Integration of Retirement Plans with Social Security

Background

Under the policy of Social Security integration, employers can consider the amount of Social Security benefits their workers receive when calculating the defined-benefit retirement benefits they pay to these workers.

Lower-income workers—disproportionately women and people from racial and ethnic groups that have experienced discrimination—are more likely than others to experience a reduction in their employer-sponsored retirement benefit as a result of pension integration. This occurs because Social Security benefits are larger as a percentage of pre-retirement income for lower earners than for higher earners.

INTEGRATION OF RETIREMENT PLANS WITH SOCIAL SECURITY: Policy

Integration

In this policy: Federal

Pension benefits, from either public or private plans, should not be reduced as a result of Social Security benefits.

Employers should be required to notify their employees if their retirement plan is integrated and if integration could affect the value of future retirement benefits.

Participants should be informed about the effects of integration on benefit levels in both defined-benefit. They should receive this information when hired, subsequently on an annual basis, and when they leave employment.