Navigating Retirement Plan Challenges in Mergers and Acquisitions

Mergers and acquisitions (M&A) can be exciting milestones for any organization. They open the door to new markets, expanded teams, and fresh opportunities. But for business owners and plan sponsors, these big moves also come with a long checklist, and retirement plans are often near the bottom of it. 

Yet overlooking retirement plan integration can cause major compliance headaches and employee confusion down the road. It’s a critical piece of the puzzle that deserves attention from the beginning. 

The Retirement Plan Challenge 

Take Alex, for example—a plan sponsor at a mid-sized pharmaceutical company. When her company merged with another, she quickly realized she had a new challenge on her hands: two very different retirement plans under one roof. 

Alex’s plan offered a generous match and flexible investment options. The other company’s plan? Different rules for eligibility, different vesting timelines, and a completely different contribution structure. 

As she worked through the details, Alex faced three major questions: 

1. How do we handle multiple plans with different features? 

2. How do we stay compliant through the transition? 

3. How can we keep employees informed and protected? 

These aren’t small issues. Let’s look at each one more closely. 

Different Plans, Different Features 

After a merger, it's not uncommon to end up with two or more retirement plans. But with every plan comes a different set of rules—contribution limits, vesting schedules, eligibility criteria, and more. Trying to manage them all without a clear strategy can quickly lead to confusion and compliance risks. 

Compliance Risks and Regulatory Requirements 

Understanding the regulations set forth by the IRS and the Department of Labor is crucial to navigate the retirement plan integration successfully. Common pitfalls during this phase include: 

• Failure in nondiscrimination and coverage testing, which are essential to ensure plans benefit all employees equitably. 

• Confusion around whether to merge, freeze, or terminate existing plans, a decision that has lasting implications. 

• Errors in plan documentation and missed participant communication or filing deadlines can lead to penalties and participant dissatisfaction. 

The Role of a Third-Party Administrator (TPA) 

Involving a Third-Party Administrator (TPA) from the outset of the M&A process can significantly mitigate risks and streamline the integration of retirement plans. A TPA's key responsibilities include: 

• Evaluating the compatibility of existing retirement plans. 

• Recommending actions to merge, freeze, or terminate plans as needed. 

• Performing required compliance testing and updating plan documentation. 

• Minimizing disruption to participants and ensuring a seamless transition. 

• Supporting overall compliance with regulatory requirements. 

Partnering with RPCSI 

At RPCSI, we help businesses navigate the retirement plan side of mergers and acquisitions. We understand how important it is to protect both your company and your employees during times of change, and we’re here to make the process smoother and more manageable. 

Getting us involved early can help you avoid common mistakes, stay compliant, and make sure your retirement plans continue to support your team without unnecessary disruption. 

If you're a business owner or plan sponsor preparing for a merger or acquisition, let's talk. Visit www.rpcsi.com to learn how we can help, or schedule a consultation for a clear, practical look at your retirement plan options during the transition.