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A Milliman and Eversheds Sutherland Co-Presentation

Legal and HR Considerations for Post-Merger Benefits Integration

March 20, 2019

Brenna Clark PartnerEversheds Sutherland

Brittany Edwards-FranklinAssociateEversheds Sutherland

Principal & Consulting ActuaryMilliman

Consulting Actuary Milliman

Bret Linton

Paul Sakhrani

Eversheds Sutherland

Speakers

Paul SakhraniConsulting Actuary Milliman+1 404 254 6723paul.sakhrani@milliman.com

Brenna ClarkPartnerEversheds Sutherland+1 404 853 8027 brennaclark@eversheds-sutherland.com

Brittany Edwards-FranklinAssociateEversheds Sutherland+1 404 853 8130 brittanyedwards-franklin@eversheds-sutherland.com

Bret LintonPrincipal & Consulting ActuaryMilliman+1 206 342 8955bret.linton@milliman.com

Eversheds Sutherland

Merger and Acquisitions – Benefit PlansToday’s Discussion

─ Understanding the landscape

─ Opportunity analysis and harmonization

─ Implementation and communication

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Major Stages of Benefits Analysis and IntegrationMerger and Acquisition

─ Companies should consider the following stages:

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High level benefit evaluation – high level benefits due diligence

In depth analysis: Identify cost saving

opportunities Detect potential

liabilities related to employee benefits

Anticipate financial and accounting implications

Analyze gaps in programs and integration risks/issues

Manage transition and integration issues

To ensure that HR Finance teams in charge of the M&A deals are prepared to handle employee benefit issues…

To manage and support work streams and resources on the ground across different locations…

Ensure that solutions are implemented and focus is on the key priorities

Manage the scope, schedule and budget as well as the key issues and dependencies/risks

Satisfy legal requirements

Coordinate locations

OPPORTUNITY ANALYSIS AND HARMONIZATION

IMPLEMENTATION AND COMMUNICATION

UNDERSTANDING THE LANDSCAPE AND OBJECTIVE

Data driven analysis to help identify the financial and employee risk…

M&A Introduction –Prepare and educate the team around the M&A process and assignment of roles

Benefits overview Guide –Understand the current landscape and potential challenges and risks that may arise during the harmonization process

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Health and Welfare QuestionsUnderstanding the Landscape

─ Why did the companies merge?

─ Alignment of industries?

─ Size of the companies, before and after?

─ Type of employees: hourly/salary, union status, etc.?

─ Will employees be co-located or continue to be separate?

─ Alignment of benefits: retirement, medical, ancillary and leave

─ Eligibility for benefits

─ Level of subsidization

─ Liabilities

─ Contractual agreements

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Health and Welfare Deep DiveUnderstanding the Landscape

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Qualified PlansUnderstanding the Landscape

─ Compliance • Errors and corrections• Claims• Data sufficiency• Qualification status

─ Eligibility – coverage testing

─ Possibility of mid-year changes

─ Funding status (defined benefit plans)

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Nonqualified Plans and Equity Understanding the Landscape

─ Types of Plans• Severance• Equity • Deferred compensation• Employment agreements

─ Application of 409A• Required payment terms• Substitutions• Errors and corrections

─ Contractual Provisions

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Opportunity Analysis

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Reduce program cost by taking advantage of economies of scale

Benchmark your programs cost-driven

by data analysis

Explore strategies that can lower cost

Analyze employee impact for potential

changes

Optimize benefits while minimizing risk to the company

and its employees

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Health and Welfare PlansHarmonization of benefits should focus on enhancing the employee experience, improving care and managing costs.

Harmonization of Benefits

Considerations

─ Plan Design: PPO vs. HDHP

─ Funding Arrangement: Fully-insured vs. self-funded

─ Subsidy: Point of service vs. payroll deductions

─ Contributions: Employee vs. dependents

─ Pricing: Avoid “death spiral” and unexpected pricing risk

─ Employee Impact: Winner and losers analysis/disruption analysis

─ Ancillary program offerings

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3. DevelopFuture State

4. Build a Roadmap

5. Implement and Monitor

2. ReviewConsiderations

1. Assess Current State

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401(k) PlansHarmonization of Benefits

─ Protected benefits

─ Compensation definition

─ Loans

─ Beneficiary designations

─ Mid-Year safe harbor plan changes

─ Record-keeper transitions

─ Uncovered operational failures

─ Investments

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Other BenefitsHarmonization of Benefits

─ Severance benefits

─ Payroll transition

─ Nonqualified plan elections

─ Retirement benefits• Service credit• Plan freezes

─ Cafeteria plan elections

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Implementation and Communication

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Vendor Selection andHarmonization

Communication and Open Enrollment

Post Implementation and Monitoring

― Conduct RFP― Score vendors― Host finalist

meetings― Final negotiations

(BAFO)― Award contracts― Evaluate and

harmonize plan options

― Communicate benefit changes

― Conduct open enrollment meetings

― Develop open enrollment guide

― Test enrollment and eligibility portals

― Ensure benefit enrollment and administration of claims

― Conduct claims audit and/or eligibility audits

― Monitor financial performances and employee impacts

Eversheds Sutherland

Legal Issues Implementation

─ Communicating to Employees: • SMM/SPD• Blackout notices• 204(h) notices• Fee disclosures

─ Communicating to Third Parties:• PBGC reportable events• 5500 Filings• Terminating contracts with current vendors

─ Nondiscrimination Testing

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eversheds-sutherland.com© 2019 Eversheds Sutherland (US) LLPAll rights reserved.This communication cannot be used for the purpose of avoiding any penalties that may be imposed under federal, state or local tax law.

Paul SakhraniConsulting Actuary Milliman+1 404 254 6723paul.sakhrani@milliman.com

Brenna ClarkPartnerEversheds Sutherland+1 404 853 8027 brennaclark@eversheds-sutherland.com

Brittany Edwards-FranklinAssociateEversheds Sutherland+1 404 853 8130 brittanyedwards-franklin@eversheds-sutherland.com

Bret LintonPrincipal & Consulting ActuaryMilliman+1 206 342 8955Bret.linton@milliman.com