Consider effects on employee retirement plans when planning mergers, acquisitions, expert says

Merger and acquisition activity in senior living and care has been flowing at a record pace throughout this year. But operators should not overlook the effects on employees’ retirement plans when making those deals, according to accounting and consulting firm CliftonLarsonAllen.

Failing to make provisions for transitioned employees can be costly and time-consuming in the end, cautioned Kyle Rose, principal at CLA, in an online post.

“When an acquired company integrates with another organization, careful consideration must be given to align the retirement plans of both the acquiring and acquired companies,” he said. “Key considerations for evaluating a plan merger include compliance, vesting and eligibility requirements, investment options, communication and education, and fiduciary responsibilities.”

Developing a formal strategy at the onset can mitigate areas of conflict and reduce inefficiencies, according to the expert.

Options for tackling the issue include merging together the retirement plans of both companies, terminating the newly acquired companies plan, or maintaining the status quo, where each company’s plan continues to exist and operate separately. Alternatively, according to Rose, existing employees of the acquired company can keep their current retirement plan, while new workers would be provided with the acquiring company’s plan.

When considering a retirement plan merger, Rose said, it’s important to review the documents of each plan to ensure that there are no discrepancies or issues with compliance. Consider the vesting schedules and eligibility requirements of both plans to make sure the employees are not short-changed.

Look at multiple factors when combining plans, he said, such as investment performance, fees and participant elections to ensure that the merge plan “offers a wide range of investment options to meet participants’ needs.”

Communication is not to be underestimated, according to the expert. Make sure your employees are well-informed of the pending merger and any plan modifications being considered. 

Lastly, Rose said, “properly address all fiduciary responsibilities throughout the merger process. This includes conducting due diligence, documenting decisions and acting in plan participants’ best interests.”