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 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. 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.
Key Characteristics of 401(k) and 403(b) Plans