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Clayton & McKervey, P.C. has a dedicated group of Employee Benefit Plan Auditors, who provide audits that meet ERISA, DOL and IRS requirements.

Please consider Clayton & McKervey, P.C. to audit your plan. Our most competitive pricing is for audits that can be scheduled during May, June, July or August. For a quote, please call Sarah Russell or Tim Wise 248.208.8860.

Employee Benefit Plan Audit brochure

Partial Plan Termination

As we continue to face uncertain economic times and companies continue to layoff employees, it is important to remember how such layoffs could affect your plan. Although the plan sponsor may not have any intention of terminating the plan, layoffs could trigger a partial plan termination.

Below are common questions surrounding partial plan terminations:

When does a partial plan termination occur?

A partial plan termination can occur if approximately 20% or more of eligible plan participants are terminated by the plan sponsor as a result of an action, such as a plant closure, a decision to downsize, or the termination of a product line. The reduction can take place over one or more plan years and still be classified as a partial plan termination.

What impact does a partial plan termination have on the plan?

When a partial plan termination occurs, all affected participants become fully vested at the date of termination.

What if there was a partial plan termination and we did not fully vest affected participants?

The plan should reinstate the participants’ accounts with the amounts forfeited. Generally these amounts will be less than $1,000, and the plan can “force-out” those participants and distribute the funds without a participant distribution request. However, the plan should consider reaching out to those participants as they will be faced with tax consequences related to the such distributions.

If you think your plan may have experienced a partial plan termination, seek consultation from your ERISA attorney and your plan auditor.

248.208.8860 | 2000 Town Center, Suite 1800 | Southfield, MI 48075