The ERISA Eligibility of TALF and PPIP Loans and Securities: Do the Government’s Programs and ERISA Mesh?

Abstract

The Term Asset-Backed Securities Loan Facility (TALF) and the Legacy Loan and Legacy Security Public-Private Investment Program (PPIP) were created anticipating investment by employee benefit plans and other retirement arrangements subject to ERISA (Plans), but there was no specific coordination of these programs with, or amendment of, ERISA-related provisions to facilitate this investment. This article describes the ERISA considerations that are relevant to a Plan’s use of a TALF loan to finance its purchase of assetbacked and commercial mortgage-backed securities (ABS/ CMBS), either via a direct purchase of ABS/CMBS or by means of an intervening fund. It then discusses the ability of Plans to become investors in PPIP funds established to purchase CMBS/MBS legacy loans or securities given the additional ERISA complications that are created when a Plan invests in a managed fund. The article concludes that while the economy, the credit markets, and Plans could all benefit from allowing greater Plan investment in PPIP funds, current ERISA provisions hamper such investment. The author suggests that the U.S. Treasury might explore with the U.S. Department of Labor the possibility of granting an administrative exemption that could allow greater Plan participation in PPIP funds than is currently available.