Definition of "Flat amount"

Robin Ungaro real estate agent

Written by

Robin Ungaroelite badge icon

Coldwell Banker Residemtal Brokerage

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:

  1. 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.
  2. 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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

In the insurance field, we have insurance companies, which is where every individual or company goes to get insurance policies, and then there are reinsurance companies. Now, you might ask ...

Authority to act on behalf of an individual that terminates upon its revocation or death of that individual. ...

Coverage that is purchased to provide protection for a loss that has already occurred. The severity of the loss, however, is uncertain. ...

Professional designation earned after the successful completion of 10 national examinations given by the American Institute for Property and Liability Underwriters. Covers such areas of ...

Activities of interest in underwriting an application for life insurance to determine the rate classification (premium) for the applicant. For example, a sky diver is at greater personal ...

Notice added to the employee retirement income security act (erisa) requiring the employer to disclose the following information concerning the pension plan to the employee: statement ...

Group of plans (to include section 401(k) plans and section 403(b) plans) that permit in-service withdrawals to fund a college education if a hardship exists. ...

Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old living room sofa will not be replaced at ...

Date, in insurance, on which a person becomes one year older. Depending on the insurance company, premiums in life and health insurance manuals are figured to the age-nearest-birthday or ...

Popular Insurance Questions