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Sun Capital Prevails in Long-Running ERISA Liability Dispute, But Pension Risks Remain for Private Equity Funds

Eleven years after its portfolio company’s bankruptcy triggered a multiemployer pension plan’s demand that funds sponsored by private equity firm Sun Capital Advisors, Inc. pay the portfolio company’s $4.5 million ERISA withdrawal liability, Sun Capital has won a long-sought victory. On November 22, 2019, a three-judge panel of the First Circuit held that two Sun Capital funds were not required to pay for the withdrawal liability of Scott Brass Inc. While the decision represents a meaningful victory for Sun Capital, individually, it is unlikely to end attempts by the Pension Benefit Guaranty Corporation and multiemployer plans (many of which remain severely underfunded) to seek payment from private equity funds for unpaid pension liabilities of their portfolio companies. Private equity sponsors should continue to focus on potential joint and several liability concerns when structuring investments in companies that participate in defined benefit pension plans.

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SEC Adopts Final Rules on Compensation Committee Listing Standards and Consultant Conflicts of Interest

Practices: Executive Compensation & Employee Benefits

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