del.icio.us
Digg
Sphere
Stumble
Technorati
Twitter
What To Expect When You're Laying Off
By Jerry Kalish
This is not one of those usual “how to take advantage of your retirement plan” posts I’ve been writing. Instead, this week, I want to try to help you deal with one of the harsh realities of being a business owner--particularly in this economy and particularly at this time of year. It’s the unfortunate action that business owners sometimes have to take. It’s having to lay people off. That’s the polite term for firing.
Guy Kawasaki, who blogs at How To Change The World, posted an article recently on The American Express Open Forum (OPEN also sponsors BizBox) called "The Art of Laying People Off". In it, Guy nicely covers some of the practical aspects of down-sizing. His advice includes, "Cut deep and cut once," and, "Show consistency". The whole thing is worth a read.
Additionally, before you start the layoff process, there is an important retirement matter to consider: whether or not a “Partial Termination” will occur.
Under IRS regulations, if there a sufficient number of employees are terminated, then a Partial Termination results. In that event, the IRS requires everyone to be 100% vested regardless of your retriment provisions. This could include employees terminated prior to the round current cutbacks, depending on the specific situation and timing.
Unfortunately, there is no objective set of rules, so I can't just tell you if this applies to you or not. Each case is based on the individual facts and circumstances, an expression I've heard on many occasions from my attorney friends over the years.
So what should do when planning layoffs?
* Consider the Partial Termination rule in the context of the planning for the reduction in force and layoffs.
* Determine whether it would make sense to submit your retirment plan to the IRS for a ruling as to whether a partial termination occurred.
Here is the nitty-gritty of Partial Terminations: the IRS' 401(k) Resource Guide - Plan Participants-Plan Termination.
Now, good luck.
Comments (0)December 2, 2008 9:42 AM
