[Code of Federal Regulations]
[Title 29, Volume 9]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR2510.3-101]
[Page 366-373]
Go to (d) Venture capital operating company.
TITLE 29--LABOR
CHAPTER XXV--EMPLOYEE BENEFITS SECURITY ADMINISTRATION, DEPARTMENT OF
LABOR
PART 2510_DEFINITIONS OF TERMS USED IN SUBCHAPTERS C, D, E, F, AND G OF
THIS CHAPTER--Table of Contents
Sec. 2510.3-101 Definition of ``plan assets''--plan investments.
(a) In general. (1) This section describes what constitute assets of
a plan with respect to a plan's investment in another entity for
purposes of subtitle A, and parts 1 and 4 of subtitle B, of title I of
the Act and section 4975 of the Internal Revenue Code. Paragraph (a)(2)
of this section contains a general rule relating to plan investments.
Paragraphs (b) through (f) of this section define certain terms that are
used in the application of the general rule. Paragraph (g) of this
section describes how the rules in this section are to be applied when a
plan owns property jointly with others or where it acquires an equity
interest whose value relates solely to identified assets of an issuer.
Paragraph (h) of this section contains special rules relating to
particular kinds of plan investments. Paragraph (i) describes the assets
that a plan acquires when it purchases certain guaranteed mortgage
certificates. Paragraph (j) of this section contains examples
illustrating the operation of this section. The effective date of this
section is set forth in paragraph (k) of this section.
(2) Generally, when a plan invests in another entity, the plan's
assets include its investment, but do not, solely by reason of such
investment, include any of the underlying assets of the entity. However,
in the case of a plan's investment in an equity interest of an entity
that is neither a publicly-offered security nor a security issued by an
investment company registered under the Investment Company Act of 1940
its assets include both the equity interest and an undivided interest in
each of the underlying assets of the entity, unless it is established
that--
(i) The entity is an operating company, or
(ii) Equity participation in the entity by benefit plan investors is
not significant.
Therefore, any person who exercises authority or control respecting the
management or disposition of such underlying assets, and any person who
provides investment advice with respect to such assets for a fee (direct
or indirect), is a fiduciary of the investing plan.
(b) Equity interests and publicly-offered securities. (1) The term
equity interest means any interest in an entity other than an instrument
that is treated as
[[Page 367]]
indebtedness under applicable local law and which has no substantial
equity features. A profits interest in a partnership, an undivided
ownership interest in property and a beneficial interest in a trust are
equity interests.
(2) A publicly-offered security is a security that is freely
transferable, part of a class of securities that is widely held and
either--
(i) Part of a class of securities registered under section 12(b) or
12(g) of the Securities Exchange Act of 1934, or
(ii) Sold to the plan as part of an offering of securities to the
public pursuant to an effective registration statement under the
Securities Act of 1933 and the class of securities of which such
security is a part is registered under the Securities Exchange Act of
1934 within 120 days (or such later time as may be allowed by the
Securities and Exchange Commission) after the end of the fiscal year of
the issuer during which the offering of such securities to the public
occurred.
(3) For purposes of paragraph (b)(2) of this section, a class of
securities is ``widely-held'' only if it is a class of securities that
is owned by 100 or more investors independent of the issuer and of one
another. A class of securities will not fail to be widely-held solely
because subsequent to the initial offering the number of independent
investors falls below 100 as a result of events beyond the control of
the issuer.
(4) For purposes of paragraph (b)(2) of this section, whether a
security is ``freely transferable'' is a factual question to be
determined on the basis of all relevant facts and circumstances. If a
security is part of an offering in which the minimum investment is
$10,000 or less, however, the following factors ordinarily will not,
alone or in combination, affect a finding that such securities are
freely transferable:
(i) Any requirement that not less than a minimum number of shares or
units of such security be transferred or assigned by any investor,
provided that such requirement does not prevent transfer of all of the
then remaining shares or units held by an investor;
(ii) Any prohibition against transfer or assignment of such security
or rights in respect thereof to an ineligible or unsuitable investor;
(iii) Any restriction on, or prohibition against, any transfer or
assignment which would either result in a termination or
reclassification of the entity for Federal or state tax purposes or
which would violate any state or Federal statute, regulation, court
order, judicial decree, or rule of law;
(iv) Any requirement that reasonable transfer or administrative fees
be paid in connection with a transfer or assignment;
(v) Any requirement that advance notice of a transfer or assignment
be given to the entity and any requirement regarding execution of
documentation evidencing such transfer or assignment (including
documentation setting forth representations from either or both of the
transferor or transferee as to compliance with any restriction or
requirement described in this paragraph (b)(4) of this section or
requiring compliance with the entity's governing instruments);
(vi) Any restriction on substitution of an assignee as a limited
partner of a partnership, including a general partner consent
requirement, provided that the economic benefits of ownership of the
assignor may be transferred or assigned without regard to such
restriction or consent (other than compliance with any other restriction
described in this paragraph (b)(4)) of this section;
(vii) Any administrative procedure which establishes an effective
date, or an event, such as the completion of the offering, prior to
which a transfer or assignment will not be effective; and
(viii) Any limitation or restriction on transfer or assignment which
is not created or imposed by the issuer or any person acting for or on
behalf of such issuer.
