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.
Healthcare 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 healthcare 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.
Mercer Services for DC Plans
The DC retirement plan landscape is complex and constantly changing. Healthcare organizations face additional complications in light of industry M&A activity. Designing the best DC plan for a merged system and the plan’s participants is paramount and, unfortunately, may be different depending on the characteristics of the organization. Additionally, plan governance will grow increasingly important as the regulatory environment changes.
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