In a decision that could have far-reaching implications for private investment funds, a District Court held that co-investing funds were part of a portfolio company’s controlled group and that the funds were thus liable for that portfolio company’s multiemployer plan withdrawal liability.

  • The District Court essentially substituted the statutory 80% ownership threshold for controlled group liability with a facts-and-circumstances analysis that could establish controlled groups among separate independent entities with ownership interests below 80% in a common subsidiary.
  • In addition, the District Court took an expansive view of what constitutes an “economic benefit” that will satisfy the “investment plus” test articulated by the First Circuit for whether a private investment fund is a “trade or business.” In particular, the District Court found that management fee offsets could constitute an “economic benefit” even if the offsets are carried forward and potentially never used.

Please see our recently published client alert here for a full analysis, and our previous coverage on the Sun Capital case here.

Photo of Colleen Hart Colleen Hart

Colleen Hart is a partner in the Tax Department and a member of the Employee Benefits & Executive Compensation Group.

Colleen advises companies, executives and boards on complex executive compensation matters. She offers a multidisciplinary approach to compensation and benefits issues with a…

Colleen Hart is a partner in the Tax Department and a member of the Employee Benefits & Executive Compensation Group.

Colleen advises companies, executives and boards on complex executive compensation matters. She offers a multidisciplinary approach to compensation and benefits issues with a focus on tax planning, securities laws and corporate governance. Matters she handles include the negotiation, structuring and implementation of employment and change-in-control agreements and deferred compensation, equity and incentive compensation plans. She advises on golden parachute and deduction limitation rules, securities reporting, registration and disclosure requirements and California employment laws. In addition, Colleen has extensive experience advising clients on compensation and benefits issues arising in mergers and acquisitions, initial public offerings, bankruptcies and finance transactions.

Colleen is a contributing author of The 409A Handbook (BNA 2016) and lectures frequently on executive compensation matters. As a U.S. Navy veteran, Colleen devotes a substantial amount of time to organizations that provide legal and support services to U.S. veterans.