Retirement Plans: Workforce Reductions And Triggering Events Employers Should Keep In Mind

As a result of the coronavirus pandemic, U.S. employers are shedding employees at rates that haven't been seen since the 2007-09 recession. This trend is expected to continue. The following is a high-level summary of several triggering events that employers who maintain qualified retirement plans should keep in mind when undertaking significant workforce reductions. The rules surrounding workforce reductions and retirement plans are complex and include many nuances and exceptions. Please use this summary for general information purposes only and not legal advice. As always, please reach out with any specific questions or issues you have.

1. Partial Terminations

1. If a qualified retirement plan experiences a "partial termination," Section 411(d)(3) of the Internal Revenue Code provides that all "affected employees" (as described below) must become 100% vested in their accrued benefits (to the extent funded) or in the amounts credited to their plan account(s).