What to do about DB plans? A Not-for-Profit Corp is acquiring 2 other Not-For-Profit facilities, one is a County facility.

[katieinny]

I'm used to the for-profit world where an acquiring corporation is usually not interested in taking on the selling corp's retirement plan. In the cases I've seen where assets are being purchased, the seller agrees to terminate the plan (typically a 401(k)) and distribute the assets. The buyer takes on the employees as new hires. The new hires evenutally meet the buyer's plan eligibility requirements and enter their new employer's plan. Sometimes prior service is counted, sometimes not, depending on if the new employer doesn't mind including these new people sooner rather than later in its retirement plan. But I'm feeling like a fish out of water with this not-for-profit situation. I'm hearing words like "obligations of the Successor Employer" and some people speculating that the acquiring employer cannot refuse the DB obligations of the County facility's severely underfunded pension obligations. They have yet to determine the funding status of the other not-for-profit facility's DB plan, but it's probably not good. Is the not-for-profit world different, meaning that the acquiring not-for-profit might be forced to take on both facilities' DB plan obligations? Or are there situations when it can be avoided, and if so what types of situations?

[Lou S.]

Sounds like you need an attorney versed in such matters in volved in this. Or more precisely the acquring non-profit needs one to review this.

[david rigby]

...speculating that the acquiring employer cannot refuse the DB obligations of the County facility's severely underfunded pension obligations.

Usually, this is a matter that will concern the PBGC. See requirements for notifying PBGC of a Reportable Event.

However, the phrase "county facility" raises the question: governmental plan? If so, that changes many things.

[My 2 cents]

Just out of curiosity - what do you see being done in a for-profit situation when the seller has a not-fully-funded defined benefit plan that they are not in a position to fund up enough to terminate? The seller can't just terminate and distribute the assets unless everyone in the plan gets all that has been accrued (unlike a 401(k) plan where there is always enough money to pay people what they are entitled to).

[katieinny]

Yes, David, I guess I should start researching governmental plans next. In answer to My 2 cents, in the only situation I saw where a for-profit corp was trying to sell their business with an underfunded DB plan, the company was not able to sell until they could resolve the DB situation. Last I knew, they were looking into a distress termination.