Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 - Free CRPC Practice Questions and Study Guide

The target benefit plan establishes a fixed contribution formula based on actuarial computation. This type of plan is designed to provide a specific retirement benefit based on a predetermined formula, similar to a defined benefit plan, but instead, it utilizes contributions that are fixed, with the goal of providing a target benefit at retirement. The actuarial computations involved account for life expectancy and other factors to estimate what contributions are necessary to reach that target benefit.

In a target benefit plan, the contributions are made to an individual account for each participant, and those contributions are theoretically designed to achieve a "target" retirement benefit based on calculations that consider various assumptions. This unique blend of a defined benefit approach (setting a target benefit) with defined contribution logic (fixed contributions) distinguishes it from other plan types, such as money purchase plans and profit-sharing plans, which do not base their contributions on actuarial computations intended to meet specific future benefit goals.