DEFINITION of 'Past Service'

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.

BREAKING DOWN 'Past Service'

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.

RELATED TERMS
  1. Corporate Pension Plan

    A formal arrangement between a company and its employees - or ...
  2. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  3. Plan Participant

    A plan participant either contributes into a pension plan or ...
  4. Unfunded Pension Plan

    An employer managed retirement plan that uses the employer's ...
  5. Pension Adjustment Reversal - PAR

    A numerical calculation in certain Canadian pension plans that ...
  6. Pensionable Service

    The period of service, expressed in a yearly figure, for which ...
Related Articles
  1. Retirement

    Pension Plans: Pain Or Pleasure?

    Employees have a love/hate relationship with this retirement option.
  2. Retirement

    Florida's Surprisingly Flexible State Retirement System

    Retired Florida employees can choose a 401(k)-style investment plan or a traditional pension.
  3. 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.
  4. Retirement

    Understanding Defined Benefit Pension Plans

    An employer-sponsored retirement plan where employee benefits are based on a formula using factors such as salary history and duration of employment.
  5. Retirement

    New 401(k) Pension Rollover Rule: Pros and Cons

    Is the new rule allowing participants to roll their 401(k) balances into pensions a good idea?
  6. Retirement

    America's Frozen Pension Dilemma

    Unfortunately, there are several factors that have eroded the presence of pension plans in America, and workers need to be prepared to replace that expected income for their retirement years. ...
  7. Financial Advisor

    How to Advise Clients with Frozen Pensions

    Financial advisors are on the front line in advising clients impacted by a frozen pension. Here's what they need to consider.
  8. Retirement

    Chipping Away At The Pension Freeze Trend

    Learn five steps that'll put your retirement back into your own hands.
  9. Financial Advisor

    What's a Qualified Retirement Plan?

    Employers establish qualified retirement plans to help their employees save money.
  10. Financial Advisor

    The 401(k) and Qualified Plans Tutorial

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
RELATED FAQS
  1. Who bears the investment risk in 401(k) plans?

    Who actually bears the investment risk in a pension plan depends on the type of pension plan that is employed. In a broad ... Read Answer >>
  2. What are qualified retirement plan types?

    Understand the different types of qualified retirement plans and what they mean in terms of employee and employer contribution ... Read Answer >>
Hot Definitions
  1. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  2. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  3. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  4. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  5. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  6. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
Trading Center