Mergers and acquisitions tend to create a very specific kind of optimism:
“We closed the deal. Everybody survived. The hard part is over.”
And then six months later, someone says:
“Wait… what do you mean the plan merger was effective last year?”
That’s usually when the awkward silence starts.
From a 401(k) plan compliance perspective, M&A activity can create a surprising amount of confusion—especially when multiple vendors, payroll systems, and legal timelines are involved. Here is our M&A Q&A: what plan sponsors need to ask before audit season arrives.
1. Was this actually a plan merger… or a plan termination?
People use these terms interchangeably all the time. Unfortunately, the IRS and DOL do not.
A plan merger means one plan is folded into another. A plan termination means the plan is formally ended altogether. Different rules. Different filings. Different documentation.
If your internal conversations have included phrases like:
“We kind of rolled it over into the other plan…”
… This is a good time to get very specific.
2. What was the effective date of the merger?
This is probably the biggest misunderstanding we see during audits.
A lot of sponsors assume the merger happens when the assets transfer. That would certainly make life simpler. But compliance does not always mean simplicity. (If only!)
Here’s the important distinction:
The merger is effective when the legal documents say it’s effective—not when the money moves.
So if the merger was effective December 31, 2024, but assets didn’t transfer until February 2025, it’s still considered a 2024 event for audit and reporting purposes.
Yes, even if everyone spent January insisting otherwise.
That timing can affect:
- Form 5500 reporting
- Participant counts
- Audit requirements
- Supporting documentation
So get clear on the dates before your 401(k) plan audit.
3. Do you actually have the documentation?
Another common issue: everybody assumes somebody else has it.
To be fair, you may be working with a variety of providers. (At Cassell Plan Audits, we pride ourselves on being the puzzle piece that connects all of them!)
That said, before the audit starts, you must know who holds what documentation. Make sure you can locate:
- Signed merger/acquisition agreements
- Plan amendments
- Board approvals
- Participant communications
- Asset transfer records
- Updated adoption agreements
If gathering documents currently involves three departments, two former employees, and a frantic search through old email chains… start now to avoid any horror stories like this one.
4. Were participant records handled correctly?
M&A transitions can create operational hiccups that don’t show up immediately.
Eligibility dates, vesting service, payroll deductions, and participant balances all need to transfer correctly between systems. Even small inconsistencies can create cleanup work later.
The good news: most M&A-related audit issues become much easier when sponsors address them early and keep clear documentation along the way.
The less-fun news: auditors tend to notice when nobody asked these questions until they did. For more on pre-M&A due diligence, check out Mergers, acquisitions and 401(k) plans: What plan sponsors need to know.
If you recently completed a merger or acquisition and need a 401(k) plan auditor well-versed in how M&A transactions impact your retirement plan compliance, we can help. Contact Cassell Plan Audits today.
Photo by Srattha Nualsate
