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How to Maintain Retirement Plan Continuity When Restructuring a Business

September 26, 2023

Many businesses undergo restructuring from mergers, acquisitions, or bankruptcy at some point. During this process, it is important to review the retirement plans associated with the business to ensure new and existing owners/employees are taken care of.

In the first half of 2023, 9,627 merger and acquisition (M&A) deals took place, a 4% increase from 2022. During a 12-month period ending in June 2023, 15,724 businesses have filed for bankruptcy in the U.S., a 23% increase from 2022. Due to the current economy, increases are expected to continue into the new year.

While restructuring a business can be a challenging process there are steps that business owners can take to protect the financial stability of owners/employees and maintain retirement plan saving continuity.

Choose the Right Professionals

It is important to make sure that businesses choose a team of professionals who are willing and able to align with all parties involved while keeping the business's best interests in mind.

Review the Retirement Plans

As part of the restructuring process, review the retirement plans to ensure that they still meet the needs of employees and remain competitive with other companies in the industry. Consider whether any changes need to be made to contribution levels, vesting schedules, or investment options.

Remain Compliant

Ensure that the retirement plans remain compliant with all relevant laws and regulations. This can be a complex process, but it's essential to avoid any legal or financial penalties that could arise from non-compliance.

Communicate Clearly

Let employees know about what is happening and how it will affect them. This includes explaining any changes that are being made to the retirement plans, such as changes to contribution levels or investment options.

Provide Financial Education

It's important to provide employees with the information they need to make informed decisions about their retirement plans. Consider offering financial education resources to help employees understand their options and make the most of their retirement savings.

Restructuring a business can be a complicated process but updating the retirement plans doesn’t have to be. By taking steps to support employees and ensure that their retirement plans remain secure, businesses can help ease the transition and ensure a financially secure future for all involved. At LRS we work with businesses that are in the process of restructuring by reviewing the retirement plans, implementing changes to keep the plans compliant and notifying employees of changes that may affect them.

For tips and information regarding retirement plans, contact us.

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