(c) Operating company. (1) An ``operating company'' is an entity
that is primarily engaged, directly or through a majority owned
subsidiary or subsidiaries, in the production or sale of a product or
service other than the investment of capital. The term ``operating
company'' includes an entity which is not described in the preceding
sentence, but which is a ``venture capital operating company'' described
in paragraph (d) or a ``real estate operating company'' described in
paragraph (e).
[[Page 368]]
(2) [Reserved]
(d) Venture capital operating company. (1) An entity is a ``venture
capital operating company'' for the period beginning on an initial
valuation date described in paragraph (d)(5)(i) and ending on the last
day of the first ``annual valuation period'' described in paragraph
(d)(5)(ii) (in the case of an entity that is not a venture capital
operating company immediately before the determination) or for the 12
month period following the expiration of an ``annual valuation period''
described in paragraph (d)(5)(ii) (in the case of an entity that is a
venture capital operating company immediately before the determination)
if--
(i) On such initial valuation date, or at any time within such
annual valuation period, at least 50 percent of its assets (other than
short-term investments pending long-term commitment or distribution to
investors), valued at cost, are invested in venture capital investments
described in paragraph (d)(3)(i) or derivative investments described in
paragraph (d)(4); and
(ii) During such 12 month period (or during the period beginning on
the initial valuation date and ending on the last day of the first
annual valuation period), the entity, in the ordinary course of its
business, actually exercises management rights of the kind described in
paragraph (d)(3)(ii) with respect to one or more of the operating
companies in which it invests.
(2)(i) A venture capital operating company described in paragraph
(d)(1) shall continue to be treated as a venture capital operating
company during the ``distribution period'' described in paragraph
(d)(2)(ii). An entity shall not be treated as a venture capital
operating company at any time after the end of the distribution period.
(ii) The ``distribution period'' referred to in paragraph (d)(2)(i)
begins on a date established by a venture capital operating company that
occurs after the first date on which the venture capital operating
company has distributed to investors the proceeds of at least 50 percent
of the highest amount of its investments (other than short-term
investments made pending long-term commitment or distribution to
investors) outstanding at any time from the date it commenced business
(determined on the basis of the cost of such investments) and ends on
the earlier of--
(A) The date on which the company makes a ``new portfolio
investment'', or
(B) The expiration of 10 years from the beginning of the
distribution period.
(iii) For purposes of paragraph (d)(2)(ii)(A), a ``new portfolio
investment'' is an investment other than--
(A) An investment in an entity in which the venture capital
operating company had an outstanding venture capital investment at the
beginning of the distribution period which has continued to be
outstanding at all times during the distribution period, or
(B) A short-term investment pending long-term commitment or
distribution to investors.
(3)(i) For purposes of this paragraph (d) a ``venture capital
investment'' is an investment in an operating company (other than a
venture capital operating company) as to which the investor has or
obtains management rights.
(ii) The term ``management rights'' means contractual rights
directly between the investor and an operating company to substantially
participate in, or substantially influence the conduct of, the
management of the operating company.
(4)(i) An investment is a ``derivative investment'' for purposes of
this paragraph (d) if it is--
(A) A venture capital investment as to which the investor's
management rights have ceased in connection with a public offering of
securities of the operating company to which the investment relates, or
(B) An investment that is acquired by a venture capital operating
company in the ordinary course of its business in exchange for an
existing venture capital investment in connection with:
(1) A public offering of securities of the operating company to
which the existing venture capital investment relates, or
(2) A merger or reorganization of the operating company to which the
existing venture capital investment relates,
[[Page 369]]
provided that such merger or reorganization is made for independent
business reasons unrelated to extinguishing management rights.
