Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back once again with Kristin Ryan, an Audit Senior Manager and one of the faces of the PKF Texas Employee Benefit Plan audit team. Kristin, welcome back to the Playbook.
Kristin: Thank you. Thanks for having me.
Jen: Well, with all the M&A activities starting to happen and expected to ramp up, how does that impact benefit plans and sponsors’ and fiduciaries’ decisions regarding plans?
Kristin: Yeah, absolutely. A lot of M&A activity and some things that plan sponsors need to get right up front, so before they’ve gotten too far into the transaction. So, the merger date is the key component; it’s not necessarily when assets are transferred, which a lot of times is what people think, it’s actually a legal determination, so it becomes important on the documentation and approval side of things. So, like board resolutions, plan amendments – those sort of things – are going to dictate when their merger date is and then when the transaction actually occurred. For financial reporting, it’s important to understand the nature of the transaction and then the timing, like we talked about – if it’s actually been assets have actually been liquidated or transferred, so there’s a distinction between those two.
Jen: So, I would imagine it is a very complicated process. Are there any problems that happen during this process?
Kristin: Yeah, absolutely. So, some of the things that we help our clients on is making sure that proper approval is there, the documentation exists, and then not just looking at the transfer or the merger spin off at the plan level but at the participant level as well. So, participants’ accounts still need to be intact, complete and accurate. If there were any benefit payments happening, recurring payments need to continue to happen in the new plan. If there’s delays and deposits with getting money into the plan, as far as employee contributions coming from payroll into the plan, those can be considered a prohibited transaction. So, just something to consider. All those things are, you know, things to consider when doing—even contemplating your merger or spin off, those things need to be thought about upfront.
Jen: And I guess at what point do you bring the employees into it? Because it is their money, at the end of the day, going into these plans.
Kristin: Yeah, absolutely. That’s tough, I mean, that’s a plan sponsor decision. I mean, we’re not involved in that as auditors necessarily, but these things that we talked about are key in determining before they make that call.
Jen: Perfect. Well, we’ll get you back to talk about some more employee benefit plan-related topics. Sound good?
Kristin: Sounds great, thank you.
Jen: For more information about this topic, visit www.PKFTexas.com/BenefitPlanAudits. This has been another thought leadership production brought to you by PKF Texas – The Entrepreneur’s Playbook. Tune in next week for another chapter.