Service to an employer that is recognized for the defined benefit pension plan purposes, but either occurred before the employee was a member in the plan, or before the plans inception. Employees have the option to purchase past service, by cash or by qualified retirement plan roll-over, to increase their years of service in the calculation of their retirement pension. In cases where employees are considering rolling over the assets from their qualified retirement plan, it is often wise to first consult a financial planner. Depending on a number of factors, such as employee life expectancy, marital status and quality of the pension plan, it may or may not be beneficial to make the roll-over.
The period of service, expressed in a yearly figure, for which a worker has established pension credits for a pension plan. Pension benefits are typically based on the worker's pensionable service and highest average salary. The pensionable service value calculated for each worker is most commonly based on the employer's record of the actual units (hours, years etc) worked. This includes any periods of purchased service which the pensioner has opted to purchase. Pension plans may have differing calculations for pensionable service, so it is important for prospective pensioners to be aware of the terms of their pension plan.
A situation in which a company offering employees a defined benefit plan does not have enough money set aside to meet the pension obligations to employees who will be retired in the future. With a defined benefit plan, the employer bears the risk of the investments in the plan. Therefore, when investments such as stocks perform poorly, a shortfall occurs, meaning there isn't enough money in the pension plan to meet the needs of people about to retire. A company can rectify a pension shortfall by increasing investment returns (usually an unlikely course of occurrence) or putting aside more money into the pension plan, thereby reducing the company's net income. As an example, in August 2002, UBS Warburg reported that General Motors had a pension shortfall of $22.2 billion, equal to 83% of the company's market value. This means that $4 of the first $5 that GM earns per share each year stands to get eaten up by pension obligations.
A type of retirement plan, usually tax exempt, wherein an employer makes contributions toward a pool of funds set aside for an employee's future benefit. The pool of funds is then invested on the employee's behalf, allowing the employee to receive benefits upon retirement. In many ways, a pension plan is a method in which an employee transfers part of his or her current income stream toward retirement income. There are two main types of pension plans: defined-benefit plans and defined-contribution plans.In a defined-benefit plan, the employer guarantees that the employee will receive a definite amount of benefit upon retirement, regardless of the performance of the underlying investment pool.In a defined-contribution plan the employer makes predefined contributions for the employee, but the final amount of benefit received by the employee depends on the investment's performance.
Benefits that have been paid into or accrued in an employer-sponsored plan and that can be transferred to a new employer's plan or to an individual who is leaving the workforce. Applies to benefits from health plans, retirement plans and most other defined-contribution plans. Portability of benefits can be found within most 401(k) plans, 403(b) plans and health savings accounts (HSAs). There has been a lot of recent progress in making employee benefits more portable. 401(k) and 403(b) plans can usually be rolled into a new employer's plan or to an IRA; the Health Insurance Portability and Accountability Act (HIPAA) even ensures that pre-existing medical conditions don't exclude a worker when moving from one group health plan to another.The two main types of plans that don't have portable benefits are defined-benefit plans (such as pension plans) and company-sponsored flexible spending accounts (FSAs).
An employee’s ability or right to retain certain benefits when switching employers. Benefits such as certain pension plans and health insurance have portability. Most 401(k) plans have portability of benefits, as well as health savings accounts (HSAs). Portability is a U.S. employee's right to keep or maintain certain benefits when switching employers or when leaving the workforce (retiring). The Health Insurance Portability and Accountability Act of 1996 (HIPAA) provides rights and protections for participants in group health plans. HIPAA states that employer health insurance plans may not be able to exclude coverage for preexisting conditions; provides opportunities to enroll in a group health plan if either coverage is lost or certain life events occur; prohibits discrimination against employees and their dependent family members based on health factors; and assures that certain people will have access to, and can renew, individual health insurance policies.
A joint and survivor option that allows you to be reinstated to the basic pension amount if the spouse predeceases the retiree. More and more companies are utilizing this option for an additional charge. Generally, pop-up options are limited to married couples.
A plan participant either contributes into a pension plan or is in a position to receive benefit payments from the plan. It includes a retired person receiving distributions from a pension plan, or a beneficiary or dependent named by a contributing member. A plan participant has the right to receive benefit payments from a pension plan, whether it is a defined benefit or a defined contribution pension plan, as long as the requirements under the plan's contract has been fulfilled. Under most defined benefit pension plans, the member is required to complete a minimum number of years or service in order to qualify for their maximum pension allowable.The tax law definition of an "active participant" to a company plan could include employees not participating in the employer's plan.
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