Amidst the chaos of a company sale, benefits managers can make the process easier by being organized. (Photo: Getty)
Companies that are owned by private equity firms are going to be sold sooner or later, according to a blog post from Dickinson Wright PLLP, and against that day, CFOs and human resources directors had best be prepared to make sales smoother by having all their benefits plan documents and operations in order.
Glitches or errors can be expensive to fix, especially at the last minute, and could even result in a cut in the purchase price—hence the need to keep on top of things and make sure that all is well.
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According to the post, there are several steps that CFOs and HR directors can take to avoid problems at sale time. Establishing a plan document file is first on the list, to contain all the insurance policies, contracts, adoption agreements and summary plan descriptions for the current benefits. In addition, amendments, as well as the original document that is the source for each amendment, should be included.
Annual reports, IRS form 5500 for the plans, and Affordable Care Act transmittal forms, such as IRS form 1094-C and 1095-C, as well as annual 401(k) testing results, should also be included, as should downloaded copies with evidence of signature for any documents signed electronically.
Once that's done, a review of the employee handbook and open enrollment materials is in order, lest there be any benefits that aren't mentioned in the plan document file—or any mentioned benefits that are no longer offered. If so, now is the time to update, before due diligence begins.
Then, become sufficiently conversant with the typical administrative process for your 401(k) plan, including such functions as the speed of transfer-of-salary deferrals from the company's bank to the plan's trustee and the frequency of fee discussions with the plan provider. Also good to be familiar with: whether plan forfeitures are being used annually and what happens to the 401(k) accounts of missing participants.
Even if your company isn't on the auction block, it's handy to know all these things, says the post, lest your plan is selected for audit by the DOL or IRS, or if the owners decide to sell.
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
