Length-of-Service FormulaThis simplest of defined-benefit formulas provides a fixed benefit for each year of service for all participants in a plan regardless of their salaries. Data for 1997 on plans offered by medium-sized and large establishments in the private sector indicate what those benefits might be: average monthly payments of $28.79 for every month that an employee worked. A worker retiring after 30 years from an employer that offered such a plan would collect $10,364 per year. The size of an establishment is not a major factor in determining which workers are likely to be subject to a length-of-service formula. Approximately 22 percent of the workers covered by private defined-benefit plans in each size category received benefits under that type of formula. A more significant factor is occupation. Blue-collar workers are more than twice as likely to receive benefits based on a length-of-service formula as are white-collar and service workers. Such formulas are never used to determine the benefits of government workers.
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