Private equity fund has controlled group liability for underfunded pension plan

In a decision having far-reaching implications, the Pension Benefit Guaranty Corporation (PBGC) Appeals Board recently held that a private equity fund ("Fund") was jointly and severally liable for a funding shortfall in a pension plan of one of its portfolio companies. While this decision only applies to the Fund at issue, it could be precedent for future action by the PBGC. The ramifications extend not only to potential PBGC liability, but possibly to other ERISA and Internal Revenue Code joint and several liability with respect to funding of pension plans, COBRA liability and certain excise taxes. To the extent a Fund has controlled group liability for an underfunded pension plan, it also may be in breach of its credit agreements.