A recent decision by the First Circuit Court of Appeals in Sun Capital Partners III, L.P. et al. v. New England Teamsters & Trucking Industry Pension Fund may have important implications for private equity funds that own portfolio companies with underfunded pension obligations. In its decision, the court held that a private equity fund that had an investment in a portfolio company that was managed by the fund’s general partner and its manager was a “trade or business” with potential joint and several liability under the Employee Retirement Income Security Act of 1974 (ERISA) for that portfolio company’s withdrawal liability from a multiemployer pension plan. As such, the private equity fund could be required to use its assets to fund the pension liability if the additional “common control” requirements were satisfied.
View the alert.