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What is a Triggering Event?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 26 January 2020
  • Copyright Protected:
    2003-2020
    Conjecture Corporation
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In finance, a triggering event is an eligibility milestone allowing someone to access a benefits plan or contract. A common example is retirement, allowing people to start receiving income from a retirement plan. There may be certain circumstances where people can dip into such plans before a triggering event, depending on the structure of the contract and the situation.

When contracts for benefits plans are written, triggering events are discussed. In addition to retirement, other triggers might include age and number of years of work. There may also be allowances for transferring or moving such accounts, as for example when someone dies, a company closes, a bank stops offering a certain benefits plan, or an employee chooses to start working for a different company. These triggering events, when properly documented, can be used to access benefits or terminate a plan without penalties.

Documentation accompanying a benefits plan should be reviewed carefully so people can understand how the plan works and familiarize themselves with the triggering events associated with the plan. At the same time, people should explore the policy on in-service withdrawals, where access is granted to the plan before a triggering event occurs. Some plans may allow withdrawals without penalties in emergencies, and may allow access at other times for people who are willing to incur the penalty, typically a small fine based on a percentage of the funds accessed.

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Flexibility is built into many benefits plans, recognizing that retirement needs can change over time and also accounting for people who change careers or move. Historically, people often stayed with one company for life and the benefits plan was more rigid, with strict triggering event policies, as very few employees would run afoul of these policies. As relationships to employers and workplaces change, more flexibility is needed in the structure of benefits plans to make them workable for employees.

When people reach a triggering event, they do not necessarily need to act upon it. Someone could reach retirement age and choose to continue working, for instance, and may even receive a bonus for working past the retirement age. Incentives to encourage people to save more and work longer are built into many plans, especially as life expectancy increases and conventional retirement ages seem early to some retirees and financial planners. People can choose to take advantage of the incentives or may opt to take their benefits when they qualify depending on a number of factors.

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