Pension Integration and Retirement Benefits

This paper investigates the outcomes associated with retirement plans, defined-benefit or defined-contribution, that take Social Security benefits into account. In 1995, just over half of the defined-benefit plans took Social Security benefits into account when calculating future retirement income. Excess-rate and offset integrated plans have major differences that makes it necessary to examine their effects on replacement rates of integrated pension plans in different ways. Offset plans do not have higher rates of replacement than excess-rate plans as is commonly believed. At low tenure levels offset plans have higher replacement rates than those plans that are not integrated, however, at higher tenure levels the opposite is true. It is also realized that nonintegrated plans have greater replacement rates than the excess-rate plans.