Controlled Groups - ERISA Retirement Plans

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  • NEW: 2019.11.19  Sun Capital Reversal - PE firm not liable.  The First Circuit decided, in Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund, 943 F.3d 49, 51, that two investment funds established by a private equity firm were not liable for a portfolio company's withdrawal liabilities owed to a union pension plan. The First Circuit held that the funds were not under “common control” with the portfolio company, since neither separately owned 80% or more of the stock of the portfolio company, and based upon the facts and circumstances, the funds had not formed a de facto partnership to acquire and own the stock.
  • 2018.09.04  Successor Liability for Single Employer DB Plan - "Trade or Business" for Controlled Group.  In PBGC v. Findlay Industries, the 6th Circuit held that a family trust which leased land to a commonly-controlled plan sponsor was a “trade or business,” and thereby became jointly and severally liable for the controlled group’s pension plan termination liability.  Further, the buyer of the plan sponsor’s assets was held liable, as a successor employer, and therefore for the plan sponsor’s pension plan termination liability. See alsoM&A ERISA Issues.

General Rule
ERISA Section 4001(a)(14) and Section 414 of the Internal Revenue Code set forth the principal provisions for determining controlled group liability issues and determinations.

Applicable Law

  • Treasury Regulations - both Treas. Reg. 1.414(b) and 1.1563-2 (excluded stock) and 1.1563-3 (attribution rules).
    • Treas. Reg. 1.1563-1 re controlled group definition, including stock voting rules.
    • Separate Line of Business Rules - see SLOBs.
  • "Controlled and Affiliated Service Groups" - 100 pages of analysis from the IRS, with numerous examples.
  • "Evade or Avoid" Transactions - ERISA 4069 and related authorities and litigation.
  • Stock Options and Convertible Debentures (Debt).