Frozen Traditional Benefit in Cash Balance Plan - Need to Count Comp from Later Years?

[Übernerd]

Company's DB Plan currently uses a traditional final-average-pay formula. Company is switching to a cash-balance formula for new hires and rehires only (i.e., no conversion of prior traditional accruals and no switch for continuously employed participants). Vested terminated employees with traditional benefits who are rehired after the switch will have a frozen traditional benefit and a new cash-balance benefit. Is there any need for the plan to provide that compensation from the period reemployment will be taken into account when calculating payment of the frozen traditional benefit? The regs suggest that this would be necessary if the traditional benefit were converted to an opening account balance, but I don't see any requirement that later comp be counted if you don't convert.

Any thoughts appreciated. Cheers.

[david rigby]

Is there any need for the plan to provide that compensation from the period reemployment will be taken into account when calculating payment of the frozen traditional benefit?

If the plan uses comp after rehire, then the "frozen traditional benefit" won't be frozen, will it?

Of have I misunderstood your question?

[Übernerd]

Is there any need for the plan to provide that compensation from the period reemployment will be taken into account when calculating payment of the frozen traditional benefit?

If the plan uses comp after rehire, then the "frozen traditional benefit" won't be frozen, will it?

Of have I misunderstood your question?

Not completely. It would be frozen with respect to credited service--i.e., there would be no additional accruals. Another way to state the question is "Is it permissible to totally freeze the traditional formula benefit?"