Retirement Plans in Mergers & Acquisitions; What Questions Should You Be Asking?

During a merger or acquisition, careful attention must be paid to the seller’s retirement plan(s) to ensure there are no issues after the transaction. With proper planning, there can be a smooth transition with minimal impact on the employees. Below are some questions to consider:

Whether the transaction is an asset sale, a stock sale or a disposition of a portion of the seller’s business has an affect on the options available for the retirement plan. 

This is a decision that should be made well in advance of the close to avoid potential corrections later.

A plan termination may result in unintended tax consequences for employees with outstanding loan balances. 

Defined benefit plans are complicated.  A buyer needs to be fully aware of outstanding funding obligations as this may have an impact on the transaction price.

Retirement Plan M&A Checklist

It is extremely important to review the plans and consider all available options early in the transaction to ensure a smooth transition for the employees.  As part of our due diligence process, we see these areas as common and important:

  1. Review plan documents for compliance with current law and ensure that all required amendments have been executed. We will also review plan provisions for compatibility with the buyer’s plan.
  2. Review non-discrimination testing results to analyze for potential liability.
  3. If there is a defined benefit plan, we will review the plan for promised benefits and any unfunded liabilities and long-term obligations in the plan.
  4. Work with current investment providers to lay out a plan for termination if the plans are to be terminated.
  5. Review the seller’s fiduciary practices for any errors or poor practices. This analysis will include the timing of employee contributions, committee meeting minutes, and bonding levels.
  6. Review plan operations such as loan and distribution procedures, enrollment procedures, and compliance with reporting requirements.
  7. Develop transition timelines and employee communication plans.

How We Can Help

Buying a business is a complicated process. That’s where Lurie, LLP can help. We have decades of experience in retirement plan administration and can assist in reviewing the plan documents and providing alternatives. Qualified retirement plans are one of many items to consider. Contact our retirement plan experts to help you navigate and achieve a best-outcome M&A process.

Meet Your Team

Wendy C. Frame, MBA, QPA, QKA
Partner, Retirement Plan Consulting

Under Wendy’s direction, the Retirement Plan Consulting group at Lurie has evolved from primarily serving in-house tax and accounting clients to a stand-alone practice. Wendy joined the firm in 1996 and has helped grow her team five-fold, and increased the number of plans served from 150 to more than 500. She specializes in designing qualified retirement plans for small to mid-sized business clients, and providing ongoing technical advice and helping clients get to solutions that they may not have known were possible.

Jeremy D. Palm, QPA, QKA
Partner, Retirement Plan Consulting

Jeremy specializes in the administration and design of Defined Benefit Plans, both traditional and cash balance. Understanding the various moving pieces with retirement plans, Jeremy thrives on technical conversations with clients. He is interested in getting to know his clients and their businesses, develops rapport quickly, and focuses on building positive relationships.

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