Last year, the Pension Benefit Guaranty Corporation (the “PBGC”) privately issued a letter holding that a private equity fund was a “trade or business” under ERISA and that the fund was therefore aggregated with its 80 percent-or-more subsidiaries for purposes of determining who is responsible for certain ERISA liabilities. As a result, the fund was supposedly jointly and severally liable under ERISA.

The PBGC letter has been made publicly available, and is causing some consternation in the market. The effects are potentially wide-ranging. On the face of it, possibly substantial plan-related liabilities may be shared among the fund’s portfolio companies, and the fund itself. There are also possible ripple effects regarding a host of tax-compliance and excise-tax issues.The negotiation and administration of credit agreements could be affected.

Investment funds should not necessarily assume that the PBGC was correct in its 2007 letter, and we have published a report in the leading ERISA advance sheet questioning the PBGC’s approach. Our report also discusses certain aspects of the potential impact of the letter, and even notes a possibly advantageous way in which a fund could theoretically use the PBGC’s reasoning to the fund’s advantage. Our full report may be accessed in full at h t t p : / / w w w . w h i t e c a s e . c o m / publications_08152008/.