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
Coverage on an all risks basis, subject to listed exclusions, for personal property of the insured dealer that is used in normal business activities. Goods that have been sold on an ...
Disposition or transfer of property at time of death. Although the law provides that property may be transferred at death only by means of a will that meets the requirements of state ...
Coverage on an all risks basis for loss due to theft or mysterious disappearance of personal property; damage to premises and property within resulting from theft; and vandalism and ...
Layman description of the key features and benefits of a pension plan that must be filed with the Department of Labor. Periodic updates of this summary must also be provided to the ...
Type of premium plan under which the employer (if noncontributory plan) or the employer and employee (if contributory plan) make level annual premium payments to fund the future retirement ...
Principle of equity in property, casualty, and health insurance. When two or more policies apply to the loss, each policy pays its part of the loss, unless its terms provide otherwise. For ...
Common element in property insurance that excludes electrical damage or destruction of an appliance unless the damage is caused by a resultant fire. ...
Partition of noncombustible material in a wall of similar material, designed when closed to slow the spread of fire from one side of the wall to the other. The national fire protection ...
Exit, act of leaving or going out. ...
Have a question or comment?
We're here to help.