Actuarial Science 1021A/B Study Guide - Pension, Life Annuity
16 Oct 2014
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Document Summary
Annual pension is a specified number of dollars for each year of service. Very simple; easy to understand by ees; good plan for low income ees. The flat amount per year of service is based on wage levels at time the level is established, but pension will be paid in future when wages/prices have increased. As a result, most flat benefit plans are subject to periodic upgrades to reflect increases in inflation and wages. Example benefit formula = 50$ per month of service. Employee who worked 10 years for an employer would be. Career average earnings (34. 6% of all db plans) Annual pension benefit is calculated as a certain percentage (usually 2%) of earnings in each year of plan membership. Disadvantage gives equal weight to employment earnings in each year of an employee"s working lifetime this is ok if employee has never had a pay raise, but not good for employees who have made significant advancements over their career.
