Qualified plans may be integrated with Social Security to balance the benefit bias toward lower paid employees that is inherent in the Social Security system. Integration allows the employer's retirement plan to be combined with Social Security to result in an overall retirement scheme. Under an integrated plan, greater contributions or benefits are provided for higher paid employees whose compensation exceeds than the Social Security wage base.


The "permitted disparity" places a limit on the allowed difference between either benefit accruals or contributions for highly paid employees vs. lower paid ones.

A. Defined benefit plans
An integrated defined benefit plan must be based on average annual compensation, defined as an average of at least three years' consecutive pay.

Two methods to integrate defined benefit plans with Social Security:

  • Excess method - Plan provides a higher level of benefits for compensation above what is called the "integration level." The integration level typically is what is known as the Social Security covered compensation, which is the average Social Security wage base for the 35 years up to and including the employee's Social Security retirement year.
  • Offset method - Plan formula reduced by fixed or formula amount designed to take into account Social Security benefits.
B. Defined contribution plans
Defined contribution plans may utilize only the excess method to integrate with Social Security.

In general, for a defined contribution plan:
  • the maximum spread between the two contribution levels must be no more than 5.7% and
  • the contribution rate above integration level may be no more than twice the rate below it.


Factors affecting contributions or benefits

Related Articles
  1. Retirement

    Will the Social Security Cap Increase Help It Last Longer?

    The Social Security cap increase will be 7% in 2017, but even that may not be enough to keep Social Security from running out of funds.
  2. Retirement

    The Purpose of a Social Security Statement

    Learn what information your Social Security benefit statement contains and how you can use the information to more intelligently plan for retirement.
  3. Retirement

    Are Social Security Benefits a Form of Socialism?

    Socialism is a loaded word in the U.S., but Social Security, one of the nation's most popular benefit programs, is wholly government-run.
  4. Retirement

    8 Types of Americans Who Won't Get Social Security

    Most Americans eventually get Social Security retirement benefits. Those who don't need a solid Plan B.
  5. Retirement

    What Will Social Security Look Like When You Retire?

    Many workers are not confident that Social Security will be around during their retirement. Here's what you need to know about its future.
  6. Retirement

    What's a Defined Contribution Plan?

    A defined contribution plan is a company retirement plan that specifies the amount of money contributed to it.
  7. Financial Advisor

    Understanding Rules on Defined Benefit Pension Plans

    Defined benefit plans offer advantages to both employers and employees. Employers must understand the federal tax rules when establishing these plans.
  8. Retirement

    How Social Security Will Change In 2015

    The average retiree’s check will rise by 1.7% in 2015, the Social Security Administration says. And the ceiling on taxable earnings will rise, as well.
  9. Financial Advisor

    What Will My Social Security Check Look Like?

    It's important to know what your Social Security check will look like in retirement. Here's how you can figure it out.
  10. Retirement

    What Retired Teachers Need to Know About Social Security

    Depending on where a teacher lives and that educator's eligibility into government provisions, a retired teacher's Social Security benefits may be affected.
Frequently Asked Questions
  1. Can I fund a Traditional IRA, a 403(b) or a Roth IRA using pension money?

    Can pension money be used to fund other retirement accounts?
  2. What are unregistered securities or stocks?

    Before securities, like stocks, bonds and notes, can be offered for sale to the public, they first must be registered with ...
  3. How does a company move from an OTC market to a major exchange?

    The over-the-counter market is not an actual exchange like the NYSE or Nasdaq. Instead, it is a network of companies that ...
  4. Can I roll a traditional IRA into a 529 college account for my grandchild?

    The short answer: Not without paying taxes. But as with much of the tax code, there are various nuisances and exemptions ...
Trading Center