In Shaver v. Siemens Corporation, 2012 U.S. App. LEXIS 4081 (3d Cir. Feb. 29, 2012), the U.S. Court of Appeals for the Third Circuit issued a precedent-setting opinion addressing the complex relationship between ERISA’s anti-cutback rules and common corporate transactions. This decision is important for employers considering acquiring another employer’s assets and workforce because it addressed the employee benefits issues related to the common practice of providing transition benefits under the seller’s pension plan after the closing date of an asset purchase.
Background on the Asset Purchase Agreement and Transition Period
On November 17, 1997, Westinghouse Electric Corporation (“Westinghouse”) and Siemens Corporation (“Siemens”) entered into an Asset Purchase Agreement (“APA”) to sell a business unit, but the transaction did not close for another nine months – on August 19, 1998, which was not an unusual delay in a corporate transaction of this size. Under the APA, Siemens was obligated to – and did – hire all affected Westinghouse employees who, on the closing date, were actively at work, on vacation, or on short-term disability. The APA required Siemens to establish a “substantially identical” pension plan for the affected employees and to provide compensation and benefits substantially comparable “in the aggregate” to the Westinghouse compensation and benefits.
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