As businesses navigate mergers, acquisitions, carve-outs, divestitures, joint ventures and spinoffs, managing retirement plans during these transitions can become a significant challenge. These corporate changes often result in overlapping 401(k) plans, each with its own design, governance, and administrative processes. Establishing, integrating or spinning off retirement plans can be costly and time-consuming, adding complexity to an already intricate M&A process.
In this first part of our series, we’ll explore how Pooled Employer Plans (PEPs) can provide a strategic solution for companies undergoing mergers, acquisitions, carve-outs, divestitures, joint ventures, or spinoffs. PEPs offer a simplified, efficient approach to managing retirement benefits during corporate restructuring, helping employers focus on their broader M&A goals. In addition, these transactions often result in streamlined HR operating models, which PEPs directly support due to their rapid deployment, minimal employer administrative requirements, and cost effectiveness.
In the second part of our series, we will discuss how Pooled Employer Plans (PEPs) can offer a solution to companies with disparate plans.
- From 2020 through 2024, there have been over 86,000 U.S. deals, valued at over $10 trillion. (Footnote: as of December 31, 2024)
- WTW works on over 2,000 M&A projects annually for organizations worldwide (as of December 31, 2024).
Although PEPs provide an efficient solution during mergers and acquisitions, there are of course considerations to work through to determine if PEP is the right fit for a given transaction. It is important to align on implementation timing as early as possible even though company resource needs are streamlined, implementing a PEP often takes 2-3 months. A company should always evaluate the flexibility of a PEP to ensure the company can honor any commitments from the sales and purchase agreement, migrate investments to the new structure, and more. And finally, with all the change already present during M&A, clear communications are key to having employees understand what to expect in the move to a PEP. Choosing a PEP provider that offers tailored solutions and a collaborative approach can help navigate these integration considerations effectively.
Conclusion
PEPs can be a powerful tool for companies undergoing mergers, acquisitions, or spinoffs. By streamlining administration, reducing costs, and minimizing fiduciary risk, PEPs aim to offer a strategic advantage in navigating the complexities of M&A activity while delivering a positive experience for impacted employees.
In the next article of this series, we’ll explore how we believe PEPs can be an invaluable tool for companies with multiple non-integrated plans.
Disclaimer
This document provides information on LifeSight Pooled Employer Plan (PEP) services that are being offered to you by WTW. Willis Towers Watson US LLC and Towers Watson Investment Services, Inc. or their affiliates are not acting in the capacity of providing “Investment Advice” within the meaning of 29 C.F.R. § 2510.3-21. It is your decision whether to engage WTW to provide any services or to invest in any investment available through WTW’s LifeSight PEP offering.