ERISA Plan-Assets 25% Test for SPVs

Under the DOL plan-asset regulation, benefit-plan-investor equity of 25 percent or more of any class is “significant” participation (29 CFR 2510.3-101(f)(1), eCFR fetched 2 Sep 2026). When participation is significant and no other exception applies, a plan’s assets include an undivided interest in the entity’s underlying assets. This post explains that test in plain English.

This is general information, not legal advice, not tax advice, and not a determination that any Allocations vehicle is or is not a plan-asset vehicle. ERISA counsel applies the statute and the regulation to a named SPV or fund. Formation of an SPV does not answer the question.

The look-through rule in one paragraph

Generally, when a plan invests in another entity, the plan’s assets include that investment and do not, solely by reason of the investment, include the entity’s underlying assets. The regulation then carves a look-through for an equity interest that is neither a publicly offered security nor a security issued by a registered investment company. In that case, the plan’s 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 by benefit plan investors is not significant (29 CFR 2510.3-101(a)(2), eCFR fetched 2 Sep 2026).

If look-through applies, the regulation says that any person who exercises authority or control respecting the management or disposition of those underlying assets, and any person who provides investment advice with respect to those assets for a fee, is a fiduciary of the investing plan. That sentence is why GPs ask about the 25% test before they take a large IRA or pension check. It is not a finding about any specific Allocations SPV.

An “equity interest” is any interest other than an instrument treated as indebtedness under applicable local law with no substantial equity features. A profits interest in a partnership is an equity interest (29 CFR 2510.3-101(b)(1)). A typical SPV membership interest is an equity interest. Counsel still classifies the instrument.

How the 25% math actually runs

Equity participation 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 is held by benefit plan investors (29 CFR 2510.3-101(f)(1)).

Two mechanics change the result:

1. Any class, not the vehicle as a whole. A small preferred class that is mostly held by benefit plan investors can trip the test even if the common class is not.

2. Disregarded interests. The value of equity 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 who provides investment advice for a fee with respect to those assets, or any affiliate of such a person, is disregarded (same paragraph). GP, manager, and affiliate commitments often drop out of the denominator. That can make a given BPI check look larger as a percentage.

The regulation’s example (j)(4) walks the arithmetic. Benefit plan investors hold interests worth $1,000. Aggregate outstanding limited partnership interests are $10,000. An affiliate of the general partner holds $6,500. After disregarding the affiliate, the BPI percentage is $1,000 / $3,500, or about 28.6%, which the example treats as significant (29 CFR 2510.3-101(j)(4), eCFR fetched 2 Sep 2026). Do not copy those dollars onto a live SPV. Copy the method, then have counsel run the live cap table.

ERISA section 3(42) states the same 25% threshold in the statute and adds that an entity is considered to hold plan assets only to the extent of the percentage of the equity interest held by benefit plan investors (ERISA § 3(42), 29 U.S.C. § 1002(42), as added by the Pension Protection Act of 2006, Pub. L. 109-280, § 611(f)). Counsel reads the statute together with the regulation.

Who is a “benefit plan investor”

The regulation’s paragraph (f)(2) still lists: any employee benefit plan as defined in ERISA section 3(3), whether or not subject to Title I; any plan described in Internal Revenue Code section 4975(e)(1); and any entity whose underlying assets include plan assets by reason of a plan’s investment in the entity (29 CFR 2510.3-101(f)(2), eCFR fetched 2 Sep 2026).

The statute is narrower. For purposes of ERISA § 3(42), “benefit plan investor” means (i) an employee benefit plan subject to part 4 of ERISA Title I, (ii) any plan to which Code section 4975 applies, and (iii) any entity whose underlying assets include plan assets by reason of a plan’s investment in that entity. Counsel treats the statute as controlling on who counts. That is why governmental plans and many foreign plans are often taken out of the BPI column — and why IRAs, which are Code 4975 plans, stay in.

This article does not classify governmental, church, or foreign plans for a live deal. Those classifications are counsel’s.

