DEFINITION of 'Allocation Of Plan Assets On Termination'

The procedure that occurs upon the termination of any kind of pension plan. The allocation of plan assets on termination can occur in one of two ways: either each employee is repaid his or her contributions plus interest, or else the employees are categorized based on their entitlement to benefits.

BREAKING DOWN 'Allocation Of Plan Assets On Termination'

The allocation of plan assets is usually done by the plan administrator or trustee. Obviously, different types of employees will favor one type of allocation over the other. For example, highly compensated employees may come out ahead in the latter type of allocation listed above, while rank-and-file employees may benefit more from the former.

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