By - February 18, 2021

How to Prepare for a Unified Benefits Plan During a Merger and Acquisition

M & A mergers acquisitions

While a large organizational merger or acquisition can be an exciting promise for a combined future, this presents significant challenges for HR teams who are responsible for not only helping employees through the benefit plan conversion, but also in holding the organization accountable for the complex requirements of the Affordable Care Act (ACA).

Be transparent about the unified benefits plan

In our experience, a best practice for converting employees to a unified benefits plan is to treat it like companies converting to only High Deductible Health Plans, a common event over the past decade. Mounting a campaign can be challenging, especially in a remote environment due to COVID-19, but these steps can help provide employees the information and comfort they need as they navigate your changes:

  • Give some grounding and specific differences: Instead of announcing your new unified plans and highlighting their benefits, be clear and transparent about the differences. For example, if you had two HDHPs and are moving to one HDHP and one PPO, provide a side-by-side comparison by aligning which old plan is closest to the new plan. By pointing out the differences clearly (such as deductible amounts) and stating what isn’t different (such as insurer networks), you can help the employee translate their previous experience with former plans to the new plans.
  • Mount a clear education campaign: Lay out a communication plan to boost your reach to both employees and their families.
    • Webinars: This technology has far reach but be deliberate about the content. Rather than having one-size-fits-all sessions, break them out into multiple topics:
      • Medical plan differences: Hit the topic head on with clear and honest review of the pros and cons of the new plans.
      • HSAs and FSAs: Take this time to re-educate on these critical tax-savings vehicles.
      • Specialty benefits: Utilization of other benefits programs, such as those for chronic conditions, remains low for most organizations; even if these programs only have slight changes, invite eligible individuals to learn how these could help them.
    • Phone and Chat support: There will be a lot of questions and you’ll need to ensure there is enough support. To avoid a flood of inquiries, either use a third-party who is knowledgeable and experienced in handling benefits questions or extend the period of time where employees can ask questions. Pro tip: use a calendar scheduling program to allow employees to book 10 or 15 minute blocks of time rather than trying to handle phone calls ad hoc.
  • Provide decision support technology: Benefits guides, webinars, and fact sheets only go so far. Giving employees access to a transparent decision support tool that shows them the math behind the numbers will grow trust. Preferably, use a tool that also imports employees’ own claims data, or claims from people like them, so they can see how the previous year’s claims will play out with the new plans.

Stay on top of ACA requirements

Experience shows the ACA is commonly a last consideration during a merger and acquisition, but failure to pay attention can have dire consequences in the years ahead when the IRS reviews submissions. Here are some common tips:

  • Preserve historical ACA data: Eventually, data from the combined organizations will end up on one system or the other. Historical data does not easily convert due to the cost, time, and poor data quality. Using a third-party ACA provider can help ensure continuity by having a separate place to house all historical data.
  • Respect look back periods: Most employers use the look-back measurement period since the conversion between monthly and look-back can be confusing and error-prone. However, some companies have different methodologies to look for:
    • Standard measurement period start date: Do both organizations measure from November 1 to October 31, or does one measure (incorrectly, but common) from October 1 to September 30?
    • Plan year start dates: It’s uncommon but possible that one organization starts their plan year on July 1 and thus has a different standard measurement period. Converting to a single plan year is challenging but possible through a third-party ACA provider.
  • Ensure 1094-C and 1095-C forms are correct: Merger close dates can happen at any time but printing forms and filing with the IRS occurs on the same date. With changes to benefit plans, the following areas warrant attention:
    • Aggregated ALE members: The 1094-C for each EIN within the combined organization must report other ALE members. If each organization is reporting separately, provide each other the other ALE members and their average full time employee count to properly complete the 1094-C.
    • Minimum Plan Cost: Line 15 reports the cost for self-only coverage on your lowest cost plan. If your unified plans have a different premium structure, measuring affordability against the new number and reporting it correctly on the 1095-C is critical.
    • Part III of the 1095-C: Only covered individuals on self-insured plans need to be listed in Part III. So, if you add or remove self-insured plans, make sure to account for these changes on the 1095-C.

We can help

Please contact us if you’re in the middle of or planning a merger and acquisition. We offer a complete ACA reporting solution focused on accuracy—we help our clients respond to IRS penalties and comply with state individual healthcare mandates. In addition, Tango Decision Assist software and the services of our Benefits Coaches can provide your team lift in helping employees understand and use your unified benefits plan.

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