Withdrawal Benefits


DEFINITION of 'Withdrawal Benefits'

The rights of an employee who has a qualified pension plan to cash-out any accumulated benefits upon leaving an employer. Withdrawal benefits under a defined contribution plan may allow the employee to have immediate rights to any contributions, plus any earnings on those contributions. The employee may not be entitled to receive any employer contributions unless he or she is vested. Under a defined benefit plan, most likely the benefits will stay with the retirement plan until you become eligible to receive them.

BREAKING DOWN 'Withdrawal Benefits'

If an employee is fully vested, he or she may elect to withdraw the accumulated benefits and be subject to certain tax liabilities and/or penalties, or transfer it to an Individual Retirement Account (IRA) or, in some cases, to another employer plan. Most employer and union sponsored retirement plans in private industry in the United States are governed by Federal laws in the Employee Retirement Income Security Act of 1974 (ERISA) and the internal Revenue Code. The terms of vesting depend on the employer; however, maximum limits are set by legal statute.

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