One way to structure an employee pension plan. It also could describe a very elaborate process for deciding who gets to eat the last piece of pizza.
In the pension sphere, the benefit allocation method is usually described in terms something like this: an employee gets a single "unit" of benefit for each "unit" of service. That's a little abstract to make much sense, so we'll break it down a bit.
A unit of service is typically a year, and a unit of benefit might be an annuity. Sometimes the amount getting contributed to the plan is decided using a percentage of the worker's salary. Other times, it's a fixed dollar amount.
In this method, benefits are directly tied to years of service (and sometimes size of salary). The benefits build up in increments over time, rather than the pension plan having a rule like "at 20 years of service, you get this...at 25 years of services, you get that."
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Finance: What is a Pension?31 Views
finance a la shmoop. what is a pension? well it rhymes with tension, and likely
for good reason. if you're a teachers pension or a fireman's pension or [person wearing dark glasses writes something down]
another state employees pension that's backed up by a state that's going
bankrupt. Hi, California, Hi Illinois. well we're looking at you. all right people
well a pension is another term for a retirement fund. but what's special about
a pension is that the employer essentially forces you to put away money
for your retirement and then they invested for you.
how nice. or at least be sure you invest it well on a salary of 75 grand a state [gambling table shown]
employed ditch-digger might get a contribution of say 10 grand a year into
her pension, and that's each year 10 grand of forced savings for as long as
she you know digs ditches for the state. and in some states where the unions are
strong in the governing financial knowledge is weak the government
guarantees a minimum financial return on the pension investment made on behalf of
the employees. that is in California for example the state guarantees a 10% per
year return on their invested pension savings. if the invested return like [equation]
investing it in Wall Street and stocks and bonds and private equity funds and
all that stuff well if that invested return is less than that number less
than that 10%, then the state rights to the pinch and a check to cover the
incremental difference. yeah it's a huge Delta and it's well pretty much why you
a Californian Illinois you're going bankrupt remember. Jesus Saves
but Moses invests. [ Moses, holding stone tablets glares and demands interest]
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