AICPA
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| Partial plan termination relief provide by Congress; EBPAQC plan advisory |
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| January 12, 2021 — EBPAQC Alert No. 462 |
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| Dear Center Members: |
This alert contains information about:
- Partial plan termination relief provide by Congress
- EBPAQC plan advisory
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Partial plan termination relief provide by Congress
The Consolidated Appropriations Act, 2021 (CAA), which was signed into law on December 27, 2020, includes a temporary rule providing COVID-related relief from certain partial plan terminations. The relief provision in the CAA is in Division EE—Taxpayer and Certainty Disaster Tax Relief Act of 2020, Title II, Section 209, and reads as follows:
"A plan shall not be treated as having a partial termination (within the meaning of 411(d)(3) of the Internal Revenue Code of 1986) 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 covered by the plan on March 31, 2021 is at least 80 percent of the number of active participants covered by the plan on March 13, 2020."
Partial plan terminations may occur when there is substantial employer-initiated employee turnover, either due to a significant event, such as a plant or division closing or as a result of adverse economic conditions or other events that are outside of the employer’s control. A partial plan termination may also be the result of plan amendments that adversely affect the rights of employees to vest in benefits under the plan. Certain factual circumstances may affect the assessment of a partial plan termination. The determination of whether a partial plan termination has occurred is based on facts and circumstances, but as a general rule the IRS has said that a more than 20% reduction in the number of covered participants during a plan year is considered a partial plan termination.
Click here for the IRS’s Retirement Plan FAQs regarding Partial Plan Termination.
EBPAQC Plan Advisory on Partial Plan Terminations
The EBPAQC has issued a new plan advisory, Partial employee benefit plan terminations, to provide plan sponsors, administrators or trustees with an understanding of partial plan terminations under the Employee Retirement Income Security Act of 1974 (ERISA) and their related responsibilities. The plan advisory describes a partial plan termination; discusses the plan administrators' fiduciary responsibilities related to partial plan terminations, the consequences of a partial plan termination, and rebutting the presumption of a partial plan termination; and also provides suggestions for best practices for evaluating partial plan terminations and references to additional resources.
Click here for the EBPAQC plan advisory Partial employee benefit plan terminations.
EBPAQC members are encouraged to share plan advisories with their plan clients. Click here for additional EBPAQC plan advisories.
Sincerely,
AICPA Employee Benefit Plans Audit Quality Center |
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| In This Alert |
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| Additional Resources |
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| Stay Informed |
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AICPA
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