In transactions where a buyer of assets is also hiring a large group of the seller’s employees who are needed to operate the purchased assets, the Asset Purchase Agreement (“APA”) will contain fairly detailed provisions explaining how the buyer will provide ERISA plans for the employees of the seller who become employees of the buyer. In some transactions, the buyer will require that all the seller’s employees who are hired by the buyer are simply treated as new hires under the buyer’s existing ERISA plans with no connection to the seller’s ERISA plan. In other transactions, the circumstances may require that the buyer adopt the seller’s existing ERISA plans for the seller’s employees who are hired by the buyer or, if not adopting the existing plans, the buyer may be required by the APA to put in place “comparable” plans. It is not unusual for an APA to also include some assurance that what ERISA plans are in place initially will not be changed (diminished) for a period of time.
It is also not uncommon that after the closing, the buyer fails to do exactly what the APA said it would do in terms of the ERISA plan covering the employees hired from the seller.