Bottom Line Up Front

• Stock purchases prioritize continuity but carry more risk. The buyer acquires the entire company, including employees, contracts, benefit plans, and all existing liabilities. 
• Asset purchases offer more control and tax advantages. Buyers can selectively assume assets and liabilities, but benefit plans typically do not transfer and must be rebuilt. 
• Deal structure has real implications for employee benefits. Retirement plans and pensions can significantly affect risk, cost, and post-closing complexity, making early planning essential

When a business is acquired, the structure of the deal matters — a lot. Two transactions that look similar on the surface can have very different consequences once you dig into the taxes, liabilities, employees, and benefit plans. 

Most acquisitions fall into one of two buckets: stock purchases or asset purchases. While lawyers and tax advisors usually drive the final structure, understanding the basics can help you avoid surprises especially when retirement plans or pensions are involved.

Let’s break it down. 

The Big Picture: Two Ways to Buy a Business

At a high level, here’s the difference:

• Stock Purchase: The buyer purchases the ownership interests (stock, membership interests, or shares) of the company itself. 
• Asset Purchase: The buyer purchases specific assets and only the liabilities they choose to assume. The seller remains the legal owner of the existing business.
  

Same company. Very different outcomes. Each approach has different legal, tax, and operational consequences.

From the Buyer’s Perspective 

Stock Purchase – Pros

A stock deal keeps the business largely intact.

• Continuity is built in. Contracts, licenses, vendor agreements, employees, and benefit plans usually carry over automatically. 
• Fewer moving parts after closing. There’s no need to retitle every asset or renegotiate dozens of  agreements. 
• Customer relationships stay smooth. From the outside, the company looks and operates the same. 

This structure is often attractive when speed, simplicity, and continuity matter most. 

Stock Purchase – Cons 

The continuity comes with a price. 

• All liabilities come along for the ride. Known and unknown — tax issues, legal claims, environmental exposure, and benefit plan compliance problems. 
• No tax step-up on assets. The buyer doesn’t get increased depreciation or amortization deductions. 
• Heavier due diligence. Buyers must dig deep into historical operations to avoid inheriting unpleasant surprises. 

__________________________

Asset Purchase – Pros 

Asset deals offer more control. 

• Liability protection. Buyers can pick which liabilities they want and leave the rest behind. 
• Tax advantages. Purchased assets are stepped up to fair market value, often producing meaningful future tax deductions. 
• Flexibility. Buyers can decide which employees, contracts, and operations to continue. 

This structure is common in closely held businesses or situations where risk mitigation is a priority. 

Asset Purchase – Cons 

That flexibility adds complexity. 

• Everything must be transferred individually. Contracts, leases, permits, intellectual property—it all takes time. 
• Consents may be required. Landlords, lenders, and customers may need to approve assignments. 
• Employee disruption is more likely. Workers are often technically terminated and rehired. 
• Benefit plans don’t automatically move. More on that below. 

From the Seller’s Perspective 

Why Sellers Prefer Stock Sales

For many sellers, stock sales are the cleanest exit. 

• One transaction, full exit. The entire company changes hands. 
• Tax efficiency. Gains are typically taxed at capital gains rates. 
• Liabilities move with the company. The seller can walk away cleanly. 

The downside? Buyers may be hesitant to assume all that risk therefore driving lower price points. 

When Asset Sales Make Sense for Sellers

Asset sales can sometimes command a higher price. 

• Buyers may pay more because of tax benefits. 
• Sellers can retain certain assets or carve out parts of the business. 

However, asset sales often bring complications: 

• Double taxation risk for C corporations. The company pays tax on the sale, then shareholders pay tax again when proceeds are distributed. 
• More administrative work. Asset transfers, employee matters, and lingering liabilities all need attention. 

What Happens to Employee Benefit Plans?

This is where deal structure really starts to matter. 

Stock Purchases and Benefit Plans 

In a stock deal, the company and its plans continue to exist. 

