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
Smallest face amount of life insurance that an insurance company will write on any one person. ...
Coverage that provides for replacement of damaged or destroyed property on a new replacement cost basis without any deduction for depreciation. This is equivalent to replacement cost ...
Endorsement to owners, landlords, and tenants LIABILITY POLICY, MANUFACTURERS AND CONTRACTORS LIABILITY INSURANCE, or other liability policies for business firms that provides liability ...
Plan that provides a legal resident of the state of Oregon access to basic health care through three major components: Medicaid Reform (rationing) extends Medicaid eligibility to those ...
Total estimated cost incurred by a person or persons, a family, or a business resulting from the death or disability of a wage earner (key employee), damage or destruction of property, ...
Model state law designed to govern use of information collected from insurance applications. The law forbids any insurer or agent from impersonating someone else to gain information about ...
Coverage required by the laws of a particular state. For example, many states stipulate minimum amounts of automobile liability insurance that must be carried. ...
Right to insurable interest in property such as the right of a secured creditor in the property pledged as security. ...
Coverage for the insured's personal and real property and the insured's own person. Contrast with third party. ...
Have a question or comment?
We're here to help.