Managing DB Pension Plan Administration Costs
Today, a discussion about defined benefit (DB) pension plans inevitably includes the matter of administration cost. Costs for administration are considered to be a contributing factor to the demise of the DB pension plan in the private sector. As DB plans have varying characteristics and levels of complexity—type of formula, when benefits are paid, survivor options, possible reductions, etc.—so do the costs of administering a pension plan vary. A defined benefit pension plan provides a defined amount of pension, determined by a formula and payable at some point in time. For example, a benefit formula in a defined benefit pension plan may be 2% of a person’s average earnings multiplied by years of service.
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