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Stimulus act changes partial termination rules temporarily

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On December 27, 2020, President Trump signed the Consolidated Appropriations Act of 2021 (the “Stimulus Act”), which not only gives taxpayers another stimulus payment but changes to retirement plans.

 

One change was to the partial termination rules, temporarily. The Stimulus Act provides that a 401(k) plan will not be treated as having experienced a “partial termination” 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 in the plan on March 31, 2021, is at least 80 percent of the number of active participants that were covered on March 13, 2020. What this does is change the measuring stick from the plan year and will allow employers who rehire their terminated employees, some relief from the partial termination rules.

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