Mark Poerio specializes in executive compensation,
employee benefits, and fiduciary matters, especially from a business,
governance, tax, securities, and litigation perspective. He currently
serves as President of the prestigious American College of Employee
Benefits Counsel, and on the executive board of the American Benefits
find more of Mark's Law Alerts and Newsletters, please click here.
Wagner Law Group is a nationally recognized practice in the areas of
ERISA and employee benefits, estate planning, employment, labor and
human resources and investment management.
in 1996, The Wagner Law Group is dedicated to the highest standards
of integrity, excellence and thought leadership and is considered to
be amongst the nation's premier ERISA and employee benefits law
firms. The firm has eight offices across the country, providing
unparalleled legal advice to its clients, including large, small and
nonprofit corporations as well as individuals and government entities
worldwide. The Wagner Law Group's 33 attorneys, senior benefits
consultant and seven paralegals combine many years of experience in
their fields of practice with a variety of backgrounds. Nine of the
attorneys are AV-rated by Martindale-Hubbell
and six are Fellows of the American College of Employee Benefits
Counsel, an invitation-only organization of nationally recognized
employee benefits lawyers. Five of the firm's attorneys have
been named to the prestigious Super
Lawyers list for 2017, which highlights outstanding
lawyers based on a rigorous selection process. The Wagner Law Group
is certified as a woman-owned and operated business by the Women's
Business Enterprise National Council.
Wagner Law Group
Connecticut Avenue, N.W.
Fax: (561) 293-3591
7108 Fairway Drive
Palm Beach Gardens, FL 33418
East Kennedy Boulevard
Tampa, FL 33602
Francisco, CA 94104
25 W. Moody Avenue
St. Louis, MO 63119
June 20, 2018
Deal-Breaking M&A Issues
Related to Employee Benefit Plans and Executive Compensation
benefit and executive compensation related issues have been known to
unravel merger and acquisition transactions. These sometimes
seriously disruptive issues can explode an otherwise viable deal when
overlooked until the last minute. The list below is intended to
facilitate the detection, negotiation, and resolution of possible
employee benefit plan and executive compensation related problems. As
a general matter, sellers may defuse risks and streamline
negotiations through proactive pre-sale planning. On the other hand,
buyers are able to maximize their deal-related protections (and their
post-closing alternatives) by assuring early stage attention to the
items listed below.
that the following list merely illustrates the range of benefit plan
issues that may interfere with a change in corporate control (CIC)
transaction. Disclosure schedules will often suggest other material
issues, such as benefit plan defects and potential liabilities.
Overall, sellers, targets, and buyers should always be represented in
these matters by experienced M&A ERISA counsel.
employees who have the right to resign with full severance upon
employees who are not subject to post-employment restrictive
covenants and agreements that are not assignable to the buyer
(or surviving entity).
stock options that the employer cannot unilaterally cancel.
options with a below-market exercise price on the grant date (or
grants for which there is not a reasonable basis on which to
show the exercise price was at or above fair market value).
over how equity awards will be handled upon a CIC.
- Violation of
federal and state registration or disclosure requirements.
compliance with §409A.
plans with material benefits will terminate or continue
following the CIC.
rabbi trusts will continue, or be formed to provide CIC
protections for executives.
- 280G golden
parachute penalties (or the failure to assess the golden
parachute implications of both the CIC transaction and any
associated terminations of employment).
accelerated vesting, severance, or other benefits due to 280G
limits (or the need to replace them).
- The need for
a shareholder cleansing vote, with associated disclosures and
401(k) and other Defined Contribution Plans
risks from excessive fees, poorly monitored investments, or
employer stock investments.
problems in need of correction (how to correct, and by whom),
and their impact on a possible plan termination or merger.
for plan termination (to avoid post-CIC "orphan plan"
NOTE: target companies and sellers are often best
served to terminate their retirement plans and to seek IRS
determination letters asap after signing a merger or sale agreement.
on a current or plan termination basis. Whether the plan
will terminate or continue post-CIC.
appraisals of employer stock, including the CIC value.
- Whether the
ESOP will terminate or continue post-CIC.
- Whether an
outstanding securities acquisition loan will be discharged or
unallocated shares will be released solely to seller's
- How, and by
whom, ESOP shares will be voted in connection with the CIC.
withdrawal liability for underfunded plans.
- Bonding and
other ERISA 4204 issues related to an asset purchase.
- Whether plan
contributions will continue or terminate post-CIC.
plans without adequate stop-loss coverage (or excessive exposure
to uninsured claims).
buyer or seller will be responsible for material COBRA
significant corporate-owned life insurance will be continued,
terminated, or transferred to the executive (and the terms for
- Whether the
plan is terminable at will, or provides lifetime benefits.
- Whether the
plan will continue or terminate post-CIC.
- Whether a
plan is terminable at will, locked-in for some time post-CIC, or
triggers significant severance liabilities.
Please contact Partner Mark Poerio via email or by phone
(202-969-2248), if you have any questions.