What is DB, DC and DCP?
When it comes to your retirement plan, have you seen these acronyms?
- DB
- DC
- DCP
If you have an investment account or visited the DRS website, there’s a good chance you have. While there are many acronyms you might see when it comes to retirement, these are a few of the most common.
We thought this might be a good time to breakdown each of these acronyms.
Defined Benefit (DB)
In a Defined Benefit, or DB pension plan, your benefit is based on a formula. Typically, it’s your average final salary x years of service credit x a “multiplier” (often 1% or 2%). At DRS, our Plans 1 and Plans 2 are exclusively DB plans. Once you meet age and service credit requirements, your defined benefit plan guarantees you a lifetime monthly pension payment in retirement.
Defined Contribution (DC)
Defined Contribution (DC) plans consist solely of the money you contribute and any income, expenses, gains or losses applied to your account. We often call this your investment plan.
At DRS, our Plans 3 (PERS, SERS, TRS) are hybrid plans. This means they contain a DB component and a DC component. The DC component is based on your Plan 3 contributions and the performance of your chosen investments. Plan 3 offers a range of investment choices.
Deferred Compensation Program (DCP)
The DCP acronym is short for Deferred Compensation Program. DCP is an optional savings program offered by DRS where you can save additional funds for retirement either pretax or in the new Roth option. Participants choose to set aside a portion of their salary, which they then invest in a range of funds.
Want to know more about terms related to your retirement plan? Check out the DRS Glossary.
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When it comes to your retirement plan, have you seen these acronyms?
The Office of the State Actuary prepared this example to assist DRS with developing a general educational resource.
