40 Years of Experience

Mergers & Acquisitions


Two Elderly People On A BikeMergers and acquisitions are significant events. These events are quite tricky and must be done properly, as they truly impact employees’ lives. Brucker & Morra has years of experience performing various matters for mergers and acquisitions.

Before executing such transactions, seeking an employee benefits attorney is necessary to remain compliant with ERISA.

Due Diligence Review and Disclosure

These two steps are crucial and are some of the first actions taken during a mergers and acquisitions, or (M&A) review. First, the buyer undertakes due diligence to audit the seller’s financial records, including balance sheets, income statements, contracts, and other information.

The buyer ensures the seller is providing accurate claims on the assets to be sold. The buyer generally would have a partner, like a private equity firm, provide financing. The due diligence must also pass the financing firm’s standards as well.

Disclosure schedules contain important information like contracts, intellectual property, warranties, employee information and more. A disclosure schedule typically deals more with qualitative data, compared to due diligence which primarily goes over financials. A selling party may typically hire a third party, M&A attorney to write a disclosure schedule.

Retirement and Welfare Benefit Plan Compliance

When handing a pre or post business transaction, considering the retirement and benefit plans and how it will affect current employees is key. Healthcare and retirement plans are greatly impacted by (M&A). For example, retirement plan matches could be changed or even discontinued which could cause loyal employees to become upset or leave the company.

Other benefits like PTO and health care may also be challenged, and these PTO accruals and deadlines add complications during (M&A). Drafting a solid or ongoing plan to minimize disruptions to employees is key to a smoother transition.

Here are some strategies our pension lawyers implement during mergers and acquisitions.

Maintenance of an Ongoing Plan

Some reasons to maintain current healthcare and retirement plans include preserving company morale and the health status of employees. If most employees are healthy, it might make sense to keep higher deductible plans.

Consider sending an anonymous employee survey to gauge employee benefit satisfaction. If people are generally happy, it could make sense to keep the current plan. Company culture is quite important and keeping a current plan could preserve this important asset.

Freeze Plan

One reason to freeze a plan is because of costs. For example, defined benefit plans are very expensive, and more and more employers are freezing this plan.

Complexity may be another reason to freeze a plan. Even 401(k)s are complex to administer, and other plans like simple IRAs could be more feasible for small businesses.

Merge Plan

Eldery CoupleMerging might be appropriate if you have a diverse employee base. If your older employees need HMOs, while younger ones benefit from high deductible plans, it could be wise to keep both. Having the option could increase employee retention.

Partial Plan Termination

Partial plan termination occurs when a layoff occurs and fewer people participate in the retirement plan. Partial plan terminations could be helpful if you want to accelerate vesting. This may benefit employees who were laid off.

Plan Termination

It could be wise to terminate plans if they are cost prohibitive or are mostly unused by employees. For example, some plans like 412(i)s are complex and rare. If these plans create more headache than benefit, it might be smart to move employees to more traditional plans like 401(k)s.

Another reason to consider termination a plan is if there is high turnover with many part-time employees or contractors. In this case, it might not be feasible to offer a standard benefits package.

ERISA Transaction Support for Mergers & Acquisition Attorneys or CPAs

Attorneys and CPAs work alongside these deals. Specialized CPAs are needed for their knowledge of tax law and M&A transactions. It’s also important for CPAs to act as an impartial third party. Companies should exercise great caution with having CPAs act as investment advisers. Acting in an investment role could considered them fiduciaries, which is highly scrutinized under ERISA.

M&A attorneys need to stay up to date on Merger and Acquisition laws. Some laws include active participant laws for pensions per the Pension Benefit Guaranty Corporation or PGBC.

Overfunded and Underfunded Defined Benefit Plans During Mergers & Acquisitions

Many companies want to terminate or freeze their defined benefit or pension plans due to significant ongoing expenses. There are many tax and financial issues to consider.

For example, taxes on reversions from the termination of an overfunded plan will use most of the cash the company was hoping to invest. Since the PBGC strictly monitors these events, it makes sense to ensure the pros and cons of defined benefit plans. I

If you have an over or under funded defined benefit plan, this could also spell problems with ERISA. For example, if you have an underfunded plan, this liability might be significant enough to prevent the M&A transaction.

Contact an Employee Benefits Attorney

M&A transactions are complex. It’s crucial to consult with a highly-experienced ERISA law firm, like Brucker & Morra. With extensive knowledge of ERISA laws and the impact of M&A on employee benefit plans, we can consult you on the following:

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