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Carol is a project manager for a healthcare management group in         New Jersey. About a year ago, her company was acquired. After talking         with some of her new coworkers from the acquiring company, she realized         her benefits were lacking compared to what her coworkers got.&lt;p&gt;      &lt;p&gt;&quot;In         the beginning, it was a real problem. They were getting things like more         days off,&quot; she said. &quot;But I had a job to do, so I tried to forget         about it more or less. I tried not to dwell on it.&quot;      &lt;p&gt;Situations         like Carol&#39;s are becoming more common for employees as the number of mergers         and acquisitions continues to increase. During the due diligence process         of a merger, the acquiring company must consider employees&#39; reactions         when deciding to what extent and how to continue the seller&#39;s benefit         programs, because integrating employees is an important consideration         during a merger.&lt;/p&gt;      &lt;p&gt;Carol&#39;s         boss later informed her that her yearly bonus was going to be higher than         that of some of her coworkers to offset the benefits discrepancy. Eventually,         the company sorted out the disparity and offered comparable benefits to         all employees. However, this unsettling scenario is becoming familiar         for many, as mergers are putting thousands of employees into new employment         situations with unfamiliar benefit plans.      &lt;p&gt;&lt;b&gt;Effective         communication smoothes the transition&lt;/b&gt;&lt;br&gt;        The way a benefits plan is continued depends on the type of acquisition.         If it is a stock deal, the acquiring company purchases the assets, liabilities,         and contracts of the seller. Thus, each of the existing benefit plans         moves to the buyer intact. If it is an asset deal, the acquiring company         purchases only certain of the seller&#39;s assets and liabilities. In this         scenario, employees are essentially terminated by the selling company         and hired by the acquiring entity at midnight simultaneously as the deal         is finalized. Benefits plans could be transferred; they could be terminated,         or they could be continued, but the transferred employees might no longer         participate. The employer may then put new employees into its own benefit         plan or establish a new plan.&lt;/p&gt;      &lt;p&gt;When a merger         is completed, a crucial goal for the company is to integrate the two groups         of workers effectively. The merger process is unnerving and full of uncertainty         for employees, who are concerned about retaining their benefits as well         as their jobs. To achieve a smooth transition, management needs to assure         employees from the acquired company that the benefit continuation will         be acceptable. According to David Kirchner, a principal with the Benefits         Consulting Group at Boston-based law firm Ropes &amp; Gray, health insurance         and retirement plans are the major concerns for employees, because the         potential financial liabilities of losing them are the greatest.&lt;p&gt;&lt;p&gt;&lt;p&gt;~&lt;p&gt;Many merging         companies take the best benefits of each in an effort to retain the best         workers after the merger is complete. During the due diligence process,         lawyers, accountants, and benefit consultants determine disparities between         the plans and take steps to integrate them. The integration process often         lasts more than a year beyond the merger or acquisition.&lt;/p&gt;      &lt;p&gt;As soon as         they hear about a potential deal, employees begin wondering whether they         will have to change healthcare providers, pay higher premiums, lose vacation         time, or perhaps receive better benefits. The answer varies for each company,         but there remains one key to every merger: communication.&lt;/p&gt;      &lt;p&gt;Communication         is critical to continuing benefit plans successfully and sustaining employee         morale. Employees inevitably have many questions and concerns, and human         resource professionals should be prepared to answer them.&lt;/p&gt;      &lt;p&gt;Kirchner         stressed the importance of human resource managers discussing what will         happen to employees&#39; benefits. &quot;The best thing an employer can do         is communicate, even if there&#39;s nothing going on. Generally speaking,         there is a lot of uncertainty with companies during a merger. Human resource         professionals should communicate with employees, so they are not left         in the lurch.