Many companies faced turbulent times during 2020 due to the unexpected impact on their businesses from COVID-19. As a result, many companies were forced to temporarily or permanently layoff or furlough employees during the year. Typically, plan sponsors would assess the facts and circumstances of significant turnover to determine if a partial plan termination has occurred for their retirement plan. However, Congress has recently provided temporary partial plan termination relief to Plan Sponsors. The Consolidated Appropriations Act 2021 was signed into law on December 27, 2020. Included below is a snipit from this recent ruling:

“A plan shall not be treated as having a partial termination (within the meaning of 411(d)(3) of the Internal Revenue Code of 1986) during any plan year which includes the period beginning on March 13, 2020, and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021 is at least 80 percent of the number of active participants covered by the plan on March 13, 2020.”

Plan sponsors should consider their employee turnover during the 2020 plan year, as well as the recent relief ruling to determine the impact, if any, to their retirement plan(s).

For more information regarding Partial Plan Terminations:

• EBPAQC Partial Plan termination Advisory: https://www.aicpa.org/content/dam/aicpa/interestareas/employeebenefitplanauditquality/resources/planadvisories/downloadabledocuments/partial-plan-terminations-ebpaqc-plan-advisory.pdf?utm_medium=email&SubscriberID=112287403&utm_source=EBPQAC21&Site=AICPA&LinkID=10983476&utm_campaign=EBPAQC_AlertSEP462&cid=email:EBPQAC21:EBPAQC_AlertSEP462:https%3a%2f%2fwww.aicpa.org%2fcontent%2fdam%2faicpa%2finterestareas%2femployeebenefitplanauditquality%2fresources%2fplanadvisories%2fdownloadabledocuments%2fpartial-plan-terminations-ebpaqc-plan-advisory.pdf:AICPA&SendID=337042&utm_content=Jan21