DTH Posted December 3, 2003 Posted December 3, 2003 Has anyone seen a plan design where a individual is rehired, within a certain period of times after separation from service, and is able to "buy back" the missed service from the time the participant terminated until the date of rehire? The plan provides that if a participant is a vested term or began payments and repaid the plan the amount s/he received, within a certain period of time, the rehired employee can purchase "service credits" of the time s/he was out of work. Example: Participant terminated 12/31/00 with 10 years of service. The participant was rehired 1/2/03. The participant may purchase the missed service between 12/31/00 through 1/2/03. I know that under EGTRRA, state and local governmental plans (403 and 457) can allow participants to purchase service credits, but I think this is done while the individual is employed. If this is a valid design, could you please provide me a Code cite. Thanks!
AndyH Posted December 3, 2003 Posted December 3, 2003 The provision that you are describing is a very common provision in DB plans that is often referred to as a "cashout/buyback" provision. I'm going to test my memory now and see if anybody can confirm that it was GCM 39310 that caused such a provision to become fairly standard. And GCM stands for General Counsel Memorandum. You could probably find this on an internet search, but maybe somebody could confirm that my memory is ok before you go off on a wild goose chase! p.s. Yes, it was the subject of GCM 39310. I tried to find a link to it but could not.
DTH Posted December 10, 2003 Author Posted December 10, 2003 Thank you for your response. I have a copy of GCM 39310. As it applies to my issue, it is my understanding that the GCM refers to participants who terminate and are not 100% vested> When rehired the participant may be allowed to buy back the non-vested services performed while employed. My issue deals with allowing individuals to buy service credits while s/he was NOT employed (i.e., the time between termination and the rehire date). I do not think this is an allowable plan design. Any other comments?
AndyH Posted December 10, 2003 Posted December 10, 2003 ok, sorry, I misread your question. I agree. To my knowledge this is not permitted.
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