Investing in Venture Capital Funds

[Guest AJ Milano]

I am inquiring if a Qulaified Plan is allowed to invest in a Limited Partnership and / or a Venture Capital Fund. If allowed, I would appreciate if you can tell me the section of the code where I can find this information. Also, if there is any liability the plan should be concerned about. Any help is greatly appreciated. Sincerely, A Milano

[Kirk Maldonado]

I seem to recall that there was an article on that topic about 10 years ago. If my memory is right, it was published by CCH in connection with their Pension Plan Guide. However, it has been so long, that I'm not certain of that.

[QDROphile]

No specific proscriptions. Depending on the investment, you may have special concerns under the plan asset rules under section 3 of ERISA and prohibited transaction rules. Get advice about unrelated business income tax.

[Guest hank]

AJ -

You should definitely take a close look at the plan asset regulations and the specific rules in those regs pertaining to venture capital operating companies (VCOCs). The regs are found at 29 CFR 2510.3-101. There is also a DOL Advisory Opinion (89-04A)which goes into more detail about the concept of management rights. BEFORE making the investment, your qualified plan investment fiduciary should obtain a written opinion of counsel for any venture capital investment to the effect that the entity meets the definition of VCOC in the DOL reg.