(ii) An investment ceases to be a derivative investment on the later
of:
(A) 10 years from the date of the acquisition of the original
venture capital investment to which the derivative investment relates,
or
(B) 30 months from the date on which the investment becomes a
derivative investment.
(5) For purposes of this paragraph (d) and paragraph (e)--
(i) An ``initial valuation date'' is the later of--
(A) Any date designated by the company within the 12 month period
ending with the effective date of this section, or
(B) The first date on which an entity makes an investment that is
not a short-term investment of funds pending long-term commitment.
(ii) An ``annual valuation period'' is a preestablished annual
period, not exceeding 90 days in duration, which begins no later than
the anniversary of an entity's initial valuation date. An annual
valuation period, once established may not be changed except for good
cause unrelated to a determination under this paragraph (d) or paragraph
(e).
(e) Real estate operating company. An entity is a ``real estate
operating company'' for the period beginning on an initial valuation
date described in paragraph (d)(5)(i) and ending on the last day of the
first ``annual valuation period'' described in paragraph (d)(5)(ii) (in
the case of an entity that is not a real estate operating company
immediately before the determination) or for the 12 month period
following the expiration of an annual valuation period described in
paragraph (d)(5)(ii) (in the case of an entity that is a real estate
operating company immediately before the determination) if:
(1) On such initial valuation date, or on any date within such
annual valuation period, at least 50 percent of its assets, valued at
cost (other than short-term investments pending long-term commitment or
distribution to investors), are invested in real estate which is managed
or developed and with respect to which such entity has the right to
substantially participate directly in the management or development
activities; and
(2) During such 12 month period (or during the period beginning on
the initial valuation date and ending on the last day of the first
annual valuation period) such entity in the ordinary course of its
business is engaged directly in real estate management or development
activities.
(f) Participation by benefit plan investors. (1) Equity
participation in an entity by benefit plan investors is ``significant''
on any date if, immediately after the most recent acquisition of any
equity interest in the entity, 25 percent or more of the value of any
class of equity interests in the entity is held by benefit plan
investors (as defined in paragraph (f)(2)). For purposes of
determinations pursuant to this paragraph (f), the value of any equity
interests held by a person (other than a benefit plan investor) who has
discretionary authority or control with respect to the assets of the
entity or any person who provides investment advice for a fee (direct or
indirect) with respect to such assets, or any affiliate of such a
person, shall be disregarded.
(2) A ``benefit plan investor'' is any of the following--
(i) Any employee benefit plan (as defined in section 3(3) of the
Act), whether or not it is subject to the provisions of title I of the
Act,
(ii) Any plan described in section 4975(e)(1) of the Internal
Revenue Code,
(iii) Any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity.
(3) An ``affiliate'' of a person includes any person, directly or
indirectly, through one or more intermediaries, controlling, controlled
by, or under common control with the person. For purposes of this
paragraph (f)(3), ``control'', with respect to a person other than an
individual, means the power to exercise a controlling influence over the
management or policies of such person.
(g) Joint ownership. For purposes of this section, where a plan
jointly owns property with others, or where the value of a plan's equity
interest in an
[[Page 370]]
entity relates solely to identified property of the entity, such
property shall be treated as the sole property of a separate entity.
(h) Specific rules relating to plan investments. Notwithstanding any
other provision of this section--
(1) Except where the entity is an investment company registered
under the Investment Company Act of 1940, when a plan acquires or holds
an interest in any of the following entities its assets include its
investment and an undivided interest in each of the underlying assets of
the entity:
(i) A group trust which is exempt from taxation under section 501(a)
of the Internal Revenue Code pursuant to the principles of Rev. Rul. 81-
100, 1981-1 C.B. 326,
(ii) A common or collective trust fund of a bank,
(iii) A separate account of an insurance company, other than a
separate account that is maintained solely in connection with fixed
contractual obligations of the insurance company under which the amounts
payable, or credited, to the plan and to any participant or beneficiary
of the plan (including an annuitant) are not affected in any manner by
the investment performance of the separate account.
(2) When a plan acquires or holds an interest in any entity (other
than an insurance company licensed to do business in a State) which is
established or maintained for the purpose of offering or providing any
benefit described in section 3(1) or section 3(2) of the Act to
participants or beneficiaries of the investing plan, its assets will
include its investment and an undivided interest in the underlying
assets of that entity.
