The 25 percent threshold is calculated each time there is a change in ownership of equity interest of the fund. An ERISA fund manager must acknowledge its fiduciary responsibility under ERISA rules and need to be in compliance with ERISA requirements at all times.
Of significance, the typical indemnity clause in a partnership agreement for gross negligence of the investment manager is not permitted under ERISA. Fund documents need to be reviewed for compliance with ERISA laws.For example, the interests of the plan should not exceed ten percent of the block trade. There are certain limitations with respect to block trades and cross trades.Fund managers and plan trustees are thus liable for each other’s actions. The fund manager becomes an ERISA fund manager creating co–fiduciary liability.
There are others, but we’ve chosen to highlight these key items: Once the 25 percent threshold is met, the fund is subject to the following significant requirements and obligations. Moreover, the “prohibited transaction” rules of Section 4975 of the IRC raise additional issues for fund managers who manage ERISA assets. Under ERISA, each fund is subject to additional requirements and obligations once more than 25 percent of the fund’s assets under management (AUM) are subject to ERISA (the 25 percent threshold).
#LOOKTHROUGH ISSUES ERISA CODE#
However, the Employee Retirement Income and Security Act of 1974, as amended (ERISA), the Internal Revenue Code of 1986 (IRC) and the Pension Protection Act of 2006 (PPA) create special issues for fund managers who manage ERISA plan assets. At the same time, fund managers are eager to manage retirement fund assets since:ġ) there are a vast amount of assets being held in pension plans (USD11 trillion dollars of plan money as of 30 September, 20111) and Ģ) there is typically a long investment horizon for such assets.
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