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Section 3.3 states that an employer shall elect in the
adoption agreement either a “fixed benefit” or a “flexible
benefit”. As to a fixed benefit, section 3.3 states that the
benefit payable to a covered employee shall equal the sum of the
future service component for each year of participation plus the
past service component. The future service component equals for
each year of participation the amount of that year’s
“Compensation [defined as the “amount specified by the Employer
in the Adoption Agreement”] multiplied by the Severance Benefit
percentage elected by the Employer in the Adoption Agreement”.
The past service component equals the product of (1) the benefit
percentage elected by the employer in the adoption agreement,
(2) a fraction not to exceed 1, the numerator of which is the
covered employee’s past service and the denominator of which is
10, and (3) the covered employee’s total compensation for the
10 years preceding the year of termination of employment.
As to a flexible benefit, section 3.3 allows a different
percent of compensation to be elected for each year of service
and states that the formula for computing a severance benefit is
made applicable to the employer’s contribution each year. In
addition, there is a provision for adjustments each year based on
benefits provided to other employees, forfeitures, investment
earnings, and cost of insurance for the covered employee.
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Last modified: March 27, 2008