(3) When a plan or a related group of plans owns all of the
outstanding equity interests (other than director's qualifying shares)
in an entity, its assets include those equity interests and all of the
underlying assets of the entity. This paragraph (h)(3) does not apply,
however, where all of the outstanding equity interests in an entity are
qualifying employer securities described in section 407(d)(5) of the
Act, owned by one or more eligible individual account plan(s) (as
defined in section 407(d)(3) of the Act) maintained by the same
employer, provided that substantially all of the participants in the
plan(s) are, or have been, employed by the issuer of such securities or
by members of a group of affiliated corporations (as determined under
section 407(d)(7) of the Act) of which the issuer is a member.
(4) For purposes of paragraph (h)(3), a ``related group'' of
employee benefit plans consists of every group of two or more employee
benefit plans--
(i) Each of which receives 10 percent or more of its aggregate
contributions from the same employer or from members of the same
controlled group of corporations (as determined under section 1563(a) of
the Internal Revenue Code, without regard to section 1563(a)(4)
thereof); or
(ii) Each of which is either maintained by, or maintained pursuant
to a collective bargaining agreement negotiated by, the same employee
organization or affiliated employee organizations. For purposes of this
paragraph, an ``affiliate'' of an employee organization means any person
controlling, controlled by, or under common control with such
organization, and includes any organization chartered by the same parent
body, or governed by the same constitution and bylaws, or having the
relation of parent and subordinate.
(i) Governmental mortgage pools. (1) Where a plan acquires a
guaranteed governmental mortgage pool certificate, as defined in
paragraph (i)(2), the plan's assets include the certificate and all of
its rights with respect to such certificate under applicable law, but do
not, solely by reason of the plan's holding of such certificate, include
any of the mortgages underlying such certificate.
(2) A ``guaranteed governmental mortgage pool certificate'' is a
certificate backed by, or evidencing an interest in, specified mortgages
or participation interests therein and with respect to which interest
and principal payable pursuant to the certificate is guaranteed by the
United States or an agency or instrumentality thereof. The term
``guaranteed governmental mortgage pool certificate'' includes a
mortgage pool certificate with respect to which interest and principal
payable
[[Page 371]]
pursuant to the certificate is guaranteed by:
(i) The Government National Mortgage Association;
(ii) The Federal Home Loan Mortgage Corporation; or
(iii) The Federal National Mortgage Association.
(j) Examples. The principles of this section are illustrated by the
following examples:
(1) A plan, P, acquires debentures issued by a corporation, T,
pursuant to a private offering. T is engaged primarily in investing and
reinvesting in precious metals on behalf of its shareholders, all of
which are benefit plan investors. By its terms, the debenture is
convertible to common stock of T at P's option. At the time of P's
acquisition of the debentures, the conversion feature is incidental to
T's obligation to pay interest and principal. Although T is not an
operating company, P's assets do not include an interest in the
underlying assets of T because P has not acquired an equity interest in
T. However, if P exercises its option to convert the debentures to
common stock, it will have acquired an equity interest in T at that time
and (assuming that the common stock is not a publicly-offered security
and that there has been no change in the composition of the other equity
investors in T) P's assets would then include an undivided interest in
the underlying assets of T.
(2) A plan, P, acquires a limited partnership interest in a limited
partnership, U, which is established and maintained by A, a general
partner in U. U has only one class of limited partnership interests. U
is engaged in the business of investing and reinvesting in securities.
Limited partnership interests in U are offered privately pursuant to an
exemption from the registration requirements of the Securities Act of
1933. P acquires 15 percent of the value of all the outstanding limited
partnership interests in U, and, at the time of P's investment, a
governmental plan owns 15 percent of the value of those interests. U is
not an operating company because it is engaged primarily in the
investment of capital. In addition, equity participation by benefit plan
investors is significant because immediately after P's investment such
investors hold more than 25 percent of the limited partnership interests
in U. Accordingly, P's assets include an undivided interest in the
underlying assets of U, and A is a fiduciary of P with respect to such
assets by reason of its discretionary authority and control over U's
assets. Although the governmental plan's investment is taken into
account for purposes of determining whether equity participation by
benefit plan investors is significant, nothing in this section imposes
fiduciary obligations on A with respect to that plan.
