For defined benefit plans, what is a typical pay credit percentage per

[Guest SBritten]

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[Guest Keith N]

I think the reason no one has responded is that these can be all over the board. What I describe as "tax shelter plans", which are primarily designed around a few targeted individuals are commonly funding benefits at the 415 limit (lesser of 100% of pay or $160,000 per year).

More traditional plans, tend to run in the .75% to 2% of pay per year of service range, but depending on the other benefits offered by the employer, they can fluxuate as well. You also need to consider the basis of the benefit. Is it using highest three year average compensation, highest 5, highest 10, career or it may not be pay based at all.

You may want to search the benefitlink web site for survey information. Several companies prepare serveys containing this type of information and benefitlink usually posts a link. Try the Wyatts, Mercers, TPF&C - the big boys usually do these types of surveys.

Regarding replacement ratios, I think most people agree that depending on the persons compensation a replacement ratio in the range of 70-80% should be sufficient. This would include employer plans & personal savings. The reason that it's not 100% is that generally social security benefits are not taxable so the persons tax burden is decreased.

[AndyH]

I agree completely.

I'd say the average non-union, non-tax shelter db plan that I've seen is about 1% of average pay per year, with a limit of perhaps 35 years, or 35%. This, plus 30%-35% social security (in theory) would get somebody close to the desired replacement ratio. It's the old three-legged stool, personal savings being the third.

[david rigby]

Generally I agree with above responses.

However, worth noting that there could be significant variation among different industries. For example, it is likely the textile industry will have a benefit less generous than the automotive manufacturing.

BTW, it helps if you summarize your question in the title of the discussion thread.

[RCK]

It's also going to be a function of what other qualified plans there are. An employer that emphasizes their 401(k) or Profit Sharing plan may choose to target a smaller benefit from their DB plan.

RCK