Post Merger - Limiting service credit to current (acquired) employees

[Guest jcarlos]

What restrictions can we place on limiting predecesssor service credit to existing employees in an acquired company.... If we hire an employee who previously worked for and then (in 2003) terminiated employment with the recently acquired company, is the newly hired employee eligible for prior service credit?

[GBurns]

You state that the employee terminated employment yet this employee is newly hired. Which is it?

Why would employees have terminated from a recently acquired company? Recently acquired is just a change in ownership. Did you also cancel the leases, the accounts receivable and payable?

Existing employees are simply existing employees, they are not new hires, unless you mean that there was more than an acquisition that took place for some reason.

[david rigby]

I beleive that the Q is:

- employee X worked for company A, left employment, went to work for Company B (whether or not directly);

- Company A is acquiring Company B;

- A is placing B's employees under A's employee benefit plans;

- does A have any requirements on how it recognizes X's service with A?

Is this it?

[Guest jcarlos]

I did not make things very clear, did I? I'm sorry.

This is the scenario:

Employee X worked for Company A, terminated employment and went to a mountain-top to meditate for a brief period of time.

Comany B acquired Company A

Company B has hired Employee X

Issue: Does B have any requirements on how it recognizes X's service with A?

[Guest Lisha]

If one company has had its assets acquired by another co. In this case, if B acquired the assets of A, all of A's employees are treated as terminated and rehired. Their access to service credits are at the mercy of the agreement worked out between B and A. It would not matter that X had worked for A before and left or not.

Are you sure that's what X was doing after he left?

[Guest jcarlos]

I'm sure.

[GBurns]

If a company is acquired by a stock purchase why would there be any termination or even concern about ongoing employment?

What happened to Company A?

[mbozek]

Why dont you read the Company B plan and the purchase agreement to see how prior service with A is to be treated under B's plan? The plan document will state what service is counted and the purchase agreement may include service with A under B's plan. Counsel for B should know if this was discussed in negotiations.

[jaemmons]

Was this a stock or asset sale? Although a stock sale would require a mandatory crediting of past service, since there is a continuation of the acquired employer, the same may not be required in an asset sale. From my understanding, unless the plan document specifically states that predecessor service is recognized, the employees of the aquired company do not need to have past service recognized under the acquiring company's plan, unless the acquiring company is maintaining sponsorship or merging the plans together. The assumed sponsorship or merger of plan assets is viewed as a continuation of the prior employer, whereby they are not deemed to have a severance of employment.

[RCK]

Keep in mind that you can have different answers for each potential kind of service--eligibility service, vesting service, credited service, vacation service, service award service, mountain top meditation service, etc.

RCK

[GBurns]

Lisha,

Can you explain or cite why "If one company has had its assets acquired by another co. In this case, if B acquired the assets of A, all of A's employees are treated as terminated and rehired"? In other words what does the purchase of assets have to with the employees?