• 401(k), pension, health, and welfare plans stay in place.
• Employees typically see little to no disruption.
• No immediate re-enrollment or plan setup is required. 

That said, buyers inherit everything, including compliance issues. Any past problems with ERISA, Form 5500 filings, or pension funding become the buyer’s responsibility. 

Asset Purchases and Employee Benefit Plans

In an asset purchase, employee benefit plans typically do not transfer to the buyer. Instead, the plans usually remain with the selling entity, and the buyer must decide how, and when, to establish new benefit plans for the employees they choose to bring over. As a result, benefit transitions often require more planning and communication than in a stock transaction. 

From the employee’s perspective, this usually involves termination followed by rehire under the buyer’s entity. While day-to-day work may feel the same, benefit participation often changes behind the scenes. 

At a high level, in asset purchases, employee benefit plans generally remain with the seller.

• The buyer’s entity must establish new benefit plans for transferred employees. 
• Employees may be eligible to roll over retirement balances or, in some cases, take distributions. 
• If there is a Defined Benefit Plan, the owner needs to ensure that this doesn’t result in IRC 415 limit issues where  plan assets exceed the benefits that may be paid.

Defined Benefit (Pension Plans)

DB plans require special attention and are often a major risk consideration in asset transactions. 

• These plans usually remain with the seller unless the buyer explicitly agrees to assume them. 
• If the plan is not assumed, the seller remains responsible for:
  
  • Ongoing funding requirements
  • Plan administration 
  • Any termination-related liabilities
    
• If the plan is assumed, the buyer takes on:
  
  • Funding and compliance obligations
  • Potential exposure to the Pension Benefit Guaranty Corporation (PBGC)

Because of this risk transfer, early actuarial and legal due diligence is critical when a pension plan is involved. 

401(k) and Other Defined Contribution Plans 

DC plans, such as 401(k)s, are generally more straightforward, but will still require coordination. 

• The seller’s 401(k) plan typically remains behind or is terminated 
• The buyer establishes a new plan for transferred employees
• Employees may roll over existing balances into the buyer’s plan or an IRA
• Short-term disruptions can occur, particularly around:
  
  • Payroll deductions
  • Employer matching contributions 
  • Enrollment timing
    

Clear communication and advance planning can help minimize confusion and ensure a smoother transition for employees. 

Side-by-Side Comparison 

To bring these differences together, the comparison below highlights how stock purchases and asset purchases compare across key considerations.

What Often Drives the Final Deal Structure

Smaller and closely held businesses often lean toward asset purchases because they offer greater control over risk and liabilities. The ability to selectively assume assets and obligations can be especially appealing when historical exposure or benefit plan risk is a concern.

Larger organizations, on the other hand, tend to favor stock purchases for the continuity they provide. Keeping contracts, employees, and benefit plans intact can reduce operational disruption and help preserve momentum immediately following the transaction.

Defined Benefit pension plans tend to be a key inflection point in deal discussions. In a stock purchase, buyers inherit all funding, compliance, and regulatory responsibilities tied to the plan. In an asset purchase, those obligations typically remain with the seller unless expressly assumed—making early actuarial analysis an important part of evaluating risk.

Across both structures, benefit plan transitions require early coordination. Clear communication around what is changing, what is staying the same, and when decisions need to be made can help prevent confusion and protect employee trust during a period of significant change.

In Summary

Ultimately, the difference between a stock purchase and an asset purchase isn’t just a legal distinction, it’s a decision that shapes risk, tax outcomes, and the employee experience long after the deal closes. What may seem like a technical choice on paper can have lasting implications for liabilities, retirement plans, and organizational continuity. 

For buyers, the structure determines what you inherit and what you can leave behind. For sellers, it affects not only taxes and proceeds, but how cleanly you can step away. And for employees, especially those relying on retirement or pension benefits, the transaction structure often determines whether their benefits feel seamless or suddenly uncertain. 

