Integration of Retirement Plans with Social Security

Social Security integration is an employer practice related to the calculation of the retirement benefits employees receive from a defined benefit (DB) retirement plan. Under integration, the employer subtracts a percentage of the worker’s Social Security from the amount paid by the DB plan. Then the employee is only paid the difference between the two. Since 1986, the law has limited the amount of the DB benefit reduction to half of the promised amount, but it also gave employers more flexibility in estimating Social Security benefits. 

Lower-income workers—disproportionately women and people from historically disadvantaged racial and ethnic groups—are more likely than others to experience a reduction in their retirement income as a result of pension integration. Social Security benefits are larger as a percentage of preretirement income for lower earners than for higher earners. Thus, integration leaves them with a much smaller DB benefit to supplement their Social Security.