The $900 billion coronavirus relief package, which is expected to be approved by President Trump in the coming days, includes some good news for retirement plan sponsors. The massive 5,600-page bill includes a “temporary rule preventing partial plan terminations” for plan sponsors of defined contribution retirement plans. The provision specifically states, “A plan shall not be treated as having a partial termination (within the meaning of 4119(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.”
This provision allows defined contribution retirement plan sponsors to avoid requirements that are attached to partial plan termination rules, the biggest of which includes terminated participants to become 100% vested in plan benefits. Plan sponsors that previously concluded they may trigger partial plan termination due to layoffs, furloughs or terminations of employment should evaluate participant counts to determine whether their active participant count as of March 31, 2021 is 80% of the active participant count on March 13, 2020.
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