15-day Special Notice Period for 204(h) Notices in Connection with Business Transaction

Would appreciate any experience or guidance around the special 15-day 204(h) notice period rather than the usual 45-day notice period when an amendment reducing benefits is adopted in connection with certain qualifying business transactions.  The "in connection with" language seems fairly broad and flexible but I cannot find any guidance on how broadly that is to be interpreted or applied.  For example, is it possible to freeze a plan using the special 15-day rule before a pending deal is signed up?  The deal is proceeding and expected to close soon and will expressly require that the seller freeze and terminate its cash balance plan but if the plan is not frozen using the 15-day rule (and thus in advance of closing) additional benefits will accrue for 2021.  Thanks.

I'm not aware of any definitive guidance on the subject. However the buyer should be aware that failure to provide the 204(h) notice carries a substantial penalty. They may wish to consider the cost of the penalty at 30 days multiplied by the number of participants versus the minimum required contribution that would be owed if the plan were frozen 30 days later.

The rest of this post is pure conjecture. I would advise you to disregard it entirely and seek ERISA counsel.

If I were going to rely on the exception to the 45-day requirement, I would want it to be as clear as possible that the amendment is being made in connection with the acquisition of the plan sponsor, and not for any other reason. For example, I might do the following:

• In the 204(h) notice itself, state that "In connection with the acquisition of Sponsor Co by Bigname Inc., the Sponsor Co. Defined Benefit Plan is being amended..."
• Put similar language in the resolution adopting the amendment, e.g. "Whereas Bigname Inc has agreed to acquire Sponsor Co on the condition that the Sponsor Co. Defined Benefit Plan be terminated..."
• Commit in writing - either in the amendment itself or by a separate resolution - that if the acquisition falls through, or is not completed by X date, that the termination is rescinded and benefit accruals will be reinstated retroactive to the date of the freeze.

I assume this plan has over 100 participants to require 45 day timing, rather than the 15 day timing for plans with under 100 participants?

Yes.  Thanks. 

After some considerable back and forth, the plan administrator decided to just do a standard 45 day notice to eliminate risk with use of the 15 day notice.  We never did find any guidance specifically on point.