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Private Equity Fund Pension and Withdrawal Liability: The Impact of the ‘Sun Capital’ Case


Product Code - HRAU01
Speaker(s): James P. McElligott, Jr., Partner, McGuireWoods LLP and Jeff Capwell, Partner, McGuireWoods LLP and Taylor French, Associate, McGuireWoods LLP
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Underfunded Taft-Hartley multi-employer pension plans are aggressively asserting withdrawal liability claims against alleged controlled group members, including private equity funds investing in companies that participate in such plans. The liability stakes are huge: the vast majority of multiemployer plans are not fully funded and thus employers participating in such plans are exposed to potential withdrawal liability.

Under ERISA, withdrawal liability and pension termination liability are a joint and several obligation of the employer and each member of the employer’s “controlled group.” Private equity funds are exposed to the entire amount of such liabilities if they are determined to be a member of the impacted employer’s controlled group. The Pension Benefits Guaranty Corp. has also used “controlled group” theories to find private equity funds liable for the unfunded pension obligations of the funds’ portfolio companies.

On July 24, 2013, the U.S. Court of Appeals for the First Circuit ruled that two private equity funds that could be liable for the withdrawal liability of one of their portfolio companies. Sun Capital Partners III LP v. New England Teamsters & Trucking Indus. Pension Fund. The ruling is a wake-up call for private equity funds whose portfolios include companies who participate in Taft-Hartley plans or sponsor pension plans with substantial unfunded benefit liabilities.

Join Jay McElligott, Jeff Capwell, and Taylor French of McGuireWoods LLP, as they discuss controlled group rules, withdrawal liability, and key decisions from the courts and PBGC.

The webinar will assess the risks faced by private equity firms, including:
•What are the range of potential pension-related liabilities that may be triggered in a private equity fund context and what are the various circumstances that can trigger those liabilities?
•What factors will courts consider in determining whether a private equity fund is a “trade or business” in the controlled group of the fund’s portfolio companies?
•What steps can private equity funds take to minimize liability for pension-related liabilities, including withdrawal liabilities?
•What potential impact will Sun Capital have on PBGC claims for “downsizing liability” under ERISA 4062(e)?
•How might this potential liability influence the structuring of private equity transactions?

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•1.5 HRCI credits by attending this Webinar. Find out how.
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James P. McElligott, Jr., Partner, McGuireWoods LLP and Jeff Capwell, Partner, McGuireWoods LLP and Taylor French, Associate, McGuireWoods LLP

McElligott
James P. McElligott, Jr.

James P. McElligott, Jr. is partner in the Richmond office of McGuireWoods LLP. He advises and defends corporations, public agencies, benefit plans and fiduciaries concerning employee benefits, labor relations, executive compensation, ERISA litigation, class actions, ERISA fiduciary litigation, withdrawal liability, bankruptcy and benefits, PBGC matters, COBRA, HIPAA and HITECH issues. Mr. McElligott has an active trial and arbitration practice, is a Fellow of the College of Labor and Employment Attorneys, is listed in Who's Who in American Law, Best Lawyers in America, Chambers USA Guide to Leading Lawyers, and Virginia Super Lawyers , serves as a member of the US Chamber of Commerce Employee Benefits Committee. Mr. McElligott is a graduate of Harvard Law School, cum laude, where he served as Note Editor, Harvard Journal on Legislation.

jeffcapwell
Jeff Capwell

Jeff Capwell is a partner in the Charlotte, N.C. office of McGuireWoods LLP and leader of the firm's Employee Benefits practice group. Jeff has over 20 years of experience helping employers design and administer a wide range of employee benefit and executive compensation programs, including all forms of health benefit plans. He works with employers in a number of different of industries and of varying sizes.
Jeff regularly represents employers in audits and examinations by the IRS, the U.S. Department of Labor, and other government agencies. He advises clients on ERISA fiduciary requirements, prohibited transaction restrictions and other aspects of benefit plan administration, including retention and monitoring of plan service providers. He also counsels clients on plan integration and disposition following mergers and acquisitions.
Jeff is President of the Southern Employee Benefits Conference and a member of the Employee Benefits Committee of the American Bar Association Section of Taxation. He is a graduate of Dartmouth College and Syracuse University College of Law, where he served as Editor-in-Chief of the Syracuse Law Review.

taylorfrench
Taylor French

Taylor French is an associate in the Charlotte, N.C. office of McGuireWoods LLP. Taylor’s employee benefits practice covers a wide-range of traditional executive compensation and employee benefits matters, along with a variety of inter-disciplinary practice areas and industries that are affected by executive compensation and employee benefits laws. Taylor regularly works with clients to design, implement and maintain equity compensation plans, long-term incentive plans, bonus programs and non-qualified deferred compensation arrangements for executives, employees and non-employee directors.

Taylor frequently works with clients to ensure compliance with HIPAA and HITECH and provides counsel concerning issues relating to PPACA and other healthcare reform laws. In addition, he assists many clients in creating WRAP plan documents and in the design, implementation and operation of employee wellness programs.

Taylor is a graduate of Vanderbilt University Law School, and received his AB in Government and History from Dartmouth College.