A Benefits Attorney’s Role in Corporate Transactions: Part 2


Michelle Capezza, Member of the Firm in the Employee Benefits and Health Care & Life Sciences practices, in the firm’s New York office, authored an article in Law360, titled “A Benefits Attorney's Role in Corporate Transactions: Part 2.” (Read the full version – subscription required.)

Following is an excerpt:

A corporate transaction often requires employee benefits and executive compensation attorneys to utilize all aspects of their knowledge in the field in order to review the transaction parties' current arrangements, assess and address explicit and potential liabilities and advise on program structures post-transaction.

The goal of this article, appearing in two parts, is to assist benefits attorneys in their approach to a corporate transaction and reference common issues that may arise, which will require their competencies. …

This second part will address treatment of benefit plans, integration issues and the purchase agreement, and will discuss other transaction-related agreements.

The following, together with the first part, is meant to serve only as an outline of common employee benefits and compensation issues that may arise in a corporate transaction and to assist the benefits attorney — or the practitioner who isn't a benefits attorney — in identifying risks and liabilities associated with the plans, programs, and arrangements in a transaction. …

Addressing Treatment of Benefit Plans and Integration Issues

Once the benefits attorney has identified all of the benefit plans and programs at issue in the transaction, and the potential risks and liabilities, it will be important to address handling of the target's plans and programs as affected by the transaction.

These decisions will affect drafting of applicable provisions in the transaction agreement and the offerings available to the acquired employees following the transaction. For example, discussions will be needed regarding the transfer of the target's retirement plans to the buyer, potential retirement plan mergers, freezing plans, plan spinoffs, or requirements for plan terminations prior to the closing — which will trigger full vesting.

Health and welfare plan participation and continuation coverage issues under the Consolidated Omnibus Budget Reconciliation Act will need to be addressed.

The ability to cancel, assume or substitute equity awards will need to be analyzed.

Collective bargaining agreements may need to be revisited for applicable employees. Pension plan underfunding or withdrawal liability issues may need to be addressed.

Transition periods and employee communications will need to be discussed and distributed. …