However, pension benefit reductions due to integration make it more difficult for lower-income workers to attain retirement income security. The majority of these workers are women and minorities.
Pension plans use different approaches to integration.
In addition, the approach to integration depends on whether a plan is a defined benefit plan, which commits a firm to pay a specified benefit at a future date, or a defined contribution plan, which bases benefits on the amount accumulated in a participant's account. Integrated plans must also take account of non-discrimination requirements specified in the tax code. A qualified plan is permitted to offset some, but not all, of Social Security's tilt in benefits toward lower-paid employees. Permitted disparity limits both the percent reduction in Social Security benefits when using the offset method, and the percent of benefits permitted above the integration level when using the step-rate approach. The extent of regulatory restrictions placed on an approach affects its selection by an employer.