(3) Assume the same facts as in paragraph (j)(2), except that P
acquires only 5 percent of the value of all the outstanding limited
partnership interests in U, and that benefit plan investors in the
aggregate hold only 10 percent of the value of the limited partnership
interests in U. Under these facts, there is no significant equity
participation by benefit plan investors in U, and, accordingly, P's
assets include its limited partnership interest in U, but do not include
any of the underlying assets of U. Thus, A would not be a fiduciary of P
by reason of P's investment.
(4) Assume the same facts as in paragraph (j)(3) and that the
aggregate value of the outstanding limited partnership interests in U is
$10,000 (and that the value of the interests held by benefit plan
investors is thus $1000). Also assume that an affiliate of A owns
limited partnership interests in U having a value of $6500. The value of
the limited partnership interests held by A's affiliate are disregarded
for purposes of determining whether there is significant equity
participation in U by benefit plan investors. Thus, the percentage of
the aggregate value of the limited partnership interests held by benefit
plan investors in U for purposes of such a determination is
approximately 28.6% ($1000/$3500). Therefore there is significant
benefit plan investment in T.
(5) A plan, P, invests in a limited partnership, V, pursuant to a
private offering. There is significant equity participation by benefit
plan investors in V. V acquires equity positions in the companies in
which it invests, and, in connection with these investments, V
negotiates terms that give it the right to participate in or influence
the management of those companies. Some of these investments are in
publicly-offered securities and some are in securities acquired in
private offerings. During its most recent valuation period, more than 50
percent of V's assets, valued at cost, consisted of investments with
respect to which V obtained management rights of the kind described
above. V's managers routinely consult informally with, and advise, the
management of only one portfolio company with respect to which it has
management rights, although it devotes substantial resources to its
consultations with that company. With respect to the other portfolio
companies, V relies on the managers of other entities to consult with
and advise the companies' management. V is a venture capital operating
company and therefore P has acquired its limited partnership investment,
but has not acquired an interest in any of the underlying assets of V.
Thus, none of the managers of V would be fiduciaries with respect to P
solely by reason of its investment. In this situation, the mere fact
that V does not participate in or influence the management of all its
portfolio companies does not
[[Page 372]]
affect its characterization as a venture capital operating company.
(6) Assume the same facts as in paragraph (j)(5) and the following
additional facts: V invests in debt securities as well as equity
securities of its portfolio companies. In some cases V makes debt
investments in companies in which it also has an equity investment; in
other cases V only invests in debt instruments of the portfolio company.
V's debt investments are acquired pursuant to private offerings and V
negotiates covenants that give it the right to substantially participate
in or to substantially influence the conduct of the management of the
companies issuing the obligations. These covenants give V more
significant rights with respect to the portfolio companies' management
than the covenants ordinarily found in debt instruments of established,
creditworthy companies that are purchased privately by institutional
investors. V routinely consults with and advises the management of its
portfolio companies. The mere fact that V's investments in portfolio
companies are debt, rather than equity, will not cause V to fail to be a
venture capital operating company, provided it actually obtains the
right to substantially participate in or influence the conduct of the
management of its portfolio companies and provided that in the ordinary
course of its business it actually exercises those rights.
(7) A plan, P, invests (pursuant to a private offering) in a limited
partnership, W, that is engaged primarily in investing and reinvesting
assets in equity positions in real property. The properties acquired by
W are subject to long-term leases under which substantially all
management and maintenance activities with respect to the property are
the responsibility of the lessee. W is not engaged in the management or
development of real estate merely because it assumes the risks of
ownership of income-producing real property, and W is not a real estate
operating company. If there is significant equity participation in W by
benefit plan investors, P will be considered to have acquired an
undivided interest in each of the underlying assets of W.
(8) Assume the same facts as in paragraph (j)(7) except that W owns
several shopping centers in which individual stores are leased for
relatively short periods to various merchants (rather than owning
properties subject to long-term leases under which substantially all
management and maintenance activities are the responsibility of the
lessee). W retains independent contractors to manage the shopping center
properties. These independent contractors negotiate individual leases,
maintain the common areas and conduct maintenance activities with
respect to the properties. W has the responsibility to supervise and the
authority to terminate the independent contractors. During its most
recent valuation period more than 50 percent of W's assets, valued at
cost, are invested in such properties. W is a real estate operating
company. The fact that W does not have its own employees who engage in
day-to-day management and development activities is only one factor in
determining whether it is actively managing or developing real estate.
Thus, P's assets include its interest in W, but do not include any of
the underlying assets of W.
