DOL Weighs In on Single-Property Transaction by Pension

November 6, 2012 ( – The Department of Labor (DOL) stated its position regarding whether a purchase or sale of a single property by a pension trust violates ERISA.

The agency was asked whether certain transactions involving parcels of  employer real property that are contributed to, or sold by, the Master Pension Trust for Certain Defined Benefit Plans of Anheuser-Busch Companies Inc. and its subsidiaries would violate the prohibited transaction provisions of section 406 of the Employee Retirement Income Security Act (ERISA).   

ERISA section 406(a)(1)(A) provides, in relevant part, that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect sale or exchange, or leasing of any property between the plan and a party in interest. However, section 408(e) of ERISA provides an exception to this prohibited transaction based on certain conditions stated in section 407, including whether a substantial number of properties are dispersed geographically.  

In its advisory opinion, the DOL said the purpose of requiring that a substantial number of the parcels of employer real property held by a plan be dispersed geographically is to prevent adverse economic conditions peculiar to one area from significantly affecting the economic status of the plan as a whole.   

“It is the view of the Department that whether any one parcel of employer real property defined under section 407(d)(2) of ERISA satisfies the requirements of section 407(d)(4)(A) of ERISA is determined by considering the plan’s holdings in employer real property immediately after the transaction involving the parcel. Otherwise, a plan could never acquire or sell any single parcel of employer real property even if the other QERP [qualifying employer real property] requirements of section 407 of ERISA, besides section 407(d)(4)(A), would be met for the plan’s holdings after the acquisition or sale,” the agency stated.  

Advisory Opinion 2012-05A is here.