What Is The High 3 Retirement Plan?

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   David G. Pipes, CLU®, RICP®

   Business Development Officer, T.D. McNeil Insurance Services, Fresno, California

   You are probably referring to a defined benefit pension plan that uses the highest three years of earning as a factor in the benefit formula.  Defined benefit plans, although quickly disappearing, compute the benefit by using a formula.  The earnings on the fund are immaterial to the participant.  Members do not have separate accounts in a defined benefit plan.  Normally the benefit is a combination of factors, age, years of service and perhaps others, which is then multiplied by salary.  In this case it is the average of the highest three years of salary.  That then becomes the starting benefit.

   Answered on May 21, 2014

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