Health System Mergers Require Rethink of DC Plans — Mercer

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DC plan considerations facing health care organizations that engage in M&A activity — Mercer



Health care reform is not the only thing shaking up the health systems industry. This sector has seen a surge in merger and acquisition (M&A) activity — the health care sector had 84 deals in 2013 and 12 deals in the first quarter of 2014 alone.1 The successful integration of two organizations into a combined entity entails substantial effort for merged health care organizations. One question arising from these M&A deals involves determining the most appropriate type of defined contribution (DC) retirement plan for the new organization and its employees.

Health care organizations sponsor roughly 21% of the 403(b) industry.2 The recent growth in M&A activity among health systems could present unique issues to these enterprises relative to other 403(b)-eligible organizations.

This paper provides a brief overview of defined contribution (DC) plan considerations facing health care organizations that engage in M&A activity. We also include a high-level comparison of 401(k) and 403(b) plans, key issues with plan mergers, the potential loss of church plan status, the importance of DC retirement plan governance, and regulatory changes.

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Michael Ancell

Kyle Zotta

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