Client Alert
Private Equity ERISA Alert: Consider ERISA Pension Liability Risks from Portfolio Plans
July 26, 2013
BY MARK POERIO, STEVE HARRIS & ERIC KELLER
On July 24th, the First Circuit issued a decision that should concern private equity funds because it breaks new ground in articulating when these funds could be held liable to a multiemployer (union) pension plan for a portfolio company’s withdrawal liability. The Sun Capital decision has two immediate implications for PE funds. First, they should evaluate their exposure to ERISA pension liability risk for any portfolio company as to which the PE fund is an 80% or more owner. Second, they should consider structuring future investments in a manner that keeps each fund’s ownership below 80% of any portfolio company with ERISA defined benefit or multiemployer pension plans (because the PE fund could potentially be held liable for those obligations under ERISA).
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