When you re-run the test

The test is run “immediately after the most recent acquisition of any equity interest.” DOL Advisory Opinion 89-05A reads “acquisition” broadly. The Department said determinations should not occur less frequently than after each new investment, and referred to that testing as continual. The same opinion treats a redemption of a partner’s equity as an acquisition that retriggers the test, because remaining partners’ percentages increase (DOL Advisory Opinion 89-05A, 5 Apr 1989, fetched 2 Sep 2026).

Transfers, additional closes, and withdrawals can move a vehicle across the line without a new BPI writing a larger check. Subscription documents that require investors to state whether they are benefit plan investors, and operating-agreement transfer restrictions that block a transfer that would cause significant BPI participation, are how counsel operationalizes the test. They are not a finding that the vehicle is below 25%.

A fund with rolling closes re-tests more often than a single-close SPV. That is an ops fact, not a plan-asset conclusion. For the securities-law investor-limit overlay that sits next to ERISA, see 3(c)(1) vs 3(c)(7) fund investor limits.

Operating-company and VCOC exceptions exist. This post does not apply them.

Look-through does not apply if the entity is an operating company, including a venture capital operating company (VCOC) or a real estate operating company (REOC) as defined in 29 CFR 2510.3-101(c)–(e). A VCOC, in summary, must have at least 50 percent of its assets (other than short-term investments pending long-term commitment or distribution), valued at cost, in venture capital investments or derivative investments, and must actually exercise management rights with respect to one or more operating companies in the ordinary course (29 CFR 2510.3-101(d)(1)).

DOL Advisory Opinion 89-15A states that an entity is not a VCOC for the period before its first venture capital investment, so initial cash sitting in short-term investments can be plan assets unless another exception applies (DOL Advisory Opinion 89-15A, 3 Aug 1989, fetched 2 Sep 2026).

None of that is a determination that a deal-by-deal SPV, a multi-asset fund, or any Allocations product is or is not a VCOC. Management rights, valuation dates, and actual exercise are fact questions for counsel and, where needed, for the LP’s ERISA counsel.

What GPs actually do with the test

GPs who accept IRAs and Title I plans typically:

• Collect BPI representations in the subscription.

• Run the 25% math after each close, transfer, and withdrawal, with GP/affiliate interests disregarded.

• Put transfer blockers and, where counsel wants them, hard caps in the operating agreement.

• Decide, with counsel, whether they will stay under the threshold, pursue a VCOC analysis, or operate as a plan-asset vehicle with the fiduciary and prohibited-transaction overlay that look-through implies.

Allocations Standard SPV, Premium SPV, and Fund products are formation and administration products with published fees on Allocations fees (fetched 2 Sep 2026). Those fees do not include an ERISA determination. They do not make a vehicle a plan-asset vehicle or a non-plan-asset vehicle.

K-1 mechanics after close are a tax file, not an ERISA file. See SPV K-1s and taxes.

FAQ

Does a 24.9% BPI cap automatically mean the SPV is not a plan-asset vehicle?
No. Counsel still classifies who is a BPI, which class is tested, which interests are disregarded, and whether another look-through rule applies. This post does not determine status for any vehicle.

Do IRAs count toward the 25% test?
IRAs are plans to which Code section 4975 applies. ERISA § 3(42) includes those plans in the definition of benefit plan investor. How a given IRA LLC is counted is a counsel question.

If the GP owns 20% of the SPV, does that 20% shrink the BPI percentage?
Often the opposite. Interests of a person with discretionary authority or control (and affiliates), other than a BPI, are disregarded in the 25% math, which can increase the BPI percentage. Run the regulation’s example method on the live cap table.

Does Allocations determine plan-asset status?
No. Allocations forms and administers vehicles. Plan-asset status is a legal determination for the issuer and its ERISA counsel.

Is this investment advice?
No. Nothing here is investment advice, a valuation, or a recommendation to accept or reject a plan or IRA subscriber.