Real estate investments provide long-term opportunities for pension funds. But pension funds are also subject to rules, regulations, and other limitations, the violation of which risks significant penalties for both the fund and its trustees and advisers. This article discusses the most important rules applicable to real estate investments by private pension funds.
Qualified pension plans are regulated by the federal Employee Retirement Income Security Act of 1974, as amended, commonly referred to as ERISA. ERISA is a complex statute enacted by Congress in 1974 to protect the rights of employees who participate in their employers’ private pension plans. ERISA extensively regulates pension plan activities, including plan investments in real estate. A pension fund transaction that violates ERISA can result in the imposition of excise taxes or other penalties, and even in the rescission of the transaction to correct the violation.
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