Brown & Brown, Inc. · NYSE:BRO
Brown & Brown — Conference Presentation (June 2022)
38 slides from Brown & Brown's conference presentation, Jun 16, 2022
Slide 1: This Webinar Will Start Momentarily
This Webinar Will Start Momentarily. Thank you for joining us!
Slide 2: Benefits Overview for Mergers & Acquisitions (M&A)
Benefits Overview for Mergers & Acquisitions (M&A) June 16, 2022 Presented By: Presented by the Regulatory and Scott Wold and Dan Brady Legislative Strategy Group
Slide 3: Disclaimer
DISCLAIMER Brown & Brown, Inc. and all its affiliates, do not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this document is intended to provide a general overview o
Slide 4: Agenda
Agenda 1 Introduction to Mergers & Acquisitions (M&As) 2 Planning and Due Diligence 3 COBRA and M&As 4 ACA and the Employer Mandate 5 ERISA Considerations 6 Section 125 Cafeteria Plan Elections BROWN & BROWN | 4
Slide 5: Introduction to M&As
Introduction to M&As
Slide 6: Types of Transactions – Stock Sale
Types of Transactions – Stock Sale S T OC K S A L E – C OBRA D E F INIT ION : A stock sale is a transfer of stock in a corporation that causes the corporation to become a different employer or a member of a different employer. (26 CFR § 54.4980B-9) G E NE RA L LY, INC L UD E S : Arrangement in which
Slide 7: Types of Transactions – Asset Sale
Types of Transactions – Asset Sale A S S E T S A L E – C OBRA D E F INIT IO N: An asset sale is a transfer of substantial assets, such as a plant or division or substantially all the assets of a trade or business. (26 CFR § 54.4980B-9) G E NE RA L LY, INC L UD E S : Arrangement in which one party (t
Slide 8: Types of Transactions – Merger
Types of Transactions – Merger D E F INIT ION : Consolidation of one corporation into another resulting in a new business entity. G E NE RA L LY, INC L UD E S : New business inherits all rights and responsibilities (assets and liabilities) of each of the merged businesses Often includes reorganizati
Slide 9: Types of Transactions – Spinoff
Types of Transactions – Spinoff D E F INIT ION : The distribution by a business to its stockholders of particular assets and especially of stock of another company… with the new company created by such a distribution. (Source: Merriam-Webster) G E NE RA L LY, INC L UD E S : Stock or asset transactio
Slide 10: Planning and Due Diligence
Planning and Due Diligence
Slide 11: Due Diligence
Due Diligence D E F INIT ION : “Research and analysis of a company or organization done in preparation for a business transaction (such as a corporate merger or purchase of securities).” (Source: Merriam-Webster) E X A M PL E S : W HY IT ’ S IM PORTA NT: • Financial Manage risk and help ensure compl
Slide 12: Planning for M&As – General Transaction Questions
Planning for M&As – General Transaction Questions • What type of transaction? » Stock, asset, merger, spinoff, etc.? • What types of businesses are involved? The answers to these » Sole proprietorship, partnership, LLC, S corp. vs. C corp., etc. questions will impact the administration of the • Will
Slide 13: COBRA and M&As
COBRA and M&As
Slide 14: COBRA Considerations
COBRA Considerations PRIM A RY IS S UE : Who has the obligation to offer COBRA continuation coverage following a merger or acquisition? FA C T ORS T O C ONS ID E R: • Is it an asset sale vs. stock sale? • Will the selling group maintain a group health plan after the sale? • Is there a COBRA triggeri
Slide 15: Obligation to Offer COBRA
Obligation to Offer COBRA BOT H A S S E T A ND S T OC K S A L E S : “so long as the selling group maintains a group health plan after the sale, a group health plan maintained by the selling group has the obligation to make COBRA continuation coverage available to M&A qualified beneficiaries with res
Slide 16: Stock Sale - COBRA Considerations
Stock Sale - COBRA Considerations BUYE R’ S OBL IG AT ION T O PROV ID E C OBRA : “If the selling group ceases to provide any group health plan to any employee in connection with the sale, a Buyer not obligated group health plan maintained by the buying group has to make COBRA the obligation to make
Slide 17: Asset Sale - COBRA Considerations
Asset Sale - COBRA Considerations S UC C E S S OR E M PL OYE R: “If the selling group ceases to provide any group health plan to any employee in connection with the sale and if the buying group continues the business operations associated with the assets purchased from the selling group without inte
Slide 18: COBRA Considerations – M&A Qualified Beneficiary
COBRA Considerations – M&A Qualified Beneficiary S T OC K S A L E : “An individual is an M&A qualified beneficiary if the individual is a qualified beneficiary whose qualifying event occurred prior to or in connection with the sale and who is, or whose qualifying event occurred in connection with, a
Slide 19: COBRA Considerations – Triggering Events
COBRA Considerations – Triggering Events W HAT IS NOT A C OBRA QUA L IF YING E V E NT ? Stock Sale Asset Sale • If employee continues employment with acquired • Buyer is successor employer and employees continue corporation after sale regardless of whether they are employment with buyer immediately
Slide 20: ACA and the Employer Mandate
ACA and the Employer Mandate
Slide 21: ACA and the Employer Mandate
