When companies come together through a merger or acquisition, there’s significant work conducted when blending the two organizations, particularly in regards to benefits offered. Comparing health plans, retirement plans, and other benefit packages offered is just the first step to merging the benefits and keeping key employees in the company being bought happy with the arrangement.
Benefits is just one item of many that will need to be merged as the acquired company comes on board, but it’s an important item to get right. With so many federal laws and regulations controlling benefit offerings, HR departments will have to work to make sure everyone is covered.
The first step is to review the existing plans both companies have. This may involve conducting a compliance review of the plans the acquired company is carrying and setting the two plans up side by side to compare. This means not only comparing the types of plans offered to each employee, but also the details of the plans and whether the new plan will confer a similar benefit. Compliance with nondiscrimination requirements for the new plan should also be considered, particularly if the acquired company has a high concentration of highly compensated employees.
Determining Forward Path
Once you know where you stand in regards to the different benefit plans offered by each company, you can determine a path forward for merging the plans. In some cases, it may be as simple as enrolling employees in one healthcare plan over another. In others, it may involve a transition period where employees have the time to adapt to changes in how their healthcare is structured.
Regarding retirement plans, it may make sense to continue both plans, grandfathering in those employees who were on one plan and then moving forward with a single plan for all new employees. This can help employees feel confident that the retirement they’ve saved up towards will still be there for them. With older employees, keeping this plan the same is likely to be especially important. This may be a short-term solution, but long term, it adds to the administrative overhead.
If, on the other hand, businesses choose to merge newly acquired employees into their existing retirement plan, making sure there’s a clear plan to do so that has the minimum possible impact on individuals and allows them to continue making tax-advantaged savings is imperative. If you’ve taken the time to do a good comparison of the plans, then determining which path to take should be a little simpler.
Communicating with Impacted Individuals
Employees on both sides of the transaction, but particularly those whose company was purchased, are likely to be concerned about the future of their benefits plans. Once you know how the plans compare and what the path forward will be, communicating with each impacted individual is important. Keeping employees comfortable, retaining key personnel, and giving them a timeline of when to expect changes is an important part of HR’s role during this transition.
Following All Laws & Regulations
New plans need to meet all federal laws and regulations, but even during the transition period, if a problem is spotted with an old plan or a transition procedure no longer complies, HR will need to take steps to address these problems. When you merge a plan with problems into another plan, those problems can create problems down the road for the merged plan and, if audited, result in penalties for the whole company.