COVID-19 Layoffs Could Trigger Partial Plan Terminations

Employers considering layoffs during this period of economic uncertainty should be aware that extensive layoffs could inadvertently cause a partial termination of their company’s qualified retirement plan. Employers should monitor their employee turnover rate and consult with benefits counsel to determine the potential impact on their retirement plans.

Partial plan terminations can occur where a significant change to the plan or a significant event affects the rights of employees to vest in their plan benefits, such as termination of a large group of employees.