I know that this topic has been dealt with several times, and I thought I understood the rules, but am finding that further clarification might be a good idea.

We are a TPA. One of our defined benefit plans has invested in a LLC (established in the U.S.) which holds real estate investments in Costa Rica. Question is, does the indicia of ownership requirement need to be met just at the LLC level or at the level of the LLC's underlying investments? The plan is not the GP.

We're trying to stay out of giving legal advice here, and just want to know if this is a situation on which they should seek legal advice, or whether it is obviously okay.

Any interpretations welcome.

What is the plan asset? Is it the LLC interest or is it the Costa Rica real estate? It may be tough to answer that question without getting into legal advice.

That is the $64,000 question. At least explicitly, the investment is the interest in the LLC - and I don't think the underlying investments of the LLC pass thru to the plan unless at least 25% of the LLC ownership is by benefit plans. Agree?

That is one of the primary concerns, but other circumstances could play a part even if the 25% ownership mark is exceeded. Also, the LLC could maintain ownership documents (e.g. deeds) in the U.S., but a few questions would go along with those circumstances.

Whether sufficient indicia of ownership is maintained in the US is determined by whether courts in the US have jurisdiction over the asset to be able to protect the participants' interests. Clearly the LLC would be subject to the jurisdiction of US courts. The question, however, is: would Costa Rica recognize a judgment of a US court to affirm or transfer ownership in Costa Rican real estate? That would depend on the treaty between the US and Costa Rica.

Speaking of not wanting to give legal advice - I sure don't want to examine any international treaties.

Thanks for the comments, vebaguru and QDROphile. I think we'll alert the client to the potential issues and let them make sure they are covered legally.