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.
