On July 24, 2013, the U.S. Court of Appeals for the First Circuit ruled in Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund (No. 12-2312, 2013 WL 3814984) that a private equity investment fund was engaged in a “trade or business” under ERISA, and, therefore, could be part of a “controlled group” with one of its portfolio companies and potentially liable for its underfunded pension liabilities.  This is the first appellate decision to address this question.  If an entity (such as a private equity investment fund) is determined to be engaged in a trade or business and meets certain ownership thresholds, it could be a member of another entity’s (such as a portfolio company’s) “controlled group.”  Members of “controlled groups” are jointly and severally liable for certain liabilities of defined benefit pension plans maintained or contributed to by their members, including single employer plan termination liability and multiemployer plan withdrawal liability.  In addition, being a member of a “controlled group” may create other administrative issues, such as nondiscrimination testing on a controlled group basis for tax-qualified retirement plans and certain welfare plans.  Controlled group members also have to consider the implications of being in a controlled group for purposes of COBRA, health care reform, and Section 409A of the Internal Revenue Code, among other legal requirements.  Pending future guidance from the government agencies (in particular, the IRS), the broader implications of this decision for employers and their employee benefit plans remains uncertain.  For additional information about this case and its impact, please see our client alert at http://www.proskauer.com/publications/client-alert/investment-funds-potentially-liable-for-portfolio-companys-underfunded-pension-liabilities-under-first-circuit-ruling/.