Use this button to switch between dark and light mode.

Too Hot to Handle? What to Do with a Target’s 401(k) Plan in a Corporate Transaction

August 13, 2024 (3 min read)

Stock purchase agreements and asset purchase agreements will differ in how the parties approach the target's 401(k) plan(s). Generally, there are three options: (1) continue operations, (2) terminate the target 401(k) plan, or (3) merge the target 401(k) plan with the buyer’s plan. Each of these approaches has advantages and disadvantages and must be considered in the context of the disclosures from the target during the due diligence phase and with input from ERISA counsel. 

Read now »

Related Content

  • Retirement Plan Mergers and Spinoffs
    Learn how an actual merger of the target’s plan into the buyer’s plan might be handled. For defined contribution plans, participants' accounts generally move from one plan to another: pre-tax accounts to pre-tax accounts, and so on. The principal issues involve the harmonization of plan investments by "mapping" the transferor plan's menu of investment options onto those offered by the transferee, and possibly imposing a "blackout period," that is, a short moratorium on investment transactions and changes in contribution rates and types while assets are transferred between custodians.
  • Not Done Yet—Employee Benefits Plan Transition and Integration Decisions Continue After M&A Transactions Close
    Understand that, even in transactions where the acquired company's employee benefits plans are terminated prior to, or in connection with, the closing, there is still work to be done to wind down the plans.
  • 401(k) Plans in Stock Purchase M&A Transactions: A Buyer's Guide to Choosing Termination or Merger
    Learn more about 401(k) plans in stock purchase acquisitions. Should the buyer require the target to terminate the 401(k) plan prior to closing? Or should the buyer keep the target’s 401(k) plan in place for a short time following closing and then merge it into its own existing 401(k) plan?

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.      

PRACTICAL GUIDANCE CUSTOMER EMAIL EDITION ON THE WEB

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+