In this episode, we sit down with Pete Welsh, Managing Director of Retirement and Wealth at Inspira Financial, to explore the complexities of company mergers and their impact on retirement plans.
Welsh sheds light on what happens when businesses with different retirement plans merge, outlining key outcomes and compliance concerns. He also provides expert guidance on plan terminations and offers insights into how companies can navigate these intricate processes while staying compliant with federal regulations.
Key Insights:
Mergers Affect Retirement Plans: When two companies merge, their existing retirement plans may need significant adjustments. Depending on the scenario, one company’s plan might be terminated, or both plans could be merged or replaced with a new plan. There are also situations where both plans might be terminated without offering a new one, although this is less common. The key challenge is ensuring that employees understand how these changes impact their retirement benefits and addressing any potential confusion or concern.
Anti-Cutback Rule Compliance: A crucial element in merging retirement plans is adhering to ERISA’s anti-cutback rule. This provision ensures that any merger or restructuring does not reduce or eliminate protected benefits, such as accrued benefits, early retirement options, and retirement subsidies. Employers must be diligent and may need legal or ERISA experts to guide them through this process to avoid violating this rule. Maintaining these benefits helps ensure employees do not lose valuable entitlements as a result of the corporate merger.
Plan Termination Complexity: The process of terminating a retirement plan involves several steps, such as amending the plan to set a termination date, halting contributions, notifying participants, and distributing assets. Challenges can arise when trying to contact former employees, particularly if their information is outdated or they are unresponsive. This can extend the timeline and make it difficult to finalize the plan termination. Engaging experienced partners who provide search services and participant management can help simplify and expedite this process.
Inspira Financial Trust, LLC performs the duties of a directed custodian and, as such, does not provide due diligence to third parties on prospective investments, platforms, sponsors, or service providers, and does not offer or sell investments or provide investment, tax, or legal advice.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
