Refund of employee contributions - Defined Benefit Plan

[tja]

It is my understanding that an employee's contributions to a governmental defined benefit plan cannot be refunded to an employee who is no longer covered by the plan if he or she remains employed with the sponsoring employer unless he or she reached normal retirement age. This issue arises in the context of a collectively bargained employee who leaves the bargaining unit to become part of management.

Does anyone know of any exceptions or is there any authority that supports the refund of employee contributions to someone who transferred to a position not covered by the plan but has not separated from service?

[My 2 cents]

Two considerations in deciding:

1. What does the plan say?

2. Is it a good idea?

[Griswold]

I've come across the issue before, but our analysis was based entirely on the terms found within the plan. If I recall correctly it had to do with whether or not the participant was still in "covered employment" as defined in the corbel plan.

[tja]

The plan currently requires separation of service but an amendment is being considered to allow in-service refunds to employees who leave covered employment by transferring to management. .

[JJRetirement]

Coincidentally, this is closely related to a question I just posted on termination of employment for a governmental plan.

I think the definitely determinable regulation and the old rev. ruls. on which it was based does apply to governmental plans, so that in-service distributions wouldn't be permitted before the earlier or 62 or NRA even if the plan were amended to permit them. So I think the question of whether the employee is still employed needs to be answered (unless the participants in question are old enough to qualify for permitted in-service distributions).

[Carol V. Calhoun]

Are these picked up contributions, or after-tax employee contributions?

[tja]

All or virtually all picked up.

[Carol V. Calhoun]

Picked up contributions are treated as employer contributions. So they could not be the subject of an in-service refund until the earlier of age 62 or normal retirement age.

Merely transferring from a collectively bargained position to one that is not collectively bargained, or ceasing to be covered by the plan, wouldn't help.