401(k) and other qualified retirement plans require that, when a plan terminates or experiences a “partial termination,” the benefits of all affected participants must be fully vested. The law provides that whether a partial termination has occurred is determined based on all of the facts and circumstances, but IRS has established that a 20% or greater turnover rate among employees participating in the plan establishes a presumption that the plan did partially terminate and the full vesting rule will apply. The Consolidated Appropriations Act, 2021 (the “CAA”) provides relief from this vesting rule where the number of active participants covered by a partially terminated plan on March 31, 2021 is at least 80% of the number of active participants covered by the plan on March 13, 2020. If you reduced your workforce significantly after March 13, 2020 and are planning to increase your employment rolls, have your plan’s TPA run the numbers for you to see if you can take advantage of this rule, and call us if you need help.

Be Sociable, Share!

Comments are closed.