A Pink Slip and a Vest


In a revenue ruling, the IRS further standardized a benchmark it first proposed in 1991 for determining when a partial termination of a defined contribution retirement plan under IRC section 411(d)(3)(A) has occurred. The provision comes into play often when employers downsize, as in the scenario of the ruling, 2007-43, which was released in June. Under the statute, a termination or partial termination of a qualified plan results in the immediate vesting of all affected employees. Corresponding regulations provide only a facts-and-circumstances standard for determining how many layoffs constitute a partial termination. “So vague a regulation is no help to anyone,” said the Seventh Circuit Court of Appeals in Matz v. Household International Tax Reduction Investment Plan , 94 AFTR 2d 2004-6781 (2004). The court reached back 13 years for a benchmark in an amicus brief filed by the IRS in another case. In the earlier case, Weil v. Retirement Plan Administrative Committee , 67 AFTR 2d 91-1131 (2nd Circuit, 1991), the IRS said a partial termination may be presumed to have occurred when severance turnover is at least 20% of participating employees. In the recent revenue ruling, the IRS applied that standard to an employer that closed one of its four business locations, laying off 23% of its plan participants.

SPONSORED REPORT

2019 State of Financial Reporting Survey

We surveyed nearly 600 finance and accounting professionals on their month-end close and reporting processes. See the results.

VIDEO

What RPA is and how it works

Robotic process automation is like an Excel macro that can work on multiple applications, says Danielle Supkis Cheek, CPA. RPA can complete routine, repetitive tasks such as data entry, freeing up employee time from lower-level chores.