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Ordinary Employee Benefits Issues That Can Cause Extraordinary Problems in M&A Deals

Employee benefits rarely drive corporate transactions, but if the benefits of a target company are not reviewed carefully, they can sometimes derail the transaction.  Even some of the most routine facets of benefit plan administration can result in significant potential financial exposure (e.g., additional employer contributions, taxes, penalties, and fees as well as fees associated with the preparation and filing of IRS and DOL correction program applications) that could negatively affect the overall value of the target company. By identifying issues early in the transaction, the seller can prevent costly purchase price reductions and identify issues that need correction, while the buyer can avoid overpaying for a target and ensure that representation and warranty insurance will be available to cover potential claims. Some of those routine compliance issues include, but are not limited to, the following: Failing to timely file an annual Form 5500.  The DOL can assess a penalty… Continue Reading

DOL Issues Relief for Plan Fiduciaries

The DOL’s Employee Benefits Security Administration (?Ç£EBSA?Ç¥) recently issued EBSA Disaster Relief Notice 2020-01. Notice 2020-01 applies to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants and beneficiaries, and service providers subject to ERISA. Notice 2020-01 remains in effect from March 1, 2020 until 60 days after the announcement of the end of the presidentially declared national emergency due to COVID-19 (the ?Ç£National Emergency?Ç¥). Untimely Notice Relief Fiduciaries of ERISA plans generally have an obligation to provide notices and disclosures in accordance with the timing requirements of ERISA. However, under Notice 2020-01, the employee benefit plan and the responsible plan fiduciary will not be considered to violate ERISA for failing to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020 and 60 days after the announced end of the National Emergency, if the plan and responsible fiduciary act in… Continue Reading

DOL Issues Final Rules on Multiple Employer Welfare Arrangements

The U.S. Department of Labor (?Ç£DOL?Ç¥) recently released final rules intended to curb abuses of some multiple employer welfare arrangements (?Ç£MEWAs?Ç¥) by imposing additional reporting requirements on MEWAs and by enhancing DOL?ÇÖs enforcement authority. ?áUnder the final rules, all MEWAs that provide medical benefits, even if not a group health plan, must electronically file a Form M-1 annually, which now requires more extensive financial information than the prior version.?á Additionally, all employee welfare plans that file a Form M-1 must also file a Form 5500, even if the plan would otherwise be exempt, to demonstrate the plan?ÇÖs compliance with the Form M-1 filing requirement.?á Failure to answer the Form M-1 compliance question will cause the Form 5500 to be rejected as incomplete, which may subject the filer to civil penalties.?á The deadline for filing this year?ÇÖs Form M-1 has been extended to May 1, 2013.?á The final rules also enhance… Continue Reading

September 2022