early retirement - rehired - waiver of future accruals permissible

[dixieandruby]

Tax-qualified defined benefit plan offers early retirement distributions (age 55-64).  NRA is age 65.  Plan provides that if participant terminates and commences early retirement distribution, if upon reemployment before age 65, participant desires to continue receiving distributions, participant must waive (in writing) opportunity to earn future accruals on service earned between reemployment and eventual final retirement, in which case his initial distributions continue unchanged with no additional accruals or further adjustment to his payments.  Is this participant waiver of additional benefit accrual in exchange for continuance of pension distributions (during reemployment) permissible?  If the person does not waive the additional accruals, his pension benefit is "suspended" during the reemployment period and then resumes at eventual retirement, adjusted to reflect additional accruals earned during reemployment along with any required actuarial adjustments.

Many thanks.

[AndyH]

Not a lawyer, but this does not sound exactly right to me.  The plan can provide that any future benefit accrual is offset by the present value of distributions, but this is not a direct quid pro quo (couldn't resist).  There could still be a small increase depending on the accrual level, the level of current distributions, and the actuarial equivalence factors, but often this results in a full offset.

The plan can also provide that benefits are suspended upon re-employment under certain situations.

But I've never seen or heard of a plan that provides for an employee election in this situation.   There's a first time for everything I suppose.

[dixieandruby]

On 11/8/2019 at 1:54 PM, AndyH said:

Not a lawyer, but this does not sound exactly right to me.  The plan can provide that any future benefit accrual is offset by the present value of distributions, but this is not a direct quid pro quo (couldn't resist).  There could still be a small increase depending on the accrual level, the level of current distributions, and the actuarial equivalence factors, but often this results in a full offset.

The plan can also provide that benefits are suspended upon re-employment under certain situations.

But I've never seen or heard of a plan that provides for an employee election in this situation.   There's a first time for everything I suppose.

Thanks AndyH.  This seemed strange to me as well.  

[Calavera]

Any participant, if supported by plan document, can opt-out of DB plan accruals. I am not aware of any reason why opt-out upon rehire after commencing benefits would be prohibited.