Top 10 retirement plan issues in mergers & acquisitions

Companies that are parties to a corporate merger or acquisition must consider legal and practical issues under the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act of 1974 (ERISA) relating to the qualified retirement plans involved in the transaction. Significant liabilities on both the buyer and seller side of a transaction can result if the parties do not:

  • Consider the scope of these issues and the potential impact on the purchase price of the transaction during due diligence.
  • Protect their interests when negotiating the underlying agreement.
  • Determine the appropriate post-transaction plan design.
  • Provide employees and government agencies with required notices.

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This Article highlights the top ten legal and practical issues that practitioners should consider in dealing with qualified retirement plans in mergers and acquisitions. For an in-depth look at retirement plans in mergers and acquisitions, see Practice Note, Qualified Retirement Plans in Mergers and Acquisitions.

1. Controlled group liability

Under ERISA, assets of any member of a controlled group can be applied toward liabilities of any employee benefit plan within the controlled group on a joint and several basis. The buyer should be aware of whether the target company or any of its controlled group members contribute to any single employer defined benefit plans, multiemployer plans and multiple employer plans because many significant potential liabilities are joint and several among the employer and its controlled group members, including:

  • Funding obligations.
  • Multiemployer plan withdrawal liabilities.
  • Termination liability.

Top 10 retirement plan issues in mergers & acquisitions