MMC Benefits Handbook
Plan Benefit Formula for Benefit Accrued prior to January 1, 2006
The SRP formula for benefits accrued prior to January 1, 2006 is as follows:
For the first 25 years of benefit service:
  • 2.0% of your final average salary as of December 31, 2005 multiplied by your years of benefit service as of December 31, 2005
Plus (if applicable) for the next 5 years of benefit service:
  • 1.6% of your final average salary as of December 31, 2005 multiplied by your years of benefit service as of December 31, 2005 in excess of 25 years but less than 30 years
Plus (if applicable) after 30 years of benefit service:
  • 1% of your final average salary as of December 31, 2005 multiplied by your years of benefit service as of December 31, 2005 in excess of 30 years
Minus
  • 4% of your estimated Social Security retirement benefit payable at age 65 determined as of December 31, 2005 multiplied by your years of benefit service as of December 31, 2005, up to a maximum of 25 years of benefit service
Minus
  • Your monthly accrual under the BEP as of December 31, 2005, if any
Minus
  • Your monthly accrual under the McLennan Companies Retirement Plan as of December 31, 2005
Example – Terry, a participant whose benefit was entirely accrued prior to January 1, 2006
Terry was born on January 1, 1955, was hired by the Company on July 1, 1999, and terminated employment with the Company on December 31, 2005.
  • Terry had 78 months (6 years and 6 months or 6.5 years) of both Benefit Service and Vesting Service as of December 31, 2005. Therefore, she is vested in her accrued retirement benefits.
  • In 2001, Terry's compensation reaches the limit on pay that may be considered for tax-qualified plans. The example shows how the SRP formula generates a benefit, including how the formula takes into consideration simultaneously accruing Retirement Plan and BEP benefits.
Time Period
Unlimited Eligible
Monthly Salary
IRC-limited Eligible Monthly Salary
Unlimited Salary in Period
IRC-limited Salary in Period
7/1/1999 – 2/28/2001
$16,666.67
$16,666.67
$333,333
$333,333
3/1/2001 – 2/28/2003
$17,500.00
$16,666.67
$420,000
$400,000
3/1/2003 – 12/31/2003
$19,166.67
$16,666.67
$191,667
$166,667
1/1/2004 – 12/31/2004
$19,166.67
$17,083.33
$230,000
$205,000
1/1/2005 – 2/28/2005
$19,166.67
$17,500.00
$38,333
$35,000
3/1/2005 – 12/31/2005
$20,833.33
$17,500.00
$208,333
$175,000
Total for high 60-month period from 1/1/2001 – 12/31/2005
   
$1,121,667
$1,015,000
  • Terry's highest 60 consecutive months of Eligible Monthly Salary were during her last 60 months of employment, from 1/1/2001 through 12/31/2005. She earned $1,121,667 during that period. Under IRC limits, the maximum amount of annual compensation that could be considered for this period was $1,015,000.
  • Terry's unlimited Final Average Salary is her average over the highest consecutive 60 months (5 years): $1,121,667/ 5 = $224,333.
  • Terry's IRC-limited Final Average Salary is the average over the highest consecutive 60 months (5 years): $1,015,000 / 5 = $203,000.
  • Terry's annual estimated Social Security PIA for 2005 was $23,028.
Terry's Retirement Plan and BEP benefits are as follows:
Retirement Plan:
$19,078.07 ($1,589.84 per month)
BEP:
$2,218.67 ($184.89 per month
How SRP benefit is calculated:
Retirement Plan Benefit: $19,078.07
BEP Benefit: $2,218.67
SRP Benefit:
2.0% times unlimited Final Average Salary ($224,333) times 6.5 years = $29,163.29
Minus
4.0% times annual Social Security PIA ($23,028) times 6.5 years = $5,987.28
Equals $23,176.01 (initial SRP formula benefit, before offsets of BEP and Retirement Plan benefits)
Minus
BEP benefit: $2,218.67
Minus
Retirement Plan benefit: $19,078.07
Equals SRP benefit of $1,879.27
Total Accrued Retirement benefit from the SRP:
$1,879.27 per year ($156.61 per month), assuming for this example that payment begins once Terry attains age 65 in the form of a single life annuity