An employee has been working for a university with a defined benefit pension plan for 34 years.The employee's highest five year average earnings is $95,000.If the employee expects to receive 2% of these earnings based on years of service,what is the employee's expected pension benefit if he or she retires in 6 years?
A)$64,600
B)$95,000
C)$47,500
D)$76,000

Question

Quizplus · Accepted Answer

The calculation for the pension benefit is as follows:

$95,000 (highest five year average earnings) x 2% (annual pension rate for years of service) x 34 (years of service) = $64,600 (annual pension benefit)

If the employee retires in 6 years, the expected pension benefit would be:

$64,600 x 6 (years of additional service) = $387,600 (expected pension benefit)

Therefore, the best choice is D, $76,000.

An Employee Has Been Working for a University with a Defined