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
Percentage of first year's premium paid to compensate an insurance agent. This is known as the "First Years" to show how much new business the agent is generating, compared with renewal ...
Type of surety bond that guarantees the performance of public officials. Public officials are responsible for a broad range of property including fees that they collect, money that they ...
Type of major medical deductible amount that acts as a corridor between benefits under a basic health insurance plan and benefits under a major medical insurance plan. After benefits are ...
One who purchases insurance, usually property and liability and not life or annuities, by utilizing his or her own employee purchaser or licensed broker/agent at a minimum annual premium of ...
Dishonest statement to induce an insurance company to write coverage on an applicant. If the company knew the truth, it would not accept the applicant. Fraudulent misrepresentation gives a ...
Risk incurred by the insurance company after it makes the commitment to make the loan at some future time and the borrower may not accept the loan at that time. ...
Former arrangement under which retirement benefits payable to an employee who continued to work beyond normal retirement age were frozen, and not increased in recognition of added work ...
Term used in the reinsuring of disability income insurance policies in that, after an extended period of time expires (in addition to the elimination period found in the disability income ...
Detailed descriptive list made available to the survivor (s) of the insured showing: attorney, accountant, insurance agent, and location of important documents such as wills, power of ...
Have a question or comment?
We're here to help.