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The Partial Termination headache

partialtermination

With COVID and massive layoffs, we certainly have a partial termination problem to consider. If an employer has a turnover rate of 20% or more, that counts as a partial termination, and employers have to fully vest employees they’ve laid off, just as they would have to fully vest employees if the 401(k) plan was ended altogether.

 

The problem with partial termination is that it’s often not considered or determined until the plan year is over and after participants have been paid out after they have been terminated and paid what the employer thought was their full vested balance. The big partial termination headache is having to reinstate forfeited account balances and track down former employees with forfeited unvested balances, that are now reinstated.

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