Identification

• An ERISA pensionable salary is an amount of money used to calculate your pension benefits. This salary is considered your base salary from work. When your employer or government agency sets your base salary rate and offers you a bonus, part of your income is excluded from your pension calculation. This excluded amount is your salary bonus.
  
  

Significance

• A pensionable salary gives employers and government agencies the ability to offer significant salaries and current income without making large pension promises when employees retire. This is especially important for governments, which may use unfunded pension plans. An unfunded pension plan is a plan which has no actual savings. Instead, the pension plan relies on future tax receipts to pay employee benefits. Since future tax receipts are not guaranteed in many instances, the pension plan payments may not materialize. This causes a problem for governments who must pay promised benefits.
  
  

Benefit

• The benefit to the government or corporation offering pensionable salaries is that they may dramatically reduce future costs by making a significant portion of an employee's compensation in the form of a bonus or stock offering. These alternative compensation methods are excluded from pension calculations and save the company or government money which may then be used to expand future business activities.
  
  

Disadvantage

• The disadvantage for employees is that a good salary doesn't always translate into a good pension. If a significant portion of income is derived from bonuses, then pension amounts will be far lower than working income. The income you receive from your employer during retirement may be less than what you need to survive.
  
  

Consideration

• Consider saving money outside of your employer's pension plan. This allows you more control over your future retirement income. Income which is saved in an IRA or some other retirement plan also gives you full control over how the money is invested. Pensions are generally controlled entirely by your employer in regards to the investment allocation and contribution amounts.