A recent judicial decision from the U.S. Court of Appeals for the Second Circuit, decided yesterday, March 26, 2026, shows the importance of the “plan assets” analysis under the Employee Retirement Income Security Act of 1974 (“ERISA”). If an employee benefit plan’s acquisition of an equity interest (as determined for these purposes) in an entity causes the entity’s assets to be “plan assets,” then those with discretionary authority or control over the entity or who provide investment advice to the entity may be fiduciaries, with responsibilities and potential liability under ERISA.
Powell v. Ocwen Financial Corporation, a case emanating from the sub-prime crisis circa 2010, is on detailed facts in the context of what are known as securitization transactions (and, more specifically, securitization transactions under the so-called “underwriter exemptions”), so the case might not have direct applicability for the general market. Nonetheless, Ocwen (which, for people who care about such things, is Newco spelled backwards) presents a cautionary tale for those who wonder whether the courts will ever be ready, as a practical matter, to delve into the intricacies of the Department of Labor regulation that defines when an entity’s assets are considered plan assets (the “Regulation”).
The court embarked on a learned exploration of the application of the Regulation to distinctions between debt and equity that even addressed the nuances surrounding notes as compared with trust certificates. And the court also addressed, even if preliminarily, not only the plan-assets question but also the question of whether, in the face of plan assets, a service provider might have fiduciary authority. The case now goes back to the district court for further exploration.
A possible object lesson here is that the fundamental plan-assets analysis, however arcane, may really matter. When one considers the risks surrounding unresolved or otherwise close questions, there may be an understandable tendency to wonder whether there have been actual circumstances in which a technical ERISA analysis has had genuine practical implications. While sometimes the answer may appear to be “no,” perhaps the better response may now be “not yet.”
We at The Wagner Law Group stand ready to advise on plan-assets inquiries or any other matters arising under the fiduciary provisions of ERISA.
