IRA-Only Hedge Fund Investments....Plan Assets?

[Christine Roberts]

Hedge fund has concentration of benefit plan investors (BPIs) nearing 25% threshold under ERISA 3(42) and 29 CFR 2510.3-101(f). However none of the BPIs are qualified retirement plans, only IRAs.

Were the level of IRA investment to reach 25% would the hedge fund manager be subject to full ERISA Title I duties when none of the underlying investors are ERISA-covered plans?

[jpod]

No. But, as soon as an ERISA Title I plan invests $1.00 in the Fund it will become subject to Title I.

[Christine Roberts]

Thank you. I agree completely with the $1 dollar point.

[Guest Rajeev]

I respectfully disagree with jpod, as 29 CFR 2510.3-101(f)(2)(ii) clearly covers IRA's, and hence the hedge funds are now BPI's for the IRA's, and the hedge fund manager is now subject to ERISA... this is one of the few cases where IRA's cross the line and come under the ERISA regulations...

[jpod]

Don't agree. The assets of the fund would be plan assets for purposes of the IRC, i.e., Section 4975, but not for purposes of ERISA Title I. Please show us something in the Reg., or the preamble to the Reg. or the proposed version of the Reg., that says otherwise.