ELO manufacturing is looking to hire a new plant supervisor. They have 2 qualifi
ID: 2642630 • Letter: E
Question
ELO manufacturing is looking to hire a new plant supervisor. They have 2 qualified candidates, Charlie, 43 and Kevin, 36. Both would have a starting salary of $62,000. Each could expect a 3% cost of living raise each year. ELO Inc. also has a defined Benefit Pension plan that pays 35% of final salary as a benefit after 20 years of service, with a 2% increase in pension multiplier for each additional year of service after 20. ELO also has a "mandatory" retirement age of 66 for all plant jobs. What is the expected annual contribution to the retirement plan that each candidate would accrue if investments in the pension fund earned 6%?
Explanation / Answer
After 20 years,3% increase per annum
Salary of each =
pension benefit accrued after 20years of service=111979x35/100=39192.65
If Charlie continues till 66 yrs. then pension=41%of122362(retirement salary)
Charlie's pension at retirement=50168
If Kevin continues in service till retirement
pension=55%
150490 (retirement salary)x55/100=
Kevin's pension at retirement=82769.5
YearNumber Salary 1 63,860.00 2 65,775.80 3 67,749.07 4 69,781.55 5 71,874.99 6 74,031.24 7 76,252.18 8 78,539.75 9 80,895.94 10 83,322.82 11 85,822.50 12 88,397.17 13 91,049.09 14 93,780.56 15 96,593.98 16 99,491.80 17 102,476.55 18 105,550.85 19 108,717.38 20 111,978.90
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