Part 26 · Chapter 4

Workforce Restructuring: Benefit Plan Consequences

Law stated as of October 3, 2026 · Severance, WARN, and Workforce Restructuring

Scope and status

This chapter is a restructuring overlay: it identifies the benefit-plan consequences that a reduction in force, facility closure, furlough, or divestiture triggers across the plan portfolio, states the operative rule and the trigger to watch, and points to the Part that covers the substantive analysis. It is deliberately not a substitute for those Parts; its purpose is to make sure nothing in the portfolio is missed while attention is on the headcount decision. Related questions are treated elsewhere: severance plan status and design in Severance Plan Status, Window Programs, and Design; WARN in The WARN Act and State Mini-WARN Laws; and §409A, §457, and taxation in Severance under §409A and §457, and Severance Taxation.

Sections

The opening sections of Part A are shown in full. The other sections are listed by title; their text is available to subscribers.

Part A — Qualified Retirement Plans

A1.Partial termination — the first thing to calculate

Part 26, ch. 4, § A1

A partial termination of a qualified plan requires the affected participants' accrued benefits to become fully vested — in a DB plan, to the extent funded as of the partial-termination date; in a DC plan, their account balances. Statute: Code §411(d)(3); Final reg: Treas. Reg. §1.411(d)-2(b). The IRS applies a rebuttable presumption that a partial termination has occurred where the turnover rate of participating employees during the applicable period is at least 20%, measured as employer-initiated severances over the sum of participants at the start of the period plus those who became participants during it; the presumption may be rebutted by showing the turnover was routine. Rev. Rul.: Rev. Rul. 2007-43.

A2.Coverage and nondiscrimination testing after the reduction

Part 26, ch. 4, § A2

A RIF changes the tested population and can break §410(b) coverage or §401(a)(4) nondiscrimination, particularly where the reduction falls disproportionately on non-highly compensated employees; ADP/ACP results and §416 top-heavy status can also shift. Statute: Code §§410(b), 401(a)(4), 401(k)(3), 401(m)(2), 416.

A3.Distributions, loan offsets, and the plan's cash flow

Part 26, ch. 4, § A3

Separation from service is a distributable event; terminated participants will take distributions and rollovers, and outstanding plan loans will generally be offset on distribution; the offset is a qualified plan loan offset amount, with an extended rollover deadline through the participant's tax return due date (including extensions) for the year of offset, only if the loan met §72(p)(2) immediately before severance, the offset results from failure to repay because of the severance, and it occurs within 12 months after severance — other offsets keep the ordinary 60-day rollover deadline. Statute: Code §§401(k)(2)(B), 402(c)(3)(C), 72(p); Final reg: Treas. Reg. §1.402(c)-3.

A4.Defined benefit consequences

Part 26, ch. 4, § A4

A workforce reduction at a plan sponsor with a DB plan can trigger a §4043 reportable event (including the active-participant-reduction event), can constitute a substantial cessation of operations under ERISA §4062(e) triggering PBGC liability-determination review, and changes the plan's funding profile and potentially its AFTAP and §436 restriction posture — which in turn can restrict lump sums and plant-shutdown benefits at exactly the moment the workforce wants them. Statute: ERISA §§4043, 4062(e); Code §§430, 436.

A5Plan-shutdown and layoff benefits in DB plansSubscribers
A6Freezing or terminating a plan alongside the RIFSubscribers

The first Part of each chapter is open to everyone. The remaining sections, with their authority and practice points, are available to subscribers and to clients of ERISA Benefits Law Group, PLLC whose engagement includes access.