Integration with Social Security Definition

Course: Retirement Planning
Lesson 5: Leveraging Nonqualifed Plans for Small Businesses and Not-For-Profit Employees and Owners

Student Question:

I’ve seen the phrase “plan formula can be integrated with social security” many times, but I don’t really know what this means.

Can you explain how that works or is it beyond the scope of what we need to know?

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Instructor Response:

Hi,

“Integrated with Social Security” means a retirement plan is designed to provide relatively larger benefits or contributions to employees earning above the Social Security wage base. The idea is that lower earners already receive a higher percentage of income replacement from Social Security, so the qualified plan can legally favor higher earners somewhat to balance that out.

For CFP exam purposes, just remember that integration is a permitted coordination between a qualified plan and Social Security benefits.

Let me know any other questions.