Mergers and acquisitions of companies with retirement funds can result in administrative complexity, increased costs of operating the fund and inequitable benefits between members.
We use the term mass exit to describe the situation when a significant number of employees leave the company – either through retrenchments or corporate activity. But unlike strike action, discussed earlier, there is typically enough lead time for more contingency planning. With the shift from defined benefit to defined contribution funds, retirement fund arrangements have little bearing on any purchase, sale or wind-down of a company. But failure to appreciate how critical the management of the retirement plan is to members’ post-employment livelihood would be a serious omission.
In Benefits Barometer 2014: Fine-tuning the employee benefits system, we’ve highlighted corporate activity as another big issue for employers and trustees. Through mergers or acquisitions of companies, various occupational funds might consolidate into one large fund, containing different categories of members. This can result in administrative complexity, increased costs of operating the fund, and in some cases, inequitable benefits between members.