Suspension of Benefits on Re-Employment

[Guest TooMuchFreeTime]

I'm wrestling with the provisions of a plan, and trying to reconcile it with the actual administration...

Plan Terms

The Plan is a Cash Balance that suspends benefits paid to retired participants upon re-hire as follows:

• Any benefit being paid ceases
  
• On subsequent termination, benefit is re-calculated using all service/comp
  
• The re-calculated benefit is offset by any prior benefits paid.
  

On its face, it seems fairly straightforward. However, I'm unsure how the case of a purchased annuity would be treated under this provision.

Question

How would a purchased annuity be treated under this plan?

On purchase, would it be treated as a full distribution of the benefit from the plan's perspective, such A) there is no ongoing plan benefit to cease and B) the offset performed on re-employment would mean a reduction for the full accrued benefit as of the original termination?

Authority

The closest thing I could find ot authority on the subject were the DOL regs at 2530.203-3(d) which limits the "suspendable amount" to "the portion of a monthly benefit payment derived from employer contributions." Does this mean we're only suspending benefits paid directly from the trust, and not from purchased annuities? Or does it simply mean that we're not allowed to suspend payments form employee contributions under a defined benefit plan?

Thanks in advance for any help/background you can provide on the subject.