Benefit Offset

Reviewed by Vishnu | Updated on Sep 30, 2020

What is Benefit Offset?

A benefit offset is defined as the reduction in the number of payments that an individual receives from a pension or retirement plan. Generally, a benefit offset occurs when the subscriber owes money to a pension plan. Also, in some cases, a benefit offset can occur if the beneficiary receives benefits from other sources which are to be taken into account.

Breaking Down Benefit Offset

A benefit offset is included when a participant has overdue contributions in a retirement plan after which the participant’s retirement benefits are adjusted. In order to ensure that all contributions are paid to the plan, the overdue payments are deducted from the retirement benefits. Also, a benefit offset can be included if the subscriber receives retirement payments from other sources.

Overview of Retirement Plan Benefits

Depending on the retirement plan’s distribution options opted by the participant, the type of benefits offered by the plan can vary.

*Defined-benefit plan: *An annuity is paid over the participant’s/employee’s lifetime. In case the employee elects to add his/her spouse as a co-participant, the distribution of annuity is paid over the joint lifetime of both the participants.

*Defined-contribution plan: *Here, the retirement benefits are paid in instalments or lump sum.

Annuity payments: Annuity payments can be claimed if the participant or employee opts for a defined benefit plan or chooses to agree on a certain contract under the defined contribution plan. Under this plan, the participant receives retirement benefits in the form of instalments at regular intervals. The intervals between the payments under this plan depend on the type of annuity chosen by the participant.

Instalment payments: Here, the payments are made regularly for a pre-defined period or in specified amounts until the retirement plan account is completely depleted.

Related Terms

  • Employee Provident Fund

    The Employee Provident Fund (EPF) is a retirement benefits scheme in which employees of an organisation contribute a small portion of their basic pay monthly.   Read more

  • Dormant Account

    If you have a savings or current account and if you have not made any transactions for more than 12 months through it, the account will be listed as an inactive account.   Read more

  • Cost of Funds

    The cost of funds is the interest rate that financial institutions are paying on the funds they use in their business.   Read more

  • Showrooming

    Showrooming refers to the practice of checking out a product in a retail store before buying it from online retailers.   Read more

  • Average Propensity to Consume

    The average propensity to consume can be referred to as the percentage of income spent on goods and services by an individual.   Read more

  • Savings

    Savings represents an individual’s unspent earnings.   Read more

Recent Terms

  • Target Risk

    Target risk assets are a class of assets that are not covered under the coverage of a reinsurance treaty or insurance policy because of a particular risk they possess.   Read more