Defined Benefit Plans in Business Transactions

This guide discusses the considerations related to defined benefit plans in the context of business transactions. It outlines the differences between single employer defined benefit plans and multiple employer plans, highlighting the potential liabilities associated with these plans during transactions. The document explains that liabilities can arise from maintaining the plan post-closing, particularly if the plan is underfunded, which necessitates ongoing contributions to avoid deficiencies. It also details pre-closing plan violations as a source of liability, emphasizing the importance of due diligence for buyers assuming such plans. The guide further describes how liability varies based on the type of transaction, whether asset deals or mergers, and stresses the need for acquirers to assess the funding status of pension plans. Additionally, it presents options for mitigating liability post-closing, including plan termination, freezing, or continuing the plan, while also addressing the importance of negotiation and indemnification provisions in transaction documents.