5.6 Partial Plan Termination Under Erisa

• Library: Virginia Employment Practices and Forms (Virginia CLE) (2015 Ed.)

5.6 PARTIAL PLAN TERMINATION UNDER ERISA

When advising employers on the consequences of implementing a widespread reduction-in-force (RIF), counsel should be aware of the qualified retirement plan issues relating to such an action. Specifically, the RIF could result in a partial plan termination under section 411(d)(3) of the Internal Revenue Code. Section 411(d)(3), which forms part of ERISA, requires qualified plans that experience a partial termination to vest all affected employees with all benefits accrued to the date of termination.

Section 1.401-6(b)(2) of the Treasury Regulations defines a plan termination as including both a "partial" and a "complete" termination of the plan. With respect to partial termination, the regulation states:

Whether or not a partial termination of a qualified plan occurs when a group of employees who have been covered by the plan are subsequently excluded from such coverage either by reason of an amendment to the plan, or by reason of being discharged by the employer, will be determined on...