In a decision of significance to private equity funds, the United States Court of Appeals for the First Circuit recently held that: (1) a private equity fund can be liable as a “trade or business” for the withdrawal liability of its portfolio company; and (2) by structuring its portfolio company investment to avoid ERISA’s 80 percent parent-subsidiary common control threshold, the private equity fund did not engage in a transaction to “evade or avoid” withdrawal liability. Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund, No. 12-2312 (1st Cir. July 24, 2013). Although the decision concerns a private equity fund’s liability for the withdrawal liability of a portfolio company that contributed to a multiemployer pension plan, it is also applicable to ERISA-controlled group liability arising from single-employer pension plan terminations.

Click here to read more about how the First Circuit addressed ERISA-controlled group liability.