The Partial Termination headache

Ary Rosenbaum
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Ary Rosenbaum - The Rosenbaum Law Firm P.C.

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.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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