Changes to your org structure affect your retirement plan

It’s that time of year when we ask the question (and your annual census information also inquires):

Have there been changes to your ownership or business structure, including mergers and acquisitions?

We’re not just being nosy! This can affect your retirement plan — that is, your current plan or your budget for it. Here are some of the things you may need to think about:

Coverage and nondiscrimination testing implications: Did you become part of a control group and now your plans have to be tested for nondiscrimination together? Are there some employees that should or should not be covered based on the new contracts, locations, or benefits that you picked up? All of these could have a significant impact on your required testing.

Contribution considerations: Are the matching or employer contributions the same for the company you just purchased or will there need to be a benefits review? Should you continue to operate with multiple matches in the meantime? What does all of this mean to your current and projected budget? Do both plans recognize the same definition of compensation?

Eligibility decisions: Do your operations fundamentally change so that it’s time to review how and when employees are eligible for the plan? Or is there a reason that you should offer dual eligibility provisions based on which company they belong to?

Vendor and operational considerations: If you are merging or purchasing another business, there could be some flexibility with which plan and which providers you keep versus let go. You also want to thoroughly review the new plan to make sure there are no fiduciary liabilities lurking undiscovered!

Grandfathered benefits or termination: Will you merge the plans and keep all the old provisions of both plans, which could prove to be difficult from an administration standpoint, or is it easier to terminate one of the plans and allow employees to roll their money to the new plan? (Does it put plan participants at risk of spending what they’ve saved for retirement if you give them access to it by terminating the plan and you need to provide education?)

Cultural considerations: In addition to examining your total benefits package, communicating changes to employees about the retirement plan is key. How will you assure employees that their assets are safe, the benefits are in line with market rates, and that they’re getting a good deal out of combining plans or switching vendors?

Your plan may need to be amended, merged with another plan or even terminated. Regardless of what changes are required, we’re here to help ask the questions you might not know to ask yet, and to make sure you’re going into the situation with eyes wide open.

Considering a merger or acquisition? Need help? Contact us.