America's Benefit Specialist March 2023

EMPLOYEE BENEFIT CONSIDERATIONS DURING MERGERS AND ACQUISITIONS

By Stacy Barrow Partner, Barrow Weatherhead Lent LLP Boston, Massachusetts sbarrow@marbarlaw.com

stock or ownership interest in another) or a merger (where two existing businesses merge). An important aspect of employee benefits compliance is determining whether the parties involved in a transac tion have sufficient common ownership so as to constitute members of a “controlled group” as described in Section 414 of the Internal Revenue Code. While a fulsome discussion of controlled-group rules exceeds the scope of this article, un der ERISA, a group health plan that covers employees of two or more unrelated employers is a multiple employer welfare arrangement (MEWA), which is heavily regulated under state and federal law. Therefore, counsel on both sides of a deal will typically advise against forming even a temporary MEWA as part of a transaction. In determining whether two or more employers exist, the Department of Labor does not recognize the IRS “affiliated service group” rules (unlike in the case of qualified retirement plans). This can catch some employers unaware and result in a so-called “accidental MEWA” if seller’s group health plan continues to cover its employees who transition to the buyer

Brokers and consultants are often asked to advise on employ ee benefits considerations for their clients who are involved in mergers and acquisitions. Employee benefits are heavily implicated in this space, and it is important to encourage employers to consult directly with their counsel for the deal to ensure all compliance touchpoints are considered. Generally, an M&A transaction will consist of an asset pur chase (where a party purchases some or all of the assets of another), a stock purchase (where a party purchases all of the PERHAPS THE MOST SIGNIFICANT ACA CONSIDERATION IN M&A TRANSACTIONS IS THE EMPLOYER SHARED RESPONSIBILITY PROVISION.

benefitspecialistmagazine.com | ABS 3