ACA and the Employer Mandate M & A C ONS ID E RAT I O NS UND E R T HE E M PL OYE R M A ND AT E : • Applicable Large Employer (ALE) status after a sale » Timing of status change » Controlled group status • Offers of coverage to acquired full-time employees » Measurement methods for identifying full-t
Slide 22: Controlled Group Status
Controlled Group Status D E F INIT IONS : Parent-Subsidiary: • Exists when one or more chains of corporations are connected through stock ownership with a common parent corporation; and » 80% of the stock of each corporation, (except the common parent) is owned by one or more corporations in the gro
Slide 23: Employer Mandate – ALE Status
Employer Mandate – ALE Status PRIOR T O T HE S A L E , W E RE BOT H BUYE R A ND S E L L E R A L E S S UBJE C T T O T HE E M PL OYE R S HA RE D RE S PON S I B IL IT Y RE QUIR E M E NT ? • Based on 50 full-time and equivalent employees in the preceding calendar year • Controlled group rules will apply
Slide 24: Employer Mandate – Offers of Coverage
Employer Mandate – Offers of Coverage NON- A L E S : • Merger or acquisition may result in new obligation to offer coverage if transaction results in new ALE status F UL L - T IM E E M PL OYE E S : • How did parties define full-time employees prior to the transaction? • Asset Sale » New full-time em
Slide 25: Employer Mandate
Employer Mandate RE PORT I NG OF F E RS OF C OV E RA G E • Which entity is responsible for reporting offers of coverage for months prior to the transaction • Controlled group reporting HA ND L ING D IF F E RE NT M E A S URE M E NT M E T HOD S F OR VA RIA BL E HOUR A ND PA RT- T IM E E M PL OYE E S •
Slide 26: ERISA Considerations
ERISA Considerations
Slide 27: ERISA Considerations
ERISA Considerations PRE - T RA NS A C T I O N C ONT RA C T S • What ERISA employee welfare plans are provided by the company being acquired? Fully insured or self-insured? • Will M&A employees continue to be provided benefits under pre-transaction contracts assumed by the buyer? » Asset Sale – If e
Slide 28: ERISA Considerations
ERISA Considerations PL A N D OC UM E NT S A ND A M E ND M E NT S • If new employees are not eligible for existing plans, is this clearly stated within the plan language? • Do plans reflect requirements for employees terminated and rehired by buyer: » New eligibility waiting periods or waiver of req
Slide 29: ERISA Considerations
ERISA Considerations BE NE F IT INT E G RAT ION • If benefits are to be integrated, amendments providing for adoption of the purchasing entity’s benefits by the new or acquired entity may be required • Will credit be given for deductible/out-of-pocket limits satisfied prior to integration? » Must be
Slide 30: Section 125 Cafeteria Plans
Section 125 Cafeteria Plans
Slide 31: M&A and §125
M&A and §125 C A F E T E RIA PL A N IM PL IC AT IONS • Does either entity, or do both entities, maintain a cafeteria plan, including health care or dependent care flexible spending arrangements? » Do they have different plan years? • Will two pre-tax plans be maintained going forward? » More common
Slide 32: M&A and §125 – Asset Sale
M&A and §125 – Asset Sale HOW W IL L T HE S E L L E R’ S C A F E T E RIA C A F E T E RIA PL A N E L E C T IONS PL A N BE HA ND L E D ? • Asset sale where employees terminate • New elections for employees of employment with seller acquired business when seller’s » Employees offered participation in b
Slide 33: M&A and §125 – Stock Sale
M&A and §125 – Stock Sale HOW W IL L T HE S E L L E R’ S C A F E T E RIA PL A N BE HA ND L E D ? • Plan can continue without interruption since employees continue employment with same employer » Bound by irrevocable election rule • Buyer terminates seller’s existing cafeteria plan and enrolls employ
Slide 34: M&A and §125
M&A and §125 HOW W IL L F S A A ND D C A P BA L A NC E S BE HA ND L E D ? • Will buyer assume existing FSA plans and continue to operate them for M&A employees through the end of the current plan year? » Different plan years – Make new elections for short coverage period or hold new employees off fr
Slide 35: M&A and Nondiscrimination
M&A and Nondiscrimination W IL L C HA NG E S IN E M PL OYE R W ORK F ORC E A F T E R T RA NS A C T ION IM PA C T T HE IRC NOND IS C R IM I NAT I O N RUL E S ? Newly acquired employees must be included when buyer performs nondiscrimination testing when: • Buyer owns 80% or more of acquired business f
Slide 36: Summary
Summary • M&A situations are complex and involve many moving parts • Obligations and requirements will depend on specific facts and circumstances • Other laws to consider: Employers will need to » Family and Medical Leave Act (FMLA) work with legal counsel » Workers’ Compensation » State and local l
Slide 37: HRCI and SHRM Credits
HRCI and SHRM Credits This Program, ID No. 597109, has been approved for 1.00 HR (General) recertification credit hours toward aPHR™, aPHRi™, PHR®, PHRca®, SPHR®, GPHR®, PHRi™ and SPHRi™ recertification through HR Certification Institute® (HRCI®). Brown & Brown is recognized by SHRM to offer Profess
Slide 38: Find your solution at BBrown.com
Find your solution at BBrown.com DISCLAIM ER: Brown & Brown, Inc. and all its affiliates, do not provide legal, regulatory or tax guidance, or advice. If legal advice coun sel or representation is needed, the services of a legal professional should be sought. The information in this document is inte