RMI 3503 Lecture Notes - Lecture 6: Pension, Life Annuity
4 Apr 2016
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6. 1 traditional de ned-bene t plans: db plan and pension plan category, from this we already know: Lessor of ,000 or highest 3 consecutive year average salary. Investment of plan assets in er stock limited to 10: main item within traditional db plans is the bene t formula implemented, bene t formulas, unit-bene t formula (% of earnings per year of service formula) Ex: will receive monthly pension in form of a life annuity equal to x% of. Nal average monthly compensation * years of service. Retirement bene ts linked to years of service (# of years of service) If want 45% = (x* 30 years) x= 1. 5. Sometimes er puts cap on years of service. If no cap, bene t is greater costs er more 30610$ 36: flat percentage of earnings formula (irs label: fixed bene t formula) Depends on salary only; years of service do not a ect bene t.
