DGC provides you with critical updates and PPP Loan resources to guide you during this challenging time. Click here to visit our dedicated COVID-19 page.
In the recently passed Consolidated Appropriations Act, there is a temporary provision that provides COVID-19 relief from partial plan terminations to qualified retirement plans if certain conditions are met. This could be beneficial to companies who experienced temporary lay-offs or other reductions in their workforce due to the COVID-19 pandemic.
During any plan year which includes the period beginning on March 13, 2020 and ending on March 31, 2021 a plan will not be treated as having a partial plan termination 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.
Partial plan terminations can stem from employer-initiated employee turnover events due to such occurrences as an economic hardship that is outside of an employer’s control or a significant event within the organization such as the closing of a division. Although every situation is different, the IRS’ presumptive threshold that triggers a partial plan termination is a greater than 20% reduction in workforce. Retirement plans are required to 100% vest participants who have been affected by a deemed partial plan termination regardless of the plan’s vesting schedule.
If you have questions about partial plan terminations, contact a member of your DGC client service team or Linda McLean, CPA at 781-937-5322 / firstname.lastname@example.org. You can also visit our coronavirus web page at dgccpa.com/coronavirus which is frequently updated with new articles and checklists to help you deal with the impact of the coronavirus on you and your business.
If you would like to get alerts and insights like this sent directly to your inbox, sign up here.