IRS Releases More Guidance on Partial Plan Terminations During COVID

The Internal Revenue Service has updated its FAQs regarding partial plan terminations during COVID under Section 209 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020. This new guidance clarifies that plan administrators may use any “reasonable, good-faith interpretation of the term “Active Participant” provided that it is applied in a consistent manner and that only part of the plan year falls between March 13, 2020, and March 31, 2021, and that the relief “applies to any partial termination determination for that entire plan year.” The IRS also clarified that the same individuals need not be covered on the beginning and end dates, only that the number counted on March 31, 2021, include all individuals who are active participants covered by the plan on that date and that the reduction in the number of active participants is not solely limited to reductions related to the COVID-19 pandemic.


See: https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers#partial-termination.


For more information about partial terminations during COVID, see: https://www.boutwellfay.com/post/when-does-a-covid-19-furlough-or-layoff-trigger-a-partial-termination-for-your-qualified-plan-p2