Mergers and acquisitions have far reaching implications across your organization. From employee data updates needed for verifications to navigating compliance in new states to unemployment, you need to understand how this activity impacts your organization to prevent disruption and non-compliance.
Although state unemployment insurance (SUI) tax accounts might be the most obvious piece of the unemployment puzzle impacted by these types of transactions, your unemployment claims process can also be impacted. Whether you are the acquiring company (predecessor) or the acquired company (successor), it is important to understand how you are impacted and what steps you need to take to ensure you and your vendor are ready for this new era in your organization.
As your trusted partner, it is important that Thomas & Company know about any upcoming transactions. The more we know – and the sooner we know it – the more we are able to help you understand implications throughout your organization, including unemployment claims.
Transfers of Experience
Total Transfer of Experience
When an organization completes a total transfer, the successor assumes responsibility for the entire entity, including any historical experience (depending on the state) and current and former employees. All unemployment claims, therefore, follow suit, and become the responsibility of the successor employer. This includes claims for individuals who separated prior to the acquisition.
Partial Transfer of Experience
Partial transfers tend to be substantially more complex with additional variances between states in how they are handled. Because not all employees were transferred during a partial transfer, the state must determine how to view the movement of those employees who were transferred.
Are specific SUIs being transferred? Or are specific people being transferred? Is a percentage of the overall payroll being transferred? How a state views the transaction – and the way they determine employer liability – will determine how unemployment claims are allocated after a partial transfer.
No Transfer of Experience
It is also possible, depending on the individual acquisition situation and state, for there to be no transfer of experience. In this case, the successor would take on all of the predecessor SUI accounts but not consolidate the accounts and not transfer the experience between any accounts. Claims will continue to be filed through the original SUI(s) and the appropriate information will need to be provided to Thomas & Company
If the successor closes any predecessor accounts without transferring experience and does not take on the employees, this part of the transaction would be treated like a typical layoff. The claims will be directed to the predecessor account. If Thomas & Company does not represent the predecessor, we will not receive or be able to respond to claims unless we are set up with power of attorney (POA).
Important Considerations
Power of Attorney
Any time there is a transition in account information, it is necessary to ensure an updated power of attorney form is on file with the state. This will help direct unemployment claims to Thomas & Company and allow us to communicate with the state workforce agencies on your
Personnel Files
As the successor, it is helpful to obtain detailed personnel records to help future protests. Otherwise, protestation of unemployment claims for employees who worked at the predecessor prior to the transaction can be challenging to protest due to lack of detailed information and .
Employee Data
When M&A transactions occur, Thomas & Company, as your third-party vendor, will need to ensure we begin receiving the appropriate information to help process unemployment claims for the acquired entity(ies). The employee data helps drive this process, providing us with the employee information, including location, first day worked, last day worked, and reason for separation, needed to assist in the unemployment claim communication process.
Location Listings/Contacts
In order to appropriately direct unemployment claims, we not only need employee data from the new population, but we also need information about the new entities, including location details and contact details for each of the new locations. At Thomas & Company, your Account Manager will help guide you through what is needed, and we can provide templates to help ensure you know everything that is needed up front to make a smooth transition.
For successors, these location listings will ensure new accounts and locations are appropriately added and new claims can be directed to Thomas & Company for completion. Meanwhile, Thomas & Company can also appropriately update our system to reflect locations that are no longer attached to your organization and communicate to the state should claims inappropriately be directed after the transaction has been finalized.
Potential Implications
As with all things associated with mergers and acquisitions, there are potential implications if the transaction is not appropriately reported. Although State Unemployment Insurance (SUI) accounts are the most directly impacted – failure to timely and accurately report these transfers could result in penalties, interest, maximum rate assignments, and any unpaid (SUI) contributions – your unemployment claims process can also be adversely impacted.
Failure to appropriately report M&A transactions can result in unemployment claims being sent to the wrong employer (the predecessor) account number. This can cause incorrect charges and missed opportunities at claim protestation, depending on the situation.
As a third-party administrator, it is important to file updated power of attorney (POA) forms in a timely manner. Claims filed under an account for which Thomas & Company does not have power of attorney (POA) prevent us from being the designated representative.
If Thomas & Company is unaware of the transaction and/or the transaction has not been appropriately reported, we will likely not have appropriate account information on file for the acquired company, including POA designation. Furthermore, officers are often required to sign power of attorney forms any transition of officers during the acquisition process could become an issue if not appropriately reported. If an officer has left the predecessor and the compliance work has not been completed with the state agencies, Thomas & Company cannot handle incoming claims for this new entity(ies).
Without POA, Thomas & Company will not receive claim correspondence directly nor can we communicate with the state workforce agencies on your behalf.
Your Trusted Partner in M&A Compliance
Don’t let M&A transactions – and their impacts – catch you off guard! At Thomas & Company, our dedicated team of experts understands the complexities of these transformative deals and their impact across your organization. With industry-leading experience and an eye for detail, we work hand-in-hand with your team throughout the M&A process to maximize the value and potential of your business transaction(s), while ensuring compliance and minimizing disruptions.
Our approach is tailored to align with your unique business needs, ensuring that each transaction enables your company’s success.
There’s More!
We’ve just touched the surface of how mergers and acquisitions impact your organization. Be on the lookout for more important information and in the meantime, check out our previous articles on M&A activity.