There is no one-size-fits-all answer. The “right” structure depends on the business, the people involved, and the risks each party is willing to take on. That’s why early coordination between legal, tax, and benefit advisors is essential, particularly when retirement plans or pension obligations are in play. Thoughtful planning upfront can help ensure the transaction supports long-term stability rather than creating unintended consequences down the road. 

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Each year, the Odyssey team hits pause on the usual day-to-day to step back, zoom out, and come together face-to-face in a new city. This year? We traded spreadsheets for sunshine and headed out west to San Diego, California, and let’s just say: we didn’t hate the view.

With nine of us (plus a few honorary tagalongs) in town, we made The Guide Hotel our home base. An upscale downtown spot with a little old-school charm. It was the perfect backdrop for our annual retreat. Between conference room sessions and carne asada tacos, we made space to connect, reflect, and chart a course for where we’re headed next.

Big Ideas, Breakout Sessions, and a Peek Ahead

At the core of every offsite is a simple goal: carve out space to grow. This year’s sessions were filled with conversation around what’s next for our clients, our services, and our team. Some standout themes:

• A smarter, more helpful website: Think AI tools that guide visitors, calculators to personalize insights, and a smoother experience from click to close.
• Expanding retirement and Cash Balance plan offerings: Especially for our financial advisor/TPA partners looking for a white-label solution.
• OPEB trend insights: Municipal funding practices are shifting, and our Massachusetts clients are showing up strong.
• Bolder marketing: We’re eyeing new regions, refining outreach, and tailoring campaigns to match local needs.

We also geeked out (a little) over the latest AI, our Salesforce/MCAE wishlists, and ways to better support our clients when plans don’t go… well, to plan. (Stay tuned for an Ask an Actuary video on what to do when you can’t make your CB plan contribution. We’ve got your back!)

Our favorite takeaway? A reminder that the best actuaries aren’t just good at math, they’re great at seeing the big picture.

Things We Learned Along the Way

Let’s be honest: not everything we took away from this offsite came from the conference room.

1. We’re not the best at bowling (I think the kids beat most of us).
2. AI might be one of our new favorite coworkers.
3. Gluten-free pasta at Barbusa in Little Italy = worth the hype.
4. Connecting dots > perfecting them.

Work Hard. Play Hard(ish).

Of course, it wouldn’t be an Odyssey offsite without some time to unwind and explore! We wrapped up conference day with dinner in Little Italy at Barbusa. The gluten-free folks among us rejoiced over the perfectly al-dente pasta (some even had to double-check it was actually gluten-free). The following day, we headed to Punch Bowl Social to close out the offsite with bowlign, cornhole, and arcade games. I think it’s safe to say that we had enough friendly competition to last us until next year.

Let’s just say we’ll stick to OPEB plans over pro bowling!

Until Next Year…

Whether you’re a client, partner, a friend, or someone just checking us out, thank you for being part of the Odyssey journey!

Trips like these remind us that great work comes from great connections. From the beach to the boardroom, we left San Diego with fresh ideas, stronger bonds, and a few sore arms.

Here’s to another year of helping our clients make informed financial decisions and maybe learning to bowl a little straighter along the way!

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If you’re a sponsor of a 401(k) plan, financial advisor, or accountant helping your client, you’ve considered a safe harbor plan design. With year-end approaching, we want to take a moment to remind you of the potential benefits of such a design for your organization as well as for the owners of the business.

Why Safe Harbor?

If your plan has had issues passing nondiscrimination tests and/or your plan is top-heavy, the safe harbor contribution will allow you to automatically satisfy the nondiscrimination tests and may satisfy the top-heavy minimum contribution.

Is there more than one Safe Harbor Design?

There are three (3) distinct 401(k) Safe Harbor designs and the choice will depend on your budget, your particular goals, and demographics.

