Hong Kong: Relaxation of ERISA "Plan Assets" Test 

September, 2006 -

The recently introduced Pension Protection Act 2006 makes two important changes to the definition of the term "plan assets" for the purposes of ERISA. The new legislation continues to provide that the assets of a fund or other entity will not constitute "plan assets" and will therefore not be subject to the fiduciary obligations under ERISA if less than 25% of the value of each class of equity in the entity is held by "benefit plan investors". The Changes • the term "benefit plan investor" now excludes government plans, foreign plans and other plans that are not subject to the fiduciary provisions of ERISA or of the Internal Revenue Code; and • an entity in which a benefit plan investor invests will only be considered to hold plan assets to the extent that benefit plan investors have invested in that entity. Accordingly, if 30% of a particular class of equity issued by an entity is held by benefit plan investors then only 30% of the entity's assets will be considered benefit plan assets and not 100% as has previously been the case.



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