Question

Henry has a defined benefit plan that promises an annual retirement benefit based on 2% of his final 5-year average annual salary for each year of service. At retirement, Henry has 21 years of service and had an average salary of $95,000 over the last 5 years. His annual benefit will be:_______a. $15,200. b. $95,000. c. $60,500. d. $49,875. e. $39,900.

Answer 1

Answer: e. $39,900

Explanation:

Henry's defined benefit can be calculated by the formula:

= Average salary over the last 5 years * Years of service at retirement * annual retirement benefit percentage based on 5 year average salary

= 95,000 * 21 * 2%

= $39,900