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Stephen Ferszt Quoted in PlanSponsor Magazine on How Layoffs and Furloughs Affect Retirement Plans

April 6, 2020

Employee Benefits and Tax & Personal Planning partner Stephen Ferszt was recently quoted in PlanSponsor Magazine (subscription required) on the often confusing difference between employee layoffs and furloughs as they relate to retirement plans. Generally, the IRS may deem a partial termination of a retirement plan to have occurred when a company undertakes layoffs.  In the case of furloughs it may not be so clear depending upon the particular facts and circumstances. Generally, the IRS may deem the plan partially terminated when 20% or more of the plan’s participants experience a true separation from employment. “In determining whether there could be a partial termination of a qualified retirement plan resulting from some form of an employee’s separation from service,” Mr. Ferszt explains, “the first thing that you need to examine is how the plan counts an employee’s service. Is it counting actual hours of service performance? Is it using an elapsed time method, or some other method? The IRS’s bottom-line decision is based on an analysis of all facts and circumstances.”


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