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Benefit Plan M&A: M&A Considerations

Apr 5, 2023

In the first of a three-part series on employee benefit plan M&A, Denise Finney of EisnerAmper and Chris Hueth of Raymond James discuss trends in today's M&A environment as well as certain items plan sponsors should consider when merging benefit plans. (To listen to part 2, click here. To listen to part 3, click here.)


Kelly Critelli:Hello and welcome to EisnerAmper's Employee Benefit Plan Podcast Series on Mergers and Acquisitions. Over the next three episodes, we'll be talking about plan mergers and best practices for a smooth transition. Your host for these episodes will be Denise Finney and Chris Hueth. Now I'll turn it over to Denise and Chris.
Denise Finney:Hello, my name is Denise Finney, and I'm the partner in charge of EisnerAmper's Pension Service Audit Practice. I'm here with Chris Hueth, financial advisor at the Workplace Retirement Group at Raymond James. Today, we're going to look at M&A activity and talk about what we're seeing in the marketplace. Is M&A activity increasing? Is it decreasing? Where are we at?
Chris Hueth:Yeah. So it's really interesting. And I think the last few years, we've seen an increase, and it's for a couple different reasons. It's lower interest rates, it's easy to access to capital, it's a rising stock market, and it's made for a super favorable M&A environment. So we've been working with a number of clients that have seen injections in cash from private equity or different firms, and they've been on a buying streak. And that lends itself to a lot of different things, obviously from a broader M&A and acquisition standpoint, but also as it relates to the benefit plans, which is so important.


Right. And we've seen that in increased M&A activity in 2021, the beginning of 2022. Now that we're in 2023, what are you seeing?
CH:So at this point in 2023, it seems like things are slowing down a little bit. Going back to last summer, interest rates have risen, fear of recession is looming, right? It's all these other factors that are now a little bit different than what they were two, three years ago, and it is causing them to slow down. But that being said, there are tailwinds coming out of heavy M&A activity the last few years when it comes to the benefit plans.
DF:Sure, because that always-
CH:I'm sure you've seen that.
DF:Yes, yeah. So for sure, what we've seen is the companies are merging. They did that in 2021, beginning of 2022. So sometimes they do wait to address the benefit plans, what are we going to do? And that comes second or last.
DF:Unfortunately. And then here we are in 2023 auditing 2022 plan year ends, and we're seeing the M&A activity at the plan level.
CH:Yep. It's funny because the benefit plans typically aren't the first things that are talked about or thought about when it comes to M&A, but it's super important, right? So from a plan sponsor, employer level, from a fiduciary standpoint, there are a lot of different things that you need to make sure you're doing to... You not only do right by your employees, but insulate yourself as a plan sponsor, as a fiduciary to make sure the right things are happening for that plan.
DF:Right. And then there's a cost to maintaining two separate plans.
CH:Yep. So what do you do? Do you maintain two? Do you merge them together? What does that all look like? And then the other piece of it is the employee perspective, right? And we'll talk more about this in another podcast episode. But when you're dealing with an individual's largest or second-largest asset outside of their home, there's a lot of concern. And there's employee insecurity. And it's not just about the benefit plan, the retirement plan. It's also about, am I still going to have a job after this? So you want to make sure that when it comes to your employee's money, that you're communicating it clearly and frankly in plain English, so that they can understand what's happening and where their money's going.
DF:Yeah. And if the plan sponsor decides to change service providers, there could be some insecurity with the employees in that respect. They're used to one record keeper. Now they're going to be changing to another.
CH:Yeah. New logins, new websites, new mobile apps. And what does this all mean? Signing up for it, having to enroll, potential new investment options. So it's a lot to think about. And like I said before, it's not the first thing on the M&A agenda when these things are happening, but it really shouldn't be overlooked because it is important. You want to make sure that there's clean communications with employees. And you're protecting yourself from a fiduciary standpoint as well at the company level.
DF:That's a great point. Thanks for joining us for this first episode of our Benefit Plan M&A Series. In the next episode, we'll address the impact of M&A on plan operations. We hope you'll tune in.

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Denise Finney

Denise Finney is the Partner-in-Charge of the Pension Services Group dedicated to employee benefit plan audits. With 15 years of public accounting experience, she specializes in assisting clients with annual audit requirements regarding employee benefit plans.

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