How much would Rita be able to keep if she leaves her job with (a) 3 years, 5 months, (b) 5 years and 11 months, or
(c) 11 years, 4 months of service?
- Suppose that Bob’s company (from Exercise 9) instead used 5-year cliff vesting. Rework Exercise 9 with this vesting
schedule. - Suppose that instead of step vesting, Rita’s company (from Exercise 10) used 5-year cliff vesting. Rework Exercise 5,
using this vesting schedule.
D. Grab Bag
- Suppose your employer offers you a defi ned contribution plan with 50% matching up to 12% of salary. What total
percent of your salary would be deposited to this plan if you choose to contribute (a) 4%, (b) 8%, (c) 12%, or (d) 16%? - Ethan works for a company that offers both a defi ned contribution plan and a defi ned benefi t plan. Ethan is 22 years
old. Which plan is probably of most value to him? Why? - Jerianne is debating job offers from two different companies. The two jobs are very similar, and offer comparable
salary and benefi ts, except that one has a DB plan and the other has a DC plan. Jerianne is 54 years old. Which plan is
probably more attractive to her?
Most-Lee Quality Products offers its employees a defi ned contribution plan. The vesting schedule is shown below.
Years of Service Completed Vesting Percent<1 year 0%
1–2 years 25%
2–3 years 50%
3–4 years 75%
4 years 100%Use this plan in answering Exercises 16 to 17.
- Ahmad has worked for the company for 3½ years. Right now, his plan balance is $8,105.45, of which $3,903.15
comes from the company’s contributions. If he quits his job today, how much of this balance will he be able to keep? - Jennifer has worked for the company for 12 years. Right now, her plan balance is $19,505.99, of which $8,101.55
comes from the company’s contributions. If she is laid off from her job today, how much of this balance will she be able
to keep? - Cattarauqua Ginseng Enterprises offers its employees a DB pension plan. The plan pays 1.8% of the 2-fi nal-year
average salary for each year of service completed. If I made $49,756 last year and $51,845 this year and retire now
with 18 years of service, what will my annual pension benefi t be?
314 Chapter 7 Retirement Plans