HE TYPICAL buyer and its legal counsel may suffer great angst when they are unsure of their potential exposure to unfunded pension plan liability, multi-employer plan withdrawal obligations, unfunded retiree health costs and runaway “golden parachute” payments. Any of these costs, if not properly and timely identified, has the potential to convert a smooth and successful acquisition into a troublesome and financially disappointing transaction. This article will briefly discuss the potential liability exposure in respect of defined benefit pension plans, union (or collectively bargained) multi-employer plans, retiree health benefit plans and “golden parachute” severance arrangements (including the cost attributable to the non-deductibility of a substantial amount of such payments).
As with any area of potential liability exposure and because some areas of exposure may not be easily found on a seller’s balance sheet, the attorney performing due diligence in respect of these four areas of the employee benefits world must know what to look for, how to determine the existence or magnitude of the potential liability, and what to do if potential liability is confirmed.[1]�
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