How to Navigate a Merger or Acquisition: Part I

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by Stephanie Swanson, CIP, CHSP, and Carrie Horn, QPA, TGPC, CISP, CHSP

Many financial organizations will experience a change in legal structure at some point; some purchase or merge with another organization, while others are taken over. And while IRA programs may be a significant part of discussions during these transactions, they often can be overlooked.

 So what is the best way to ensure that your IRA program—and the program that you are acquiring—is part of the planning and not an afterthought in a merger or acquisition? Prepare before it happens and take the proper steps after it does. Understanding how IRA programs are affected by a merger or acquisition—and what to do about it—can save your organization from compliance failures, hefty IRS penalties, and potential lawsuits.

Know What You’re Getting Into

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When financial organizations merge or are purchased by other organizations, one of the entities involved in the transaction likely will no longer exist independently. If the former entity acted as trustee or custodian of the financial organization’s IRAs, the new entity will have to assume these powers for the IRAs to continue. The newly created or purchasing organization usually assumes the responsibilities of the former organization—along with any potential compliance risks. Careful analysis of each financial organization’s operating procedures, documents, and reporting, can help to create an action plan to mitigate these risks and ensure a smooth transition to the new trustee or custodian.

Policies and Procedures

Although all IRA programs must follow certain rules to be in compliance with the law, day-to-day operations vary by organization. If possible, perform a due diligence review on the acquired organization’s IRA program before the acquisition occurs to pinpoint compliance pitfalls that must be remedied. In addition, your organization should evaluate all IRA-related policies and procedures from both organizations to determine the best practices to adopt or if new procedures are warranted. Consider the following policy and procedural items, for example.

  • Transactions – Compare procedures for handling transactions, such as contributions and distributions, including recommended ancillary forms, and identify differences that must be resolved. Transactions should be carried out consistently.

  • Beneficiary designations – Verify existing beneficiary designations and, for those designations that are incomplete, determine when the new trustee’s or custodian’s beneficiary default provisions should apply. If beneficiary designations are missing for acquired IRAs, decide who will be the default beneficiary if an IRA owner does not respond.


When merging with or acquiring another financial organization, chances are you will not be using the same IRA documents. Your organization should thoroughly review all IRA documents and analyze the following to prepare to take action to avoid common document concerns.

  • Storage – Find out if IRA documents are filed or stored electronically and learn how to gain rights and access to them. Determine how IRA documents will be transferred, and if there are any missing documents that must be recreated.

  • Forms provider – Look at your forms providers—if they are different, your documents likely contain different provisions (e.g., differing default beneficiaries, allowing for a per stirpes beneficiary designation). Reconcile differences by amending to a common document to avoid having to maintain IRAs with different sets of rules.

  • Missing information – Check if any basic information has not been gathered in the past (e.g., beneficiary designations, Social Security numbers, IRA owner birthdates, etc.) and make a plan for obtaining it.

  • Signatures – Identify documents with missing signatures. IRA documents with missing signatures are not valid, so you must obtain the missing signature (if possible) or deliver new documents.

  • Amendments –Most mergers and acquisitions require some form of amendment to the previous IRA document. Know what the amendment process entails.

Past Reporting and Transactions

Conducting a compliance review of past reporting and transactions can give you an idea of common compliance issues that may need to be addressed. Look for the following.

  • Required corrections – Review forms (e.g., Forms 1099-R and 5498) for errors that require fixing, such as incorrect reporting codes or reporting transfers as distributions.

  • Common mistakes – Pinpoint frequent errors and create custom training to address them.


By evaluating newly acquired staff in a few key areas, you can plan to fill any training gaps to ensure a compliant IRA program.

  • Roles and duties – Evaluate current job functions and determine if any critical tasks will suffer if certain employees are not retained.

  • Knowledge base – Gage the employees’ level of understanding by reviewing their industry designations and continuing education practices.

  • IRA training – Assess if training is needed to bring staff up to speed on IRA rules and regulations. Conduct mock transactions with them to determine their level of competency, and explore opportunities to offer training in specific areas (e.g., reporting, opening documents, etc.).

  • Procedural training – Determine if training on new, consolidated procedures or best practices is necessary for consistent application.

Systems and Core Processors

Systems and core processors are essential for day-to-day operations and transactions—beyond an organization’s IRA program. When deciding which system and core processor to adopt after a merger or acquisition, think about the following.

  • Compatibility – How easily can data be transferred between systems? Reflect on the time and effort it will take to consolidate information.

  • Benefits – Consider the qualities that make each system desirable to use. Does one stand out as the clear winner?

  • Programming – Consider using a different system based on the best features of both systems while keeping programming costs in mind.

Take the Next Step

A proactive analysis before a merger or acquisition is a great first step. Thoroughly reviewing all of the different business aspects, however, is challenging and can be time consuming, especially if you don’t have the resources or skillset to adequately do so. And there is more to do following the merger or acquisition transaction. Your organization will be tasked with notifying IRA owners about the change in ownership, amending your IRA documents, and completing reporting. (For more on that, look for “Part II” on this topic next month in The Link.) Partnering with a business, such as Ascensus, that has the knowledge and experience to help guide your financial organization through a merger or acquisition could make all the difference.