Benefit for Employee rehired after Plan terminated

[Guest Mike Spickard]

I have a client that terminated a pension plan in 1988. IRS and PBGC both approved of the termination. Annuities were bought for actives, term vesteds and retirees. Some actives were able to "grow into" early retirement subsidies if they continued to work for the employer and later satisfied the age and service conditions.

One participant who was terminated vested (had 14 years of service) at the time of the Plan termination was rehired several years later. He worked a few more years and if the Plan had continued, he would have qualified for early retirement benefits by virtue of leaving his second tour of employment after age 55 with 15 years of service.

He is claiming that his second round of employment should count toward early retirement eligiblity and that his pension benefit (now the obligation of the insurance company) should include an early retirement subsidy.

This does not seem correct to me, but I am unable to get a grip on any certain that could be used to deny the improved benefit. The fact that the Plan terminated does not completely eliminate the impact of any contingent events or future service since in the case of active employees, they must be able to get an early retirement pension from the insurance company if they meet the qualifications. What about terminated participants? Can their service after rehire impact their benefits from a terminated plan?

[Guest Harry O]

See Rev. Rul. 85-6.

[Guest Mike Spickard]

Thanks Harry. I was aware of the requirements under RR 85-6, but did not think they would apply to a participant who was terminated at the time of the termination and could never qualify for subsidized benefits based upon expected continued separation.

RR 95-6 does not really address my particular issue, unless "participant" is broadly defined to mean anyone with a benefit.

For that matter, I suppose you could have a participant who terminated 2 years before the termination with 3 years of service, but not be vested. They forfeit their benefit, but the Plan terminates one year later, everyone gets paid out, but they are rehired a year after the Plan termination and work 2 more years.

Based upon their service after rehire, are they vested in the benefit they earned before they left and before the plan was terminated?