(9) A plan, P, acquires a limited partnership interest in X pursuant
to a private offering. There is significant equity participation in X by
benefit plan investors. X is engaged in the business of making
``convertible loans'' which are structured as follows: X lends a
specified percentage of the cost of acquiring real property to a
borrower who provides the remaining capital needed to make the
acquisition. This loan is secured by a mortgage on the property. Under
the terms of the loan, X is entitled to receive a fixed rate of interest
payable out of the initial cash flow from the property and is also
entitled to that portion of any additional cash flow which is equal to
the percentage of the acquisition cost that is financed by its loan.
Simultaneously with the making of the loan, the borrower also gives X an
option to purchase an interest in the property for the original
principal amount of the loan at the expiration of its initial term. X's
percentage interest in the property, if it exercises this option, would
be equal to the percentage of the acquisition cost of the property which
is financed by its loan. The parties to the transaction contemplate that
the option ordinarily will be exercised at the expiration of the loan
term if the property has appreciated in value. X and the borrower also
agree that, if the option is exercised, they will form a limited
partnership to hold the property. X negotiates loan terms which give it
rights to substantially influence, or to substantially participate in,
the management of the property which is acquired with the proceeds of
the loan. These loan terms give X significantly greater rights to
participate in the management of the property than it would obtain under
a conventional mortgage loan. In addition, under the terms of the loan,
X and the borrower ratably share any capital expenditures relating to
the property. During its most recent valuation period, more than 50
percent of the value of X's assets valued at cost consisted of real
estate investments of the kind described above. X, in the ordinary
course of its business, routinely exercises its management rights and
frequently consults with and advises the borrower and the property
manager. Under these facts, X is a real estate operating company. Thus,
P's assets include its interest in X, but do not include any of the
underlying assets of X.
[[Page 373]]
(10) In a private transaction, a plan, P, acquires a 30 percent
participation in a debt instrument that is held by a bank. Since the
value of the participation certificate relates solely to the debt
instrument, that debt instrument is, under paragraph (g), treated as the
sole asset of a separate entity. Equity participation in that entity by
benefit plan investors is significant since the value of the plan's
participation exceeds 25 percent of the value of the instrument. In
addition, the hypothetical entity is not an operating company because it
is primarily engaged in the investment of capital (i.e., holding the
debt instrument). Thus, P's assets include the participation and an
undivided interest in the debt instrument, and the bank is a fiduciary
of P to the extent it has discretionary authority or control over the
debt instrument.
(11) In a private transaction, a plan, P, acquires 30% of the value
of a class of equity securities issued by an operating company, Y. These
securities provide that dividends shall be paid solely out of earnings
attributable to certain tracts of undeveloped land that are held by Y
for investment. Under paragraph (g), the property is treated as the sole
asset of a separate entity. Thus, even though Y is an operating company,
the hypothetical entity whose sole assets are the undeveloped tracts of
land is not an operating company. Accordingly, P is considered to have
acquired an undivided interest in the tracts of land held by Y. Thus, Y
would be a fiduciary of P to the extent it exercises discretionary
authority or control over such property.
(12) A medical benefit plan, P, acquires a beneficial interest in a
trust, Z, that is not an insurance company licensed to do business in a
State. Under this arrangement, Z will provide the benefits to the
participants and beneficiaries of P that are promised under the terms of
the plan. Under paragraph (h)(2), P's assets include its beneficial
interest in Z and an undivided interest in each of its underlying
assets. Thus, persons with discretionary authority or control over the
assets of Z would be fiduciaries of P.
(k) Effective date and transitional rules. (1) In general, this
section is effective for purposes of identifying the assets of a plan on
or after March 13, 1987. Except as a defense, this section shall not
apply to investments in an entity in existence on March 13, 1987, if no
plan subject to title I of the Act or plan described in section
4975(e)(1) of the Code (other than a plan described in section
4975(g)(2) or (3)) acquires an interest in the entity from an issuer or
underwriter at any time on or after March 13, 1987 except pursuant to a
contract binding on the plan in effect on March 13, 1987 with an issuer
or underwriter to acquire an interest in the entity.
(2) Notwithstanding paragraph (k)(1), this section shall not, except
as a defense, apply to a real estate entity described in section
11018(a) of Pub. L. 99-272.
[51 FR 41280, Nov. 13, 1986, as amended at 51 FR 47226, Dec. 31, 1986]