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Retirement Savings Policy by Michael P. Barry

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Chapter 2 DB Plan Basics

Defined benefit plans are what most people think of when they think of a “pension plan.” Boiling it down: a DB plan is a retirement plan that (traditionally at least) provides an annuity-based retirement income, the amount of which is determined by a benefit formula written into the plan, that begins at retirement age and continues for the life of the participant.

A Formula Benefit

The benefit a DB plan provides is “defined” by a formula in the plan document that specifies the benefit to be paid at retirement age. Typically, the benefit is accrued (pursuant to the formula) over the participant’s “career” (service with the employer/sponsor).

The benefit (as is typical for salaried employees) may be a function of pay, ...

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