Sponsors of qualified retirement plans that are experiencing
layoffs, furloughs or other reductions in employee population as a
result of the COVID-19 crisis may trigger a partial plan
termination if the employment of a significant percentage of plan
participants is terminated. Plan sponsors may want to establish a
procedure to carefully monitor this potentiality.
If employer-initiated terminations during a plan year affect 20%
or more of the total plan participants, a partial termination is
likely to occur (based on the IRS position that a 20% reduction in
participants creates a rebuttable presumption of a partial
termination). Participants who leave due to death, disability or
truly voluntary termination are not counted, but anyone who
voluntarily terminates under a reduction in force program would be
counted toward the 20% threshold. In addition, if there are a
series of reductions in force, all of the reductions in the series
would be counted together, even if
