Final answer:
It is false that defined benefit pension plans have a max increase of 50% for earnings above the covered compensation level, as they usually offer a fixed benefit not based on post-retirement earnings.
Step-by-step explanation:
The statement regarding a defined benefit pension plan having a maximum increase in benefits for earnings above the covered compensation level fixed at 50% is false. Defined benefit plans are designed to provide a fixed income in retirement, traditionally set at a nominal dollar amount per year upon retirement. They do not typically feature an escalating benefit structure based on income earned above a certain level.
Unlike defined contribution plans, such as 401(k)s and 403(b)s, where contributions are fixed and the investment growth can help counteract inflation, defined benefits plans may not adjust for inflation over time, leading to a potential reduction in purchasing power for retirees.