Are those recently laid off being fully vested in 401K?
Under Rev. Rul. 2007-43, the IRS established that a 20% or greater turnover rate in the applicable period creates a rebuttable presumption that a partial termination occurred.
Your plan may have a partial termination if more than 20% of your total plan participants were laid off in a particular year. Partial terminations can occur in connection with a significant corporate event such as a closing of a plant or a division, or as a result of general employee turnover due to adverse economic conditions or other reasons that are not within the employer’s control.
The law requires all “affected employees” to be fully vested in their account balance as of the date of a full or partial plan termination. They must become 100% vested in all employer contributions (including matching contributions) regardless of the plan’s vesting schedule. Employee salary deferrals are always 100% vested.
An affected employee in a partial termination is generally anyone who left employment for any reason during the plan year in which the partial termination occurred and who still has an account balance under the plan.