Question

"Alpha Corporation has one-hundred full-time non-union employees. What is the minimum number of employees that must be allowed to participate in the company’s defined benefit plan?

Answer 1

Answer:

The minimum number of employees that must be allowed to participate in Alpha Corporation’s defined benefit plan is 40. This is based on the 40% rule explained below.

Explanation:

A traditional form of a defined benefit plan is the final salary plan, under which the pension paid is equal to the number of years worked, multiplied by the member's salary at retirement, multiplied by a factor known as the accrual rate. The final accrued amount is available as a monthly pension or a lump sum.

It is usually offered to all employees who are at least 21 years of age and who worked at least 1,000 hours for the employer in a previous year. Two years of service may be required for participation as long as the employee will be 100 percent vested immediately when he or she enters the plan.

Minimum Participation in a Defined Benefit Plan is  40% of qualifying employees. Since Alpha Corporation has 100 full time non union employees, at least 40 of them must be allowed to participate in the company's defined benefit plan.