Contact Information: Contact: Henry Stimpson Stimpson Communications 508-647-0705 HStimpson@StimpsonCommunications.com
Employee Benefits Can Spring Costly Surprises in M&A, Longfellow Benefits' Haraden Tells Boston Bar
Mass. Healthcare Law, COBRA Complicate Due Diligence
| Source: Longfellow Benefits
BOSTON, MA--(Marketwire - December 19, 2007) - You've scrutinized the deal until your eyes hurt,
but if you haven't carefully examined employee benefits, you haven't done
your job in M&A due diligence, Patrick J. Haraden, director of employee
benefit services at Longfellow Benefits, told the Boston Bar Association
today.
"If you don't review benefits and take the right steps, it could cost your
client plenty and cause employee dissatisfaction," said Haraden, whose
Boston-based firm advises New England employers on benefit plans.
If your organization has employees in Massachusetts, or will gain them via
the acquisition, the new entity must comply with the state's new healthcare
law, he pointed out.
"Employee benefit costs may continue after acquisition," he said. "These
are significant liabilities that may not be on balance sheet or readily
known or available. They can impact the fair purchase price or terms of
the deal."
COBRA can be a poison pill. The seller is obligated to make health
insurance available under COBRA if a group health plan is maintained after
the sale. The buyer must make COBRA continuation coverage available if the
selling group ceases to provide any group health plan or the buying group
is considered a successor employer. All current COBRA participants, COBRA
eligibles in the notification period and all employees on leave of absence
should be divulged.
"M&A Agreements should allow access to each other's COBRA records for at
least 36 months after close," Haraden said.
Mass.-Style Provisions Spread
Under the mandatory healthcare law, most Massachusetts employers must have
a Section 125 Plan and must not discriminate in their fully insured medical
benefit offerings, Haraden noted.
"It's still early and difficult to evaluate impact for M&A due diligence,"
he said.
Connecticut, Rhode Island, and Missouri also require Section 125 plans that
give employees the opportunity to pay for benefits on a pretax basis.
California is close to adopting other aspects of the Massachusetts model.
"Involve your employee benefits broker or consultant early. They most
often they have the required documents and expertise, and they have a
vested interest in a good outcome," he said.
Whenever possible, get data directly from vendors like insurance companies
and 401(k) managers, Haraden advised.
"Trust, but verify," he concluded.
Serving organizations in New England and nationally, Longfellow Benefits
provides employee benefits, retirement plans and executive benefits. Its
staff includes experts carrying top professional designations: Registered
Employee Benefit Consultant (REBC), Chartered Life Underwriter (CLU),
Registered Health Underwriter (RHU), Licensed Insurance Advisor (LIA),
Master of Business Administration, Taxation (MBA), Certified Employee
Benefits Specialist (CEBS), Certified Financial Planner (CFP®), Chartered
Financial Consultant (ChFC) and Accredited Investment Fiduciary (AIF®).
For more information, visit www.longfellowbenefits.com or call
617-351-6000.