Beyond 506: the other exemptions and the ERISA wall

Rule 506 is the highway because it is the cleanest ride: unlimited money, federal preemption of state merit review, and a well-worn path. But it cannot do everything. It cannot reach a non-accredited crowd, it is not the tool for offshore money, and it does nothing about a quieter danger that can convert a sponsor into a retirement-plan fiduciary. The exits below each solve a specific problem 506 cannot, and one of them is a wall a real estate sponsor can hit without seeing it.

The alternative exemptions

Regulation A+, the “mini-IPO,” lets an issuer raise up to $75 million in twelve months under Tier 2 (up to $20 million under Tier 1), from accredited and non-accredited investors alike, without a full IPO registration. The trade is real disclosure: SEC qualification of a Form 1-A, audited financials, and ongoing reporting. Tier 2 preempts state blue sky and is the overwhelming share of Reg A activity; Tier 1 does not and draws coordinated state review. Verified August 2026. Use it when you genuinely want non-accredited retail at scale and can carry the disclosure cost.

Regulation Crowdfunding caps a raise at $5 million in twelve months, conducted exclusively through a registered funding portal or broker-dealer, entirely online, with per-investor limits for non-accredited investors. Verified August 2026. There are pending petitions asking the SEC to raise that cap, one to $20 million with inflation indexing, but they are not adopted; confirm the current figure before relying on it. Use it for a small, community-scale raise from a crowd.

Rule 504 of Regulation D allows up to $10 million in twelve months with no federal accredited-investor requirement, but it is the one Reg D rule that does not preempt state law, so it means full state-by-state registration and generally no general solicitation. Verified August 2026. It is rarely the right tool for a multi-state syndication.

The intrastate exemptions, Rules 147 and 147A, cover single-state offerings by an issuer doing business in that state, selling to that state’s residents. They are narrow, and 147A relaxes a few of 147’s conditions. Regulation S is the offshore safe harbor: sales to non-U.S. persons in transactions outside the United States can avoid Securities Act registration, subject to limits on directed selling efforts into the U.S. Confirm the conditions of all of these at draft.

The ERISA wall

This is the edge a real estate sponsor is most likely to hit by accident, and it is worth the most attention.

Take enough retirement money into the wrong structure and the law makes you a fiduciary to those retirement plans, whether you meant to be or not.

If benefit plan investors, meaning ERISA plans and IRAs, hold 25 percent or more of any class of equity in your fund, the fund’s underlying assets can be deemed “plan assets.” When that happens, the manager becomes an ERISA fiduciary, subject to the prohibited-transaction rules and a standard of conduct written for pension managers, not deal sponsors. A syndication that leans heavily on self-directed IRA and pension money can cross that 25 percent line without anyone flagging it.

Real estate has a specific escape, which is the structuring consequence worth knowing. The plan-asset rule has exceptions for a Real Estate Operating Company and a Venture Capital Operating Company, and a vehicle genuinely engaged in operating real estate can qualify as a REOC and avoid plan-asset treatment even above the 25 percent line. Confirm the 25 percent significant-participation test and the REOC and VCOC conditions against the Department of Labor plan-assets regulation at draft. The point for structuring is that a real estate sponsor taking significant retirement money has two clean options, keep benefit plan investors under 25 percent of each equity class, or structure to fit the REOC exception, and one dangerous one, which is to ignore the line and become a fiduciary by accident.

The structuring consequence

Reach for 506 by default, because it is the cleanest and it preempts the states. Reach for the edges deliberately, each for the specific constraint it solves: Reg A+ or Reg CF for non-accredited reach, Regulation S for genuine offshore capital, 504 and intrastate rarely. And whatever exemption you use, if you are taking real amounts of IRA and pension money into a real estate deal, watch the ERISA 25 percent line or fit an exception, because that wall does not announce itself.