Voluntary Plan Termination

Updated: 20 December 2024

What Does Voluntary Plan Termination Mean?

A voluntary plan termination occurs when an employer ends a voluntary pension plan. Voluntary pension plans are a common retirement savings tool offered by employers. In addition to pensions, life insurance policies are often provided as a savings tool, as both types of policies may include investment components.

Insuranceopedia Explains Voluntary Plan Termination

If an employer voluntarily terminates a plan, federal law requires that the assets of the plan be distributed to the participants. This is because a portion of the employee’s paycheck is used to fund the pension premiums. When an employee changes jobs or leaves after the voluntary plan termination, they are entitled to take the assets with them, which can be worth a substantial amount of money.

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