Flat Amount
Definition of "Flat amount"
Same as term Defined Benefit Plan: retirement plan under which benefits are fixed in advance by formula, and contributions vary. The defined benefit plan can be expressed in either of two ways:
- Fixed Dollars: Unit benefit approach a discrete unit of benefit is credited for each year of service recognized by the employer.The unit is either a flat dollar amount or (more often) a percentage of compensation usually 1 1/2-2 1/2%. Total years of service are multiplied by this percentage. For example, if total years of service is 30 and the percentage is VA, 45% would be applied to either the career average earnings or final average earnings (highest three of five consecutive years of earnings). If the average of the highest five consecutive years of earnings is $100,000, the yearly retirement benefit would be $45,000. Level Percentage of Compensation After a minimum number of years of service (usually 20) and a minimum age (usually 50), all employees will receive the same percentage of earnings as a retirement benefit, regardless of income, position in the company, or years of service. For example, each employee who is at least 50 years of age, with at least 20 years of service receives 20% of compensation. This plan is more common than the flat amount approach described below, Flat Amount After having attained a minimum number of years of service (usually 20) and a minimum age (usually 50), all employees will receive the same absolute dollar amount as a retirement benefit, regardless of income, position in the company, or years of service. For example, each employee who is at least 50 years of age, with at least 20 years of service receives $8000 a year in retirement benefits.
- Variable Dollars: Cost-of-Living Plan benefits are modified according to changes in a predetermined price index usually, the Consumer Price Index (CPI). For example, when the CPI increases by at least 3% benefits are increased by that percentage, Equity Annuity Plan premiums are paid into a variable annuity plan to purchase accumulation units. At retirement, the accumulation units are converted to retirement units whose values fluctuate according to the common stock portfolio in which the premiums we reinvested.
Popular Insurance Terms
Employee of a state insurance department who audits statements of insurance companies to determine their continued solvency. ...
Basic requirements of an employee benefit insurance plan such as minimum age and years of service with an employer. ...
Figure in a mortality table derived by dividing the number of people dying during a given year by the number of people alive at the beginning of that same year. ...
Charitable planning strategy in which a donor sells an asset to the charity for an amount less than its fair market value. Internal Revenue Service regulations require that the tax basis ...
For a variable annuity, the period of time from the close of business on the first business day to the close of business on the second business day. ...
Act of stealing. Coverage can be purchased under most property insurance policies such as the homeowners insurance policy. ...
Trade association whose objective is to further the interests of its membership, as well as to inform the public on the role of its members. ...
Claim, such as a worker's lien, to property under the care, custody, and control of another. This situation occurs when a worker is not paid for labor provided. For example, a carpenter ...
Agreement among insurance companies through which a multinational employer is permitted to purchase employee benefits coverage's for two or more of its overseas subsidiaries under a single ...
Have a question or comment?
We're here to help.