&quot;&lt;/p&gt;      &lt;p&gt;The role         of human resources is crucial to the success of any merger. A survey by         Right Management Associates in February indicated that nearly half of         respondents who worked for a recently acquired company did not pay enough         attention to critical workforce issues, such as benefits. Almost all of         the respondents indicated serious problems on the human resources side         of mergers and acquisitions. &lt;/p&gt;                 &lt;p&gt;It is almost         a given that human resources representatives from both companies should         be part of the acquisition team and should be an integral part of due         diligence to ensure that employees are not adversely affected. Human resources         needs to be ready to field questions from employees about benefit continuation         and prepare a checklist of benefits concerns that need to be addressed.&lt;/p&gt;      &lt;p&gt;The acquiring         company should ask the seller to distribute a letter explaining what will         happen to employees&#39; benefits. The human resources department may also         contact the public relations department or an outside consulting group         to help communicate to employees. A meeting with employees where they         can ask questions and express concerns can be effective. Addressing benefits         issues, being forthright with employees, and keeping them informed are         the most important tasks.&lt;/p&gt;      &lt;p&gt;&lt;p&gt;&lt;p&gt;~&lt;b&gt;Asking         the right questions can provide reassurance&lt;/b&gt;&lt;br&gt;        If an employer is not communicating effectively, the best way for an employee         to determine how benefits are being continued is to take the initiative         to ask what steps are being taken to integrate or preserve the existing         programs or their features. Retirement benefits are significant because         they involve large amounts of money and concerns about the future; healthcare         is critical because it involves the well being of employees and their         families, especially a catastrophic uninsured event.&lt;/p&gt;            &lt;p&gt;&lt;b&gt;Benefit         continuation checklist&lt;/b&gt;&lt;/p&gt;      &lt;p&gt;&lt;b&gt;Healthcare&lt;/b&gt;&lt;br&gt;        - Will my provider change?&lt;br&gt;        - Will my premiums increase?&lt;br&gt;        - Will I pay more for prescription drugs?&lt;br&gt;        - Will I pay more in copayments?&lt;br&gt;        - Will I pay more for dental coverage?&lt;br&gt;        - Will my family still remained covered?&lt;br&gt;        - What about preexisting conditions?&lt;br&gt;        - Will I have to change doctors? &lt;/p&gt;      &lt;p&gt;&lt;b&gt;Retirement         &lt;/b&gt;&lt;br&gt;        - Will my 401(k) plan remain?&lt;br&gt;        - Will I be rolled over into a new plan?&lt;br&gt;        - What happens to our pension plan?&lt;br&gt;        - What if I&#39;m not vested?&lt;br&gt;        - Will the new 401(k) have the same investment options?&lt;br&gt;        - What happens to my 401(k) loan? Do I have to repay it immediately?&lt;/p&gt;      &lt;p&gt;&lt;b&gt;Sick leave         and vacation time&lt;/b&gt;&lt;br&gt;        - Will my number of days decrease?&lt;br&gt;        - Will there be any grandfathering?&lt;br&gt;        - What happens to my accrued vacation days?&lt;br&gt;        - What happens to my vacation days that have been carried over?&lt;br&gt;        - Can we buy extra days?&lt;/p&gt;      &lt;p&gt;&lt;p&gt;&lt;p&gt;~&lt;b&gt;Perks&lt;/b&gt;&lt;br&gt;        - What perks will I lose?&lt;br&gt;        - What will I gain?&lt;/p&gt;      &lt;p&gt;Employees         may encounter some problems when their company is acquired. If the new         company is based in another state, healthcare costs can be higher. Sometimes         old plans need to be scrapped altogether, and some flexibility may be         lost when switching HMOs.&lt;/p&gt;      &lt;p&gt;Pension and         profit sharing plans can be tricky as well, because the methods companies         use to value the plans present challenges for the team putting a value         on the acquisition as a whole. However, if the company decides not to         continue 401(k) plans, employees should ask for information about the         new plan. After evaluating it, employees can decide to partake or to switch         money into an Individual Retirement Account.&lt;/p&gt;      &lt;p&gt;The process         of merging is so overwhelming that communication with employees is often         pushed aside. According to the National Association of Stock Plan Professionals,         &quot;Best practice companies bring integration issues to the table even         during confidential courting.&quot; Recognizing the need to keep the talent         of the seller is critical and determining whether to continue its programs,         adopt new programs, or roll the old programs into the new is the most         important step in retaining employees after a merger.&lt;/p&gt;&lt;p&gt;

Zachary Bromer

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