Retirement language

By: | September 20, 2018

Want to improve your district’s retirement offerings for teachers? Start by ensuring that you understand these terms.

Defined benefit (DB) plan. A retirement plan in which an employer promises a specified pension payment or lump sum (or combination) on retirement that is predetermined by a formula based on the employee’s earnings history, length of service and age, rather than depending directly on individual investment returns.

LINK TO MAIN ARTICLE: Retirement savings plans: Finding the best options for educators

Defined contribution (DC) plan. A retirement plan in which the employer, employee or both make set contributions on a regular basis. Benefits paid in retirement fluctuate, as they are based on the contributions made plus any investment earnings on the money in the account.

Hybrid plan. A retirement plan that combines a DB and a DC, and is usually in the form of a smaller pension with a defined contribution component.

Nancy Mann Jackson is an Alabama-based writer.