Corporate mergers and acquisitions can be stressful. When employees hear that their company is part of such a deal, they instinctively worry about their jobs. Even with reassurances that there's no need to worry about layoffs any time soon, employees should expect changes in their benefit plans, particularly their 401(k)s or other retirement savings plans. DWC Managing Partner Keith Clark highlights these changes in this article published by Kiplinger.
"Among the closed-door meetings that take place prior to a takeover or merger, it is surprisingly common for benefit plans to be ignored, especially in the small plan market," Clark wrote. “This can be a disaster for plan sponsors and participants alike."
Excerpts from the Kiplinger Article:
- If the acquisition is an asset sale, the selling entity retains the responsibility for the 401(k) plan, and those employees retained from the selling entity are typically considered new employees of the buyer. With an asset purchase it is rare the plans are merged. The plan of the selling entity is terminated or is kept open, and employees who no longer work for the selling company can request a distribution from the selling company plan.
- If the acquisition is a stock purchase, the acquirer is purchasing the entity from the seller, including the benefit plans. The employees are usually treated as employees of the buyer, either directly or indirectly. What happens to the plan in this situation can vary based on what the acquirer decides.
- The full Kiplinger article dives into examples to highlight what the two different scenarios might look like.
Read the full article about what happens to your 401(k) after a company merger or acquisition here.