In order for a rehire to have forfeited benefits restored, is a plan required to contain a "buy back" provision, as outlined in 1.411(a)-7(d)(4)((iv)? I have a plan with an individually designed document which calls for a restoration of forfeited benefits without requiring the rehired participant to pay back any distributions, and is requiring the establishment of a separate account for tracking vesting on these amounts upon rehire.

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Let me put my question another way:

If a plan document does not contain the repayment language, am I correct in stating that a plan cannot immediately forfeit a participant's non-vested accrued benefit because the plan does not fully satisfy the "cash out" provisions in 1.411(a). From my interpretation of the Regulations, it seems as if the non-vested portion would remain in the participant's account, unavailable for current forfeiture usage (i.e.- reallocation, other restorations, payment of plan expenses, etc.).

It is my understanding that the regulations were designed to require that the plan allow a re-hired participant to "purchase" the restoration of the non-vested interest and, at the same time, allow (but not require) the plan to demand that, as a pre-condition to the restoration, the participant re-pay the vested interest.

If the plan wishes to be more generous by automatically restoring the forfeiture without requiring the repayment of the vested interest, this should be OK.

For example, the plan sponsor may not wish to deal with the hassle of communicating the repayment rules to the re-hired participants and then handling the repayments, including the question of whether the repayment creates a basis for the participant in the accrued benefit.

Our prototype plan joinder agreement provides an election for the plan sponsor to choose whether to require repayment as a pre-condition for restoration.

Hope this helps!!

I don't know if this is common, but it has a bad "smell" to me. Might there be a concern for a discrimination issue?