Benefit allocation method,
Definition of Benefit allocation method:
Both the employee's contribution and the company's matching payment go into a fund that is invested in long-term assets.
A method of funding a pension. Only one premium payment is made per year and used to purchase a single benefit. This is done for each year of service to the employer. Usually, an annuity is purchased.
Some companies that offer retirement pensions to their employees choose to fund them through the benefit allocation method. In this system, employees contribute a portion of their salaries to the fund while the company makes a single annual payment. That payment may be a fixed dollar amount or a percentage of salary.
How to use Benefit allocation method in a sentence?
- A company that offers a pension benefit must earmark money to pay them, using any of several accepted methods.
- By contrast, a cost allocation method estimates the overall cost of benefits that will be owed and sets aside that amount.
- The benefit allocation method sets aside the money contributed by employer and employee into a fund that is invested to pay the benefit down the line.
Meaning of Benefit allocation method & Benefit allocation method Definition