Jerome has a defined-benefit plan that pays him a pension of two percent of his average last five years' earnings for each year he was employed by Plastis Co. His earnings are as follows: 2000, $65 000; 2001, $66 000; 2002, $60 000; 2003, $72 000; 2004, $75 000; 2005, $72 000; 2006, $71 000; 2007, $70 000; 2008 ,$74 000. What will be his annual pension benefit if he was with Plastis Co. for 12 years?

Question

Quizplus · Accepted Answer

To calculate Jerome's average last five years' earnings, we need to add up his earnings from 2004-2008 and divide by 5:
($75 000 + $72 000 + $71 000 + $70 000 + $74 000) / 5 = $72 400
Now we can plug in his years of service and calculate his pension:
2% x ($72 400) x 12 = $17 376

Jerome Has a Defined-Benefit Plan That Pays Him a Pension