Due to the application of ERISA, pension funds have historically had limited access to commercial mortgaged backed securities ("CMBS"). The Bond Market Association is sponsoring an effort to obtain Department of Labor relief that would expand the categories of CMBS that may be sold to plans subject to ERISA.
Currently, only the most senior class of any CMBS offering is generally eligible for purchase by employee benefit plans subject to ERISA. This is because under many CBMS structures, when investment by pension funds in any class of CMBS is significant (generally, 25% or more of that class), ERISA "looks through" to the assets of the vehicle. Thus, ERISA treats such assets as assets of the pension fund investors for the purpose of the application of ERISA’s fiduciary requirements. As a result of the application of ERISA to the assets of the issuer, many transactions commonly part of the structure and operation of a CMBS vehicle may violate ERISA. In addition, the investment in
