| The purpose of an Employee Benefits Agreement | | | | of liabilities must be addressed in this General |
| is to set forth the agreement of two or more | | | | Principles article. As well, both companies' new |
| companies, or subsidiaries of the same company, | | | | level of participation should be addressed. |
| regarding the allocation and assignment of their | | | | 3. Defined Benefit Plans - This article should |
| respective rights and obligations with respect to | | | | address subjects such as the establishment of a |
| their current and former employees and with | | | | mirror pension plan, any assumption of liabilities by |
| respect to benefits and compensation matters. It | | | | the new pension plan, how the assets of the plans |
| is usually an agreement that covers what will | | | | should be computed and allocated, and how the |
| happen to a company's employee benefit plan as | | | | transfer of one company's pension plan's interests |
| a result of another agreement being executed. | | | | to a separate trust account will be effectuated. |
| For instance, when two companies merge, an | | | | 4. Defined Contribution Plans - Any changes to the |
| employee benefit agreement is often needed to | | | | employees' retirement savings plan or stock |
| address the new liabilities, interests, and obligations | | | | ownership plan must be addressed in this section. |
| of the newly merged company in respect to the | | | | If the new company will be assuming liability for all |
| Employee Benefit Plan. | | | | savings and stock ownership plans, the agreement |
| An Employee Benefit Agreement must address | | | | must recite that the new company will now be |
| any change to any of the material aspects of an | | | | solely responsible, will cause the accounts to be |
| employee benefit plan. These could include | | | | transferred, and shall take such actions as may |
| changes to the employees defined benefit plans, | | | | be needed to cause the assets associated with all |
| defined contribution plans, health and welfare | | | | transferred accounts to be transferred to a new |
| plans, executive benefits, non-employee director | | | | trust for purposes of maintaining the savings and |
| benefits, pension plans, and employee retirement | | | | stock ownership accounts. If a new outside |
| plans. In an employee benefit agreement | | | | company will be taking over as administrator, this |
| executed in tandem with a merger agreement, | | | | should be identified as well. |
| the agreement can be broken down into the | | | | 5. Health and Welfare Plans - This article should |
| following articles: | | | | address the administration of the employee's |
| 1. Definitions - This article should define all the key | | | | health and welfare plans, which includes insurance, |
| terms used in the agreement. Key terms may | | | | workers' compensation, and retirement plans as |
| include the companies' abbreviated names as they | | | | well. Will the new company assume the liabilities |
| will be used, how certain kinds of employees will | | | | for these plans? Will an outside company be |
| be referred to, or key laws or statutes such as | | | | engaged to administer them? Will there be a |
| ERISA (the Employee Retirement Income | | | | change in any material terms of the plans? These |
| Security Act of 1974) that will be of particular | | | | questions must be answered in this section. |
| importance throughout the agreement. | | | | These are the most important areas to address |
| 2. General Principles - This article must address | | | | when drafting an Employee Benefits Agreement. |
| assumption of liabilities, and must clearly identify | | | | Essentially, these types of agreements address |
| who is assuming which liabilities in respect to the | | | | any changes made to an employee benefits plan |
| employee benefits plans. One company may be | | | | as a result of another agreement being made. |
| assuming liabilities of another, or a newly merged | | | | They must be drafted carefully to cover all |
| corporation may be assuming liabilities from two | | | | aspects of a transfer or assumption of liabilities. |
| smaller ones. Whatever the case, the assumption | | | | |