M&A Due Diligence Sample Report
Below is a sample of a page from a USI Consulting Group (USICG) due diligence report on retirement plan design differences between Acquiring employer A and Acquired employer B. The third column is labeled, Merged Plan, and lists our comments and recommendations for each conflicting provision.
Please note, under Plan Provisions > Employer Contributions, each employer has a different match formula and USICG recommends three different options to consider for the match in the newly merged retirement plan.
|
ACQUIRING EMPLOYER Company A |
ACQUIRED EMPLOYER Company B |
MERGED PLAN Recommendations/Comments |
|
| Employer/Plan Information | |||
| # of Employees | 550 | 375 | |
| # of Plan Participants | Active: 469 Term Vested: 175 |
Active: 245 Term Vested: 70 |
|
| Plan Assets | $17,500,000 | $11,200,000 | |
| Plan Eligibility | |||
| Excluded Employees | None | None | None |
| Participation Eligibility | Immediate: No age or service requirements | Age 21 and 1 year of service |
Employees previously eligible will be grandgathered. Going forward all employees will be subject to |
| Entry Date | Immediate | Monthly | Update to immediate entry |
| Service Eligibility Computation | 1,000 hours | 1,000 hours | Continue to use 1,000 hours |
| Plan Provisions | |||
| Employer Contributions | 75% match up to 6% of EE deferral |
50% match up to 6% of EE deferral |
Option 1: Maintain two separate contribution strategies. Plan will need to pass coverage testing Option 2: Adopt the more generous Company A plan contribution strategy. All employees will be subject to the same formula Option 3: Consider adopting a safe harbor contribution strategy Note: Consider conducting a cost impact analysis of adopting Option 2 or Option 3 |
| Vesting | 5-year cliff | 5-year graded |
Adopt Company B plan vesting schedule for new participants. Current plan participants will receive the better of the two schedules |
| Hardship Withdrawals | Yes, subject to IRS rules | Yes, subject to IRS rules | Maintain hardship withdrawal provisions |
| In-Service Distributions | No | Yes, subject to IRS rules | Allow for a Company B plan in-service distribution rules |
| Loans |
Yes, 2 outstanding, subject to IRS rules. Interest rate = Prime+1% |
Yes, 1 outstanding, subject to IRS rules Interest rate = Prime+1% |
Allow for Company A plan loan provisions |
How USI Consulting Group can help
USICG’s experienced M&A experts are available to guide your organization through the complete retirement plan due diligence process, helping you mitigate risk and incremental costs. Through our parent company, USI Insurance Services, we have employee benefits and property & casualty experts to help with your holistic benefits offering.
To learn how we can help your organization, please contact your USICG representative or reach out to us at information@usicg.com.
Additional M&A Information
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