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
Same as term Final insurance: premiums paid out of funds borrowed from the cash value of a life insurance policy. ...
Of four SEC divisions that regulates the securities markets and the participants within these markets. ...
Amount expressed as a liability on the insurance company's balance sheet for benefits owed to policy owners. These reserves must be maintained according to strict actuarial formulas as they ...
Government agency, under the McCarran-Ferguson act (public law 15), that has no authority over insurance matters to the extent the states regulate insurance to the satisfaction of Congress. ...
Relinquishment of rights to benefits when an employee withdraws previous contributions to a plan. An employee who had not withdrawn these contributions would have been entitled to full ...
Method of establishing rates in which the current year's premium is calculated to reflect the actual current year's loss experience. An initial premium is charged and then adjusted at the ...
Provision in a life insurance policy that protects its proceeds from the beneficiary's creditors. On payment, the beneficiary loses the protection of the spendthrift trust clause and the ...
Payment due on the renewal of an insurance policy. The premium may be adjusted up or down to reflect the loss experience of the underwriting classification to which the insured belongs. ...
Circumstance under which the insured maintains that, if an insurance policy covers at least two scheduled items of real or personal property, in the event of a loss applicable coverage ...
Have a question or comment?
We're here to help.