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socrateaser, Lawyer
Category: California Employment Law
Satisfied Customers: 39045
Experience:  Retired (mostly)
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My Wifes company is being bought out by a large corporation.

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My Wife's company is being bought out by a large corporation. It is unknown if her existing pension plan will be left intact. We understand that the answer will come during the period of open enrollment for benefits in November. Understanding that the original contract of employment or employee 's handbook may contain the answer ( I have not yet seen either) Is there any general knowledge in the law about employee's rights to retain anything or is the pension plan totally in the hands of the employer?
When a business organization is consolidated (purchased), the purchaser has two options: (1) it can freeze the existing retirement benefits and then move the employees into the purchasing business' retirement plan; or (2) it can maintain the consolidated employees with their original plan.

In order to maintain an existing plan, the purchased business must be maintained as a separate entity. Also, there are numerous IRS and ERISA requirements that prohibit discrimination between plans operated by a single controlling entity.

Generally, option #2 is extraordinarily rare, and option #1 is the choice, because it's simply easier to accompish. I would be willing to bet that this will be the outcome for your spouse.

Note: when I say "freeze," what I mean is that the employer will treat the employee as having been permanently laid off as of the date of consolidation, and whatever benefits may accrue to that employee which would have accrued had the employee actually been laid off, will be provided to the employee. Typically, that means the retirement benefits will be paid out when the employee's right to benefits vests in the future.

Hope this helps.

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