How do I prove that the reduction in participants was simply due to routine turnover in my business?

Some businesses may experience employee turnover on a routine basis, such as retail establishments or companies employing seasonal employees. Employees severing employment due to a routine turnover are generally not counted toward a partial plan termination. However, in the event of an audit of your plan, your company must be prepared to offer adequate proof of routine turnover. Acceptable forms of proof include human resources records and employee statements as evidence of the voluntary nature of the employee's termination.

Factors to help determine how routine turnover has affected the turnover rate include:

  • Information on the turnover rate in other periods
  • The extent to which the terminated employees were actually replaced by new employees
  • Whether the new employees performed the same functions, had the same job classification or title, or received comparable compensation
Was this article helpful?
Have more questions? Submit a request