Voluntary Plan Termination

Published: | Updated: October 14, 2017

Definition - What does Voluntary Plan Termination mean?

A voluntary plan termination occurs when an employer ending a voluntary pension plan. Voluntary pension plans one of the retirement savings tool that is often offered by employers. Life insurance policies are also commonly offered, along with pensions, as a savings tool, since both policies can have investing components.

Insuranceopedia explains Voluntary Plan Termination

If an employer voluntarily terminates a plan, then, under federal law, the assets of the plan must be given to the participants in the plan. This is because a portion of the employee's paycheck is used to pay the premiums for the pension. So, when an employee changes jobs or moves on after the voluntary plan termination, they take the assets with them, assets that can be worth a substantial amount of money.

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