Withdrawal Credits, Pension Plan

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DEFINITION of 'Withdrawal Credits, Pension Plan'

The rights of an employee who has a qualified pension plan to cash out any accumulated benefits upon leaving an employer. Under a pension plan, through withdrawal credits, the employee may 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. The terms of vesting depend on the employer; however, maximum limits are set by legal statute.

INVESTOPEDIA EXPLAINS 'Withdrawal Credits, Pension Plan'

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.

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