Integrated Pension Plan Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Integrated Pension Plan, written in plain English, along with examples of how it is used.

What is Integrated Pension Plan?

“Integration of Social Security benefits with pension plan benefits. In addition to the Social Security amount, the pension plan pays a benefit in order to achieve a pre-determined total benefit amount.

History and Meaning of Integrated Pension Plan

An integrated pension plan is a type of retirement plan that combines Social Security benefits with those from a private pension plan. The goal is to provide a pre-determined total benefit amount. When Social Security benefits and pension plan benefits are integrated, the employer may reduce the pension plan benefit by a certain percentage, based on the amount of Social Security benefits that the employee is eligible to receive. This reduction is called an "integration level."

Integrated pension plans were introduced in the United States in the 1960s as a response to employer demand for affordable retirement benefits. They were initially most commonly used by larger companies. Today, they are used by a variety of employers in different industries.

Examples of Integrated Pension Plan

  1. An employee who is eligible to receive $1,000 per month in Social Security benefits and $2,000 per month in pension plan benefits. The integration level is 50%, so the employer reduces the pension plan benefit by 50% of the Social Security benefit amount ($500). The employee would receive a total retirement benefit of $2,500 per month.

  2. A company offers an integrated pension plan to its employees. The company calculates the integration level based on each employee's Social Security benefit amount and sets a reduction percentage as a result.

  3. A retired employee receives $1,500 per month from Social Security and $1,000 per month from their employer's pension plan. The employer integrated the pension plan with Social Security and adjusted the benefits accordingly.

Legal Terms Similar to Integrated Pension Plan

  1. Defined Benefit Plan - A type of retirement plan that guarantees a specific benefit amount based on a formula that considers factors like salary history and years of service.

  2. Defined Contribution Plan - A type of retirement plan in which employee and/or employer contributions are invested on behalf of the employee, with the benefit amount ultimately determined by investment performance.

  3. ERISA (Employee Retirement Income Security Act) - A federal law that sets standards for private retirement plans and protects the rights of participants. It includes rules around funding and reporting requirements for pension plans.