Question

Alicia has been working for JMM Corp. for 33 years. Alicia participates in JMM’s defined benefit plan. Under the plan, for every year of service for JMM she is to receive 2 percent of the average salary of her three highest years of compensation from JMM. She retired on January 1, 2019. Before retirement, her annual salary was $609,000, $639,000, and $669,000 for 2016, 2017, and 2018. What is the maximum benefit Alicia can receive in 2019?

Answer 1

For employees retiring after Jan 1, 2019, the maximum benefit under defined benefit plan is the lower of- -$225,000 -Employee's average compensation for three highest consecutive years = 33 years x 2% x Average salary = 66% $609,000+$639.000+$669.000 = $421,740 Therefore, the maximum benefit is $225,000.