Recommended Alerts

Sign Up For Alerts

Pooled Employer Plans (“PEPs”): Putting a little PEP in a 401k retirement plan could help to protect your Portfolio Companies

Set against the backdrop of the continuing wave of ERISA litigation that is being brought against employers who sponsor retirement plans, Pooled Employer Plans (“PEPs”) are emerging in the US retirement plan marketplace as an alternative that may limit employers’ risk of retirement plan-related litigation. There have been over 220 ERISA class action suits filed in connection with retirement plans since 2018, and the top ten ERISA settlements for 2021 alone totaled $840 million in the aggregate. Since ERISA litigation is a serious and relevant concern, many plan sponsors, including private equity sponsors and their portfolio companies, would benefit from evaluating whether a PEP is a viable retirement plan solution for them.

Read More

Treasury Issues Additional Guidance Regarding Paycheck Protection Program Eligibility

Practices: Private Equity

Printer-Friendly Version

Coronavirus Landing Site

The Department of Treasury and Small Business Administration have issued additional guidance related to the Paycheck Protection Program (PPP) following recent publicity regarding certain recipients. Their focus has been on the certification contained in the application that the proceeds of a PPP loan are necessary to support the ongoing operations of an applicant.

On April 23, 2020, the Treasury Department’s updated FAQ stated that borrowers, in making the certification that current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant, must take into account current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. By its terms, the guidance applies to all borrowers, however public company applicants were specifically called out, stating that “it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”

Updated guidance issued by the SBA on April 24, 2020, categorically excludes all hedge funds and private equity firms from participating in the PPP (while not specifically referenced in the new rule, other traditional asset managers should carefully consider whether the rationale contained in the answer would also exclude them from eligibility). Consistent with prior guidance, the SBA reiterated that portfolio companies of private equity firms are required to apply the SBA’s affiliation tests in determining eligibility for PPP loans, except in the case of SBA-approved franchises, businesses in the accommodation and food services industries, and businesses that have received financial assistance from SBIC funds. Importantly, in the newly issued rules, the SBA specifically cautions portfolio companies to carefully review the certification that current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.

Borrowers who have already received a PPP loan based on a “misunderstanding or misapplication” of requirements relating to the certification that the loan was necessary may repay the full amount of the loan by May 7, 2020 and be considered to have made the required certification in good faith. A Treasury spokesperson has indicated that funds returned by May 7 will be recycled and used to make additional PPP loans.

Printer-Friendly Version

Cookie Settings