INTEGRATED PENSION PLAN Meaning and
Definition
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An integrated pension plan is a comprehensive retirement savings scheme that combines elements of both social security benefits and employer-sponsored pension plans. It is designed to provide a more secure and well-rounded retirement income for employees.
In an integrated pension plan, contributions are made to two different sources: a primary defined benefit plan and a social security plan. The primary defined benefit plan is typically provided by an employer and offers retirement benefits based on the employee's salary and length of service. The social security plan, on the other hand, is a government-administered program that provides retirement benefits to eligible individuals based on their earnings and contributions throughout their working years.
The integrated pension plan works by coordinating the retirement benefits from both sources to ensure that employees receive a relatively consistent income stream during their retirement years. This coordination is achieved through a process known as "integration level," where the employer's pension benefits are reduced by a certain percentage to account for the social security benefits an employee is eligible to receive. The integration level is typically set based on factors such as the employee's age, salary, and years of service.
By integrating these two retirement income sources, an integrated pension plan aims to provide a higher level of retirement security for employees. It ensures that individuals receive a well-rounded income stream that considers both earned employer benefits and social security benefits. This approach allows for a more stable and sustainable income during retirement, reducing the risk of financial hardship and ensuring a comfortable standard of living for retirees.
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