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- Calculate the pension benefi t that would be paid for the following years of service and last 3 years’ salaries.
a. 40 years; $37,101; $36,544; $38,101
b. 7 years; $103,548; $107,626; $112,055- Suppose that this pension plan allows its workers to begin receiving pension payouts as early as age 60. For each year
below age 65, benefi ts are reduced by 2%. Calculate the pension benefi t that would be paid for the following years or
service, last 3 years’ earnings, and retirement age: 28 years; $37,500; $38,425; $39,901; age 62. - Suppose that this pension plan allows its workers to begin receiving pension payouts as late as age 72. For each year
beyond age 65, benefi ts are increased by 1½%. Calculate the pension benefi t that would be paid for the following years
or service, last 3 years’ earnings, and retirement age: 39 years; $52,600; $52,825; $53,011; age 69.
B. Defi ned Contribution Plans- Mom and Pop’s Big Box Shoppes offers its employees a defi ned contribution plan. The company matches employee
contributions at 60% up to 8% of salary.
Randy earns $28,795 working for this company. How much will be deposited to his account per year if he contributes
(a) nothing, (b) 5% of his salary, (c) 10% of his salary? - A company offers its workers a defi ned contribution retirement plan, with 45% matching up to 9% of salary. If you take
a job with this company, making a $39,400 annual salary, how much will be deposited to your account in your fi rst year
if you contribute (a) nothing, (b) 6% of salary, (c) 12% of salary? - Catskill University offers its faculty and staff a defi ned contribution retirement plan. If the employee contributes 4% of
salary, the college will contribute 10% of salary to the plan. If an employee does not contribute anything, neither does
the college. An employee may contribute more than 4%, but this will not increase the college’s contribution.
Suppose that you work at Catskill U. and earn $34,750 this year. How much will be deposited to your account this year
if your contributions to this plan total (a) $1,000, (b) $1,800 and (c) $4,000.
C. VestingTo answer these questions, use the vesting schedules given in this section.- For the 7-year step vesting schedule given in this section, what percent of the balance that comes from the employer’s
contributions are vested if someone has completed service totaling (a) 3 years and 4 months, (b) 2 years and
11 months, or (c) 6 years and 8 months? What percent of the balance that comes from the employee’s contributions
are vested for each of these lengths of service? - Bob has $10,350 in his defi ned contribution plan at work. Of that balance $7,573.25 comes from his own contributions
and $2,776.75 comes from his employer’s. The plan uses the 7-year step vesting schedule given in this section of the text.
How much of his plan balance would Bob keep if he leaves his job now, assuming he has 5 years and 3 months of service? - Rita has $12,759.17 in her defi ned contribution retirement account at work. Of this amount, $4,387.15 comes from her
contributions; the rest comes from her employer’s contributions. Her company uses the 7-year, 20% step vesting schedule.
Exercises 7.1 313