Benefits in a Merger or Acquisition: What to Decide Before and After Close
Keep every employee covered on day one, and harmonize the plans at the next renewal rather than in a rush. Before closing, compare both plans, test whether the combined company crosses a legal threshold, and confirm who is responsible for COBRA and reporting.
Four Things to Settle Before the Deal Closes
Inventory Both Plans
List carriers, funding models, renewal dates, contribution rules, waiting periods and eligibility for each plan, and who administers each.
Check the Combined Headcount
Joining two employers can push the combined group over the 50-employee line that makes it an applicable large employer under the ACA.
Confirm the Deal Structure
A stock deal usually leaves the target’s plan with the target. An asset deal may leave the buyer to decide which employees and plans transfer. Ask counsel how the structure affects the plans.
Review Liabilities
Look for open claims, unpaid premiums, late filings and self-funded run-out obligations that pass to the buyer.
Protect Coverage First
No Gap in Coverage
Employees should keep active coverage through close. Decide whether the target’s plan continues unchanged until renewal or employees move to the buyer’s plan.
COBRA Responsibility
When a business is sold, federal rules decide which side must offer COBRA to employees who lose coverage. Settle this in the deal documents.
Eligibility and Waiting Periods
New employees from the target should not be pushed into a new waiting period. Federal rules cap the wait at 90 days.
Three Ways to Combine the Plans
Keep Both Until Renewal
Run both plans as they are, then decide at the next renewal. This is the lowest-risk path when the deal closes mid-year.
Move to One Plan at Renewal
Align carriers, contributions and plan design at the next renewal, and give employees a full enrollment period to choose.
Mid-Year Move With Credits
If you must combine mid-year, ask the new carrier to credit deductibles and out-of-pocket amounts employees have already met this year.
Tell Employees What Changes and When
Say What Stays the Same
Employees worry first about losing coverage and their doctors. Say what will not change, and until when, before you explain what will.
Give One Place to Ask
Name a contact for questions, and give employees a clear timeline for each decision.
Report Correctly
Combined employers may have to file ACA reporting and Form 5500 on a different basis in the year of the deal. Confirm filings with your advisor.
Review Dependent Eligibility
Two plans often define dependent eligibility differently. Verify it when you combine, so you are not covering ineligible dependents.
Common Questions
When should I start planning benefits in a deal?
Before signing. Plan terms, funding and liabilities can change the price and the timeline of the deal.
Do I have to combine the plans right away?
No. Many employers keep both plans until the next renewal and combine them then, which avoids a rushed mid-year change.
Who offers COBRA after an acquisition?
It depends on the deal structure and the plans involved. Federal rules assign responsibility, so settle it in the deal documents.
Can the combined company become an applicable large employer?
Yes. If the combined full-time and full-time equivalent employees reach 50, the ACA employer mandate and reporting rules apply.
Where These Rules Come From
26 CFR §54.4980B-9 (COBRA in Business Reorganizations)
26 U.S.C. §4980H (Employer Shared Responsibility)
CFH are licensed insurance brokers, not attorneys or tax advisors. This page is general information, so confirm your situation with your benefits attorney or tax advisor.
Related Guides
Benefits Communication and Enrollment Engagement
How to explain the change to employees.
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Contribution split by tier
Enrolled counts by tier
Four documents, two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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