Joan recently started her career with PDEK Accounting, LLP, which provides a defined benefit plan for all employees. Employees receive 1.5 percent of the average of their three highest annual salaries for each full year of service. Plan benefits vest under a five-year cliff schedule. Joan worked five and a half years at PDEK before leaving for another opportunity. She received an annual salary of $49,000, $52,000, $58,000, $65,000, and $75,000 for years one through five, respectively. Joan earned $40,000 of her $80,000 annual salary in year six. What is the vested benefit Joan is entitled to receive from PDEK for her retirement? Use Exhibit 13-1.

What will be an ideal response?


$4,950

Joan worked for more than five years, so she is fully vested in her benefit from the plan. Joan's vested benefit is calculated as follows: [($58,000 + $65,000 + $75,000) / 3] × (1.5% × 5 years) × 100% vesting.

Business

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