Closed Defined Benefit Plan & Rehired Employee

[Guest elmo27]

A company maintains a defined benefit pension plan which was closed to new participants in 2007. An employee who once participated in the plan left work prior to 2007. He was rehired in 2009 and was allowed to participate in the plan once again because of his prior years of service. Does this raise any compliance/legal issues? Any authority covering this situation?

[Andy the Actuary]

You should verify that the Plan language allows the reparticipation. Typically, just because the employee fulfilled the one-year participation requirement prior to the participation freeze does not necessarily grant reentry upon rehire. Generally, Plans are drafted to preclude this occurrence and it can get complicated, if not ambiguous, when Plan language speaks of "employee" but defines "Employee" (capital "E"). Given it appears benefits are not frozen, the Plan must continually be tested for coverage and non-discrimination regardless.

[Guest elmo27]

You should verify that the Plan language allows the reparticipation. Typically, just because the employee fulfilled the one-year participation requirement prior to the participation freeze does not necessarily grant reentry upon rehire. Generally, Plans are drafted to preclude this occurrence and it can get complicated, if not ambiguous, when Plan language speaks of "employee" but defines "Employee" (capital "E"). Given it appears benefits are not frozen, the Plan must continually be tested for coverage and non-discrimination regardless.

Thank you for the prompt reply. I'll look into the plan language more closely but am inclined to agree with you.