M&A and Employee Benefits: Post-Transaction Considerations

May 2019

As discussed in the last post, employee benefits should be an important consideration for both buyers and sellers as they prepare for a merger or acquisition. Once the due diligence is completed and the transaction closes, however, there is still much work that needs to be done to ensure that the transition to the new benefits plan goes smoothly.
In addition to educating employees of the seller about their new benefits, the buying company needs to think about compliance and accounting issues. While this is true for all types of benefits, compliance is especially important when it comes to retirement benefits.
In most acquisitions, buyers have three options for how to handle the seller’s retirement plan: terminate it, continue operating it as a separate plan or merge it with the buyer’s plan. (When the transaction is structured as an asset sale instead of a stock sale, however, merging the plans usually isn’t an option.)
For each of these three options, BDO examines some of the rules and situations that buying companies need to consider.