If you’re acquiring a business, how will you transition new employees into your benefits plan?
You’re in the process of acquiring a business, and the topic of employee benefits is on the table. The seller wants to be sure his people will be protected—what will happen to employee benefits when the two organizations become one? How will the buyer assure coverage and prevent employees from having to start over with their deductibles? After all, the deal close date and benefits plan year will not happen at the same time.
Many times, a buyer will offer to take over the seller’s employee benefits contract. The selling company is in the middle of a plan year, and the buyer doesn’t want employees who will transition into the organization to face a 90-day waiting period to get benefits. The seller would hate to reset the deductible, causing employees to start from square one. So, the seller agrees to acquire the employee benefits contract—and the buyer likes this idea.
What’s The Problem With This Arrangement?
Let’s talk through this common scenario and identify the risks of buying out the employee benefits and how you, the acquirer, can take care of these new employees without taking on unnecessary liability.
Ask About Accommodations
The employee benefits discussion should happen during M&A negotiations—it’s not an after-thought that is managed during the transition process. Involve your employee benefits consultant and ask him or her to evaluate the contract. Find out what the provider can do to ensure seamless coverage. For example, ask about waiving the waiting period, or providing credit for deductibles satisfied under an SAP contract. That way, instead of buying out the selling company’s contract, you can put the new employees on your plan with some accommodations.
Get the Details
As an employer, you want a plan for how to execute the transition of benefits. Your employee benefits consultant can help with this. Ask these questions: How will the transition impact new employees? What liabilities will I take on as the business owner once these new employees move to our plan?
No one likes surprises. Open communication before employee benefits are transferred will allow for a smoother process.
Talk To Your People
During the onboarding process, employees of the acquired company are experiencing lots of change. There is uncertainty. Will they have the benefits they’re used to? How much will it cost them? Reassure employees by communicating with them early and often. Keep the talk straight and simple. Work with the Human Resource team during the onboarding process to make sure the message reaches the newly acquired employees. Use several forms of communication: open enrollment meetings, email, letters, status updates via internal websites. Talk to your team and host meetings where people can ask questions. Let everyone know you want their feedback. You want to be sure the employees who transition into your business feel confident and well-protected because there will be a continuity of care.
Want to learn more about to ensure a smooth transition of benefits? Let’s talk. Contact Chris Carroll at 410-213-5537.