integrated pension plan
An integrated pension plan is a type of employer-sponsored retirement plan that integrates pension benefits with Social Security benefits. Integration allows an employer to provide higher pension benefits to employees whose earnings exceed the Social Security wage base, on the theory that lower-paid employees receive proportionally greater replacement income through Social Security.
The Internal Revenue Code recognizes integration in 26 U.S.C. § 401(a), which permits a plan to take Social Security benefits into account without being treated as discriminatory. Under IRS regulations, integration is allowed so long as the plan satisfies nondiscrimination requirements and applies integration formulas uniformly to covered employees.
The Employment Retirement Income Security Act (ERISA) also allows integrated plans but restricts the extent to which pension benefits may be reduced to account for Social Security. A plan may offset benefits based on Social Security only if the reduction does not violate ERISA’s non-forfeiture protections and does not decrease accrued benefits because of post-ERISA increases in Social Security benefits, such as statutory cost-of-living adjustments (COLAs).
Integrated plans may calculate offsets using estimated Social Security benefits, but those estimates must be reasonable. Using inaccurate or inflated estimates that improperly reduce pension benefits may violate ERISA’s non-forfeiture provisions.
Integrated pension plans are subject to ERISA’s fiduciary duties and disclosure requirements, ensuring that employees receive accurate information about how Social Security benefits affect their plan benefits.
[Last reviewed in December of 2025 by the Wex Definitions Team]
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