Mergers and Dissolutions

To achieve the NAIFA 20/20 goal of fewer and stronger associations, local associations that will not be recognized as local chapters should merge with their state association or dissolve.

The rules for mergers and dissolutions are governed by state laws, which may differ from state to state, but the national association offers the following guidelines for this process. 

 

Merger or Dissolution Process
  • Decide if a local will merge with the state association or dissolve. State laws governing association mergers and dissolutions vary. Consult with the appropriate state regulator or local counsel for information about rules in your state. (This chart contains links to state government websites and guidelines on dissolutions.)
  • Vote on the merger or dissolution. Determine the percentage of members required to approve a dissolution or merger or if such action can be taken by the board.
  • Work with your state association to accomplish a merger. In the case of dissolution, notify the state for approval and with instructions on how to handle local funds.
  • State associations will approve local mergers and dissolutions and will notify national for final approval.
  • File any necessary state government forms to notify applicable regulators of the merger or dissolution.
  • If your state has an at-large local they must also merge into the state association.

 

Administrative Details for the Local Merger or Dissolution Process: Taxes, Finance, Insurance
  • File a final federal Form 990, notifying the IRS of the merger or dissolution, and any comparable state form(s). If Form 990 has not been filed in the prior three years, tax-exempt status has likely already been revoked and no further filing is needed.
  • Consult with an accountant or tax professional if a final financial review or audit is appropriate.
  • Transfer to the state association (or close) local bank and investment accounts, as appropriate.
  • File any required 1099s, if applicable, and any comparable state form(s).
  • If the local has an office, equipment, or storage space (leased or owned), determine how to dispose of or use the property and terminate the lease(s), as appropriate.
  • Terminate local association insurance policies, if appropriate (e.g., general liability, D&O insurance, workers comp).
  • Locals with employees may need to complete and file final federal and state employment forms, such as Form 941, unemployment tax returns, and W-2 forms and may need to terminate group insurance or retirement plans.