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Don’t You Forget About Me: Handling Health and Welfare Plans in M&A Transactions

November 14, 2023 (4 min read)

With so much focus on retirement plans, like 401(k) plans, in a corporate transaction, health and welfare plans often are overlooked or not addressed completely. If the seller retains ownership of the company in an asset sale, it’s likely it will continue to retain responsibility for the benefit plans. In a stock sale, the buyer typically acquires the seller’s benefit plans (unless they are terminated, pre-closing). The purchase agreement should set forth comprehensive employee benefit plan representations and warranties. Address whether the seller’s employee benefit plans are to be terminated, when this is to occur, the party that is responsible for COBRA healthcare continuation coverage, handling of incurred and unreported health claims, and more. Reference this practice note and learn the answers.

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DID YOU KNOW? IRS has released 2024 cost-of-living adjustments to retirement plan limits and their applicable contribution/benefits thresholds. The maximum employee salary deferral to a 401(k), 403(b), and to most 457 plans increases to $23,000 in 2024, from $22,500 in 2023. Catch-up contribution, for eligible employees, age 50 and older, remain at $7,500. I.R.S. Notice 2023-75. See Cost of Living Adjustments Chart for Employee Benefit Plans for applicable limits.

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