1. Nonelective Contribution – the plan sponsor will make a 3.0% compensation contribution to all eligible non-highly compensated employees (“NHCEs”) – they may also make this contribution to highly compensated employees (“HCEs”). These contributions are 100% vested as soon as they are made without conditions.
2. Matching Contribution – the plan sponsor will make a matching contribution of at least 100% of the 1st 3.0% of deferred compensation and 50% of the next 2.0% of compensation. So, the maximum cost to the employer is 4.0% of pay assuming all participants defer at least 5.0% of their pay into the plan. Again, these contributions are 100% vested as soon as they are made without conditions.
3. QACA Matching Contribution – Under a QACA or “Qualified Automatic Contribution Arrangement”, employees are automatically enrolled in the plan with deferral rates of no less than 3.0%. The plan sponsor will make a matching contribution of at least 100% of the 1st 1.0% of deferred compensation and 50% of the next 5.0% of compensation. So, the maximum cost to the employer is 3.5% of pay assuming all participants defer at least 6.0% of their pay into the plan. These contributions may be subject to cliff vesting for a period not to exceed two (2) years.

What about cross-testing?

For those plan sponsors who would like to make significant extra “profit-sharing” contributions to a targeted group of people (often owners & management), cross-testing is an excellent solution. And, it can be paired with a safe harbor plan design to minimize the costs.

To Safe Harbor or not to Safe Harbor?

As noted above, the choice of whether or not to elect a safe harbor design and which option will depend on cost, demographics, and the organization’s goals. With recent census information, your consultant can help you see if it makes sense for you.

If you need any further help with your safe harbor design, contact one of our consultants.

The post Your Guide to Safe Harbor 401(k) Plans before the December 1st Deadline appeared first on Odyssey Advisors, Inc.

If your retirement system provided you & your auditors with all the necessary disclosures, that’s great and there’s nothing for you to see here.  However, if that’s not your situation and we’re hearing it more than we’d expect,  we have developed a product that enables us to provide you with those disclosures with minimal work on your part (we will need a copy of the retirement system valuation and your pensionable payroll for the plan year) in an efficient and cost-effective manner.  This new pension accounting standard can be a compliance headache for many smaller employers and we want to make it as painless as possible.

Beginning last year, we encouraged our clients to reach out to the retirement system’s pension actuaries to see if the system would provide them with the required year-end disclosures for their annual audit. If your system does not provide you with the separately required disclosures for your audit, Odyssey is here to help

As always, if you have questions, please contact your Odyssey consultant.

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Business owners have enough day-to-day stress. The last thing you want to worry about is managing a retirement portfolio.

Your future well-being depends on this kind of long-term planning, and it is important to have your needs catered to in a customized way. At Odyssey Advisors, we pride ourselves on this level of customer attention. We want you to feel secure. Instead of offering “one size fits all” retirement planning advice, we listen to your concerns and desires so we can best handle all of your retirement needs, ranging from compliance testing to plan documentation. We provide a complimentary plan design, review, and discussion to all prospective clients.

Our expertise in the retirement plan arena can save you many thousands of dollars compared to your current plan design.  Additionally, the review continues on an ongoing basis to ensure that the plan design continues to meet your needs. This also enables us to suggest alternatives where appropriate.

Odyssey can handle everything from discussing the design with the plan sponsor to completing the required documentation, including the Summary Plan Description. The plan includes a description of the benefits, rights, and responsibilities defined by the coverage.

Let Odyssey customize your retirement planning, freeing you up to concentrate on making your business thrive today. Let us pave the way for your tomorrow.

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With this approach to plan management, you can be proactive instead of reactive. The bottom line, in the long run, is that you will save more money and have peace of mind along the way.

Odyssey Advisors will make you feel confident in your financial future by:

• Assisting you in meeting IRS reporting requirements
• Providing you with all information required for financial accounting
• Communicating plan details to decision makers and employees using visual representations and real-world examples- with concise, comprehensible language
• Constantly evaluating plans and funding policies, keeping you up to date and eliminating any surprises
• Always providing trustworthy advice that is independent and objective

Contact Odyssey for a complimentary plan management consultation to get you on track toward financial freedom.

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