M&A attorneys and advisors come to us for guidance on protecting their clients – buyers and sellers – from millions of dollars of employee benefits plan risk. They need practical solutions that avoid costly post-closing surprises. We support successful closings by bringing specialized experience in benefits due diligence to the transaction process.
The stakes are often high and time is usually short. So we focus on real, big picture risks. We work with deal counsel to efficiently quantify benefit plan risks and offer practical solutions to correct issues we identify and minimize the risk. We don’t hang up the deal with hyper-technical nit-picking.
On this page, you will find concise answers to the question, “What can go possibly wrong?” The short videos touch upon each topic’s key points.
Underfunded or Unfunded Defined Retirement Plans
Employers with an underfunded defined benefit plan face a steep hill to climb. Catching up on contributions may be out of reach. Plan termination may be unaffordable or may not satisfy the Pension Benefit Guaranty Corporation conditions for termination. Sellers and buyers need to understand how the underfunded plan may affect deal pricing and other terms.
An Efficient Approach to Due Diligence
Our phased due diligence approach helps to put business owners and their counsel in control of the process.
“Who has to provide COBRA coverage?” is a question we often hear from transaction lawyers and their clients.
The Affordable Care Act
There’s a mistaken notion that the ACA no longer applies.
Withdrawal Liability and Union Pension Plans
Withdrawal liability is a critical area of focus if the seller contributes to a union pension plan.
Plan Eligibility Mistakes
Plan eligibility mistakes are high on the IRS’s Voluntary Correction Program greatest hits list.
Imprudent or Illiquid Retirement Plan Investments
Imprudent or illiquid plan investments can be difficult to value and can cause delays in plan termination.
Adverse Claims Experience in Self-Funded Health Plans
An estimated 100 million American workers and their dependents are covered by a partially or fully self-insured company health plan. These plans are more common in larger companies but about 13% of employees covered under a self-insured plan work for companies with fewer than 200 employees. Because the employer bears the risk of unexpected healthcare costs, due diligence of a self-funded health plan is critical.
Late Contributions to Retirement Plans and Miscalculated Matching Contributions
Late plan contributions can lead to an excise tax on the seller or on the buyer in a stock sale where the buyer takes on the seller’s plan. We can surface this issue if it exists and give the parties cost-effective options for resolving the problem.
Noncompliant 409A Deferred Compensation Plans
Most of the due diligence process centers on company-wide retirement plans such as the 401(k) and the healthcare plans. But nonqualified deferred compensation plans with 409A problems can have drastic tax consequences for executing, prompting some to take legal action against their employer.
Missing, Inapplicable or Incorrect ERISA Reps and Warranties in the Purchase Agreement
“Copy and paste” ERISA reps and warranties are not okay. Your client deserves to have ERISA counsel review the purchase agreement in the context of their particular transaction.