What is a 'Triggering Event'
1. A tangible or intangible barrier or occurrence that, once breached or met, causes another event to occur. Triggering events are written into contracts to prevent or ensure that after a given occurrence, the terms of the original agreement are abandoned or changed to suit the party that included the triggering event in the agreement.
2. A certain milestone or event that a participant in a qualified plan must experience in order to be eligible to receive a distribution from a qualified plan.
BREAKING DOWN 'Triggering Event'
1. It is common for banks to issue debt at a given interest rate on certain terms. For example, one of the bank's terms could be that the borrowing party does not incur any more debt for the term of the loan. Should the borrower incur more debt - the triggering event - the bank may foreclose on the loan or increase the original rate of interest accordingly.
2. Triggering events are typically characterized by the attainment of retirement age (as defined under the plan), termination of employment, termination of the plan, the participant becoming disabled (as defined under the plan) or the death of the participant.
In some cases, in-service withdrawals may be permitted within the plan, allowing for tax and penalty free distributions before a triggering event occurs.