Underfunded Benefit Plan Issues In M&A Transactions

Given the state of the economy, may companies have employee benefit plans that are currently underfunded.  Underfunded plans can create a significant issue in the event of a sale of the company.  This post explores several potential employee benefit plan issues.

Multi-Employer Benefit Plans.  If a company's employees are unionized, a potential seller must comply with any applicable union requirements contained in the applicable collective bargaining agreement prior to the transaction.  Statutory withdrawal liability penalties can also apply to a multi-employer plan.

Any applicable penalties are assessed immediately after a transaction occurs.  Exceptions may apply depending on the situation, including the company's industry.  For example, special exceptions apply to construction industry companies.