legal and hr considerations for post- merger benefits integration · 2020-06-07 · legal and hr...
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© 2019 Eversheds Sutherland (US) LLPAll Rights Reserved. This communication is for general informational purposes only and is not intended to constitute legal advice or a recommended course of action in any given situation. This communication is not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature with respect to the issues discussed herein. The recipient is encouraged to consult independent counsel before making any decisions or taking any action concerning the matters in this communication. This communication does not create an attorney-client relationship between Eversheds Sutherland (US) LLP and the recipient. Eversheds Sutherland (US) LLP is part of a global legal practice, operating through various separate and distinct legal entities, under Eversheds Sutherland. For a full description of the structure and a list of offices, please visit www.eversheds-sutherland.com.
A Milliman and Eversheds Sutherland Co-Presentation
Legal and HR Considerations for Post-Merger Benefits Integration
March 20, 2019
Brenna Clark PartnerEversheds Sutherland
Brittany Edwards-FranklinAssociateEversheds Sutherland
Principal & Consulting ActuaryMilliman
Consulting Actuary Milliman
Bret Linton
Paul Sakhrani
Eversheds Sutherland
Speakers
Paul SakhraniConsulting Actuary Milliman+1 404 254 [email protected]
Brenna ClarkPartnerEversheds Sutherland+1 404 853 8027 [email protected]
Brittany Edwards-FranklinAssociateEversheds Sutherland+1 404 853 8130 [email protected]
Bret LintonPrincipal & Consulting ActuaryMilliman+1 206 342 [email protected]
Eversheds Sutherland
Merger and Acquisitions – Benefit PlansToday’s Discussion
─ Understanding the landscape
─ Opportunity analysis and harmonization
─ Implementation and communication
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Major Stages of Benefits Analysis and IntegrationMerger and Acquisition
─ Companies should consider the following stages:
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High level benefit evaluation – high level benefits due diligence
In depth analysis: Identify cost saving
opportunities Detect potential
liabilities related to employee benefits
Anticipate financial and accounting implications
Analyze gaps in programs and integration risks/issues
Manage transition and integration issues
To ensure that HR Finance teams in charge of the M&A deals are prepared to handle employee benefit issues…
To manage and support work streams and resources on the ground across different locations…
Ensure that solutions are implemented and focus is on the key priorities
Manage the scope, schedule and budget as well as the key issues and dependencies/risks
Satisfy legal requirements
Coordinate locations
OPPORTUNITY ANALYSIS AND HARMONIZATION
IMPLEMENTATION AND COMMUNICATION
UNDERSTANDING THE LANDSCAPE AND OBJECTIVE
Data driven analysis to help identify the financial and employee risk…
M&A Introduction –Prepare and educate the team around the M&A process and assignment of roles
Benefits overview Guide –Understand the current landscape and potential challenges and risks that may arise during the harmonization process
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Health and Welfare QuestionsUnderstanding the Landscape
─ Why did the companies merge?
─ Alignment of industries?
─ Size of the companies, before and after?
─ Type of employees: hourly/salary, union status, etc.?
─ Will employees be co-located or continue to be separate?
─ Alignment of benefits: retirement, medical, ancillary and leave
─ Eligibility for benefits
─ Level of subsidization
─ Liabilities
─ Contractual agreements
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Health and Welfare Deep DiveUnderstanding the Landscape
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Qualified PlansUnderstanding the Landscape
─ Compliance • Errors and corrections• Claims• Data sufficiency• Qualification status
─ Eligibility – coverage testing
─ Possibility of mid-year changes
─ Funding status (defined benefit plans)
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Nonqualified Plans and Equity Understanding the Landscape
─ Types of Plans• Severance• Equity • Deferred compensation• Employment agreements
─ Application of 409A• Required payment terms• Substitutions• Errors and corrections
─ Contractual Provisions
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Opportunity Analysis
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Reduce program cost by taking advantage of economies of scale
Benchmark your programs cost-driven
by data analysis
Explore strategies that can lower cost
Analyze employee impact for potential
changes
Optimize benefits while minimizing risk to the company
and its employees
Eversheds Sutherland
Health and Welfare PlansHarmonization of benefits should focus on enhancing the employee experience, improving care and managing costs.
Harmonization of Benefits
Considerations
─ Plan Design: PPO vs. HDHP
─ Funding Arrangement: Fully-insured vs. self-funded
─ Subsidy: Point of service vs. payroll deductions
─ Contributions: Employee vs. dependents
─ Pricing: Avoid “death spiral” and unexpected pricing risk
─ Employee Impact: Winner and losers analysis/disruption analysis
─ Ancillary program offerings
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3. DevelopFuture State
4. Build a Roadmap
5. Implement and Monitor
2. ReviewConsiderations
1. Assess Current State
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401(k) PlansHarmonization of Benefits
─ Protected benefits
─ Compensation definition
─ Loans
─ Beneficiary designations
─ Mid-Year safe harbor plan changes
─ Record-keeper transitions
─ Uncovered operational failures
─ Investments
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Other BenefitsHarmonization of Benefits
─ Severance benefits
─ Payroll transition
─ Nonqualified plan elections
─ Retirement benefits• Service credit• Plan freezes
─ Cafeteria plan elections
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Implementation and Communication
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Vendor Selection andHarmonization
Communication and Open Enrollment
Post Implementation and Monitoring
― Conduct RFP― Score vendors― Host finalist
meetings― Final negotiations
(BAFO)― Award contracts― Evaluate and
harmonize plan options
― Communicate benefit changes
― Conduct open enrollment meetings
― Develop open enrollment guide
― Test enrollment and eligibility portals
― Ensure benefit enrollment and administration of claims
― Conduct claims audit and/or eligibility audits
― Monitor financial performances and employee impacts
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Legal Issues Implementation
─ Communicating to Employees: • SMM/SPD• Blackout notices• 204(h) notices• Fee disclosures
─ Communicating to Third Parties:• PBGC reportable events• 5500 Filings• Terminating contracts with current vendors
─ Nondiscrimination Testing
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eversheds-sutherland.com© 2019 Eversheds Sutherland (US) LLPAll rights reserved.This communication cannot be used for the purpose of avoiding any penalties that may be imposed under federal, state or local tax law.
Paul SakhraniConsulting Actuary Milliman+1 404 254 [email protected]
Brenna ClarkPartnerEversheds Sutherland+1 404 853 8027 [email protected]
Brittany Edwards-FranklinAssociateEversheds Sutherland+1 404 853 8130 [email protected]
Bret LintonPrincipal & Consulting ActuaryMilliman+1 206 342 [email protected]