they are engaged in a “trade or business.”

Prior to the 2007 PBGC Opinion, private equity funds were considered to be insulated from U.S. pension liabilities because they were not considered to be engaging in a “trade or business.”

Click here to read the full Alert.

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