Cash Balance Plan Design - New Account for Rehired Participants?

[Übernerd]

Assuming a pretty vanilla cash balance plan (age-weighted pay credits & fixed-rate interest credits), are there any special design considerations for rehired participants who have either (i) already received a lump-sum distribution on termination, or (ii) are receiving annuity payments when they are rehired?

In the first case, the right approach seems to be simply to start over with a zero account balance. If so, does that approach work for the second group (those receiving annuities)? That is, can you simply leave the current annuity stream going (no suspension) and start them at zero in a new account? I don't see anything in the final or proposed regs, but I'm not sure what to make of the rules under 411(a)(7) in this context.

The sponsor would like to apply the same rules to those who commence payments before and after normal retirement age (and doesn't want to implement a benefit suspension rule for post-NRA rehires).

Cheers!

[SoCalActuary]

Your approach of a fresh start appears reasonable to me, unless a 415 limitation issue will be in play.

[Übernerd]

Your approach of a fresh start appears reasonable to me, unless a 415 limitation issue will be in play.

I don't think there would be any unique 415 issue. The account in pay status would remain subject to the annual benefit distribution limit (and would receive no new accruals), and accruals to the new account would remain subject to the annual accrual limits (i.e., the 401(a)(17) limit). Or am I missing something?

[SoCalActuary]

Your approach of a fresh start appears reasonable to me, unless a 415 limitation issue will be in play.

I don't think there would be any unique 415 issue. The account in pay status would remain subject to the annual benefit distribution limit (and would receive no new accruals), and accruals to the new account would remain subject to the annual accrual limits (i.e., the 401(a)(17) limit). Or am I missing something?

Consider a participant who reached their maximum benefit limits, retired and returned to work. While 401(a)(17) determined compensation limits, it is irrelevant to my comments. New benefit accruals could commence only if they did not violate 415(b) limits.

[Übernerd]

Your approach of a fresh start appears reasonable to me, unless a 415 limitation issue will be in play.

I don't think there would be any unique 415 issue. The account in pay status would remain subject to the annual benefit distribution limit (and would receive no new accruals), and accruals to the new account would remain subject to the annual accrual limits (i.e., the 401(a)(17) limit). Or am I missing something?

Consider a participant who reached their maximum benefit limits, retired and returned to work. While 401(a)(17) determined compensation limits, it is irrelevant to my comments. New benefit accruals could commence only if they did not violate 415(b) limits.

Yes, I agree that the combined distributions from both accounts would be subject to 415(b).