Background - Private-equity and similar funds sometimes invest in portfolio companies that may have significant liabilities under the Employee Retirement Income Security Act of 1974 ("ERISA") and the employee-benefits provisions of the Internal Revenue Code of 1986 (the "Code"). For example, a company may have a substantially underfunded defined benefit pension plan, or significant potential withdrawal liability under a multiemployer pension plan.

A lurking question that has persisted is whether, if a fund's ownership interest exceeds certain percentage thresholds, the fund and its portfolio companies are aggregated as a single employer for certain liability and other purposes under ERISA and the Code. ERISA and the Code provide in general terms that the 80%-or-more affiliated group of a corporation or "trade or business," commonly referred to as a "controlled group," may effectively be aggregated and viewed as a single employer.