Accrued Benefit
The portion of a pension benefit that an employee has earned to date based on their years of service and salary.
In Detail
The accrued benefit is the pension amount you have earned so far, based on the plan's benefit formula applied to your service and salary to date. For example, if your plan provides 2% of final average salary per year of service and you have worked 15 years with an average salary of $70,000, your accrued benefit is $21,000 per year (2% x 15 x $70,000). This benefit continues to grow with each additional year of service and salary increase. The accrued benefit is important because it represents a legally protected right once vested — the plan cannot reduce benefits already earned except in very limited circumstances.
For plans in financial distress, benefit reductions typically apply only to future accruals, not to already-accrued amounts. However, multiemployer plans in critical and declining status can, under certain conditions, suspend payment of previously accrued benefits with PBGC and Treasury Department approval. Your annual pension statement should show your current accrued benefit. Reviewing this annually helps you understand how much retirement income you are building and whether you need to supplement with personal savings.
Frequently Asked Questions
What does Accrued Benefit mean in pension finance?
The portion of a pension benefit that an employee has earned to date based on their years of service and salary.
Why does Accrued Benefit matter for my retirement?
The accrued benefit is the pension amount you have earned so far, based on the plan's benefit formula applied to your service and salary to date. For example, if your plan provides 2% of final average salary per year of service and you have worked 15 years with an average salary of $70,000, your acc...