MMC Benefits Handbook
Plan Benefit Formula for Benefit Accrued prior to January 1, 2006
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 IRC limit on pay that may be considered for the Retirement Plan. The example below shows how the BEP works to provide additional benefits once this limit under the Retirement Plan has been reached.
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 occurred 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 Covered Compensation for 2005 was $78,228.
How BEP benefit is calculated:
"Unlimited" Retirement Plan Benefit - calculated without regard to IRC pay limit:
1.6% times unlimited Final Average Salary ($224,333) times 6.5 years = $23,330.67
Minus
0.4% of the lesser of unlimited Final Average Salary ($224,333) or Covered Compensation as of 12/31/2005 ($78,228) times 6.5 years = $2,033.93
Equals $21,296.74 "Unlimited" Retirement Plan Benefit
"IRC-limited" Retirement Plan Benefit - calculated under IRC pay limit:
1.6% times IRC-limited Final Average Salary ($203,000) times 6.5 years = $21,112.00
Minus
0.4% of the lesser of Final Average Salary ($203,000) or Covered Compensation as of 12/31/2005 ($78,228) times 6.5 years = $2,033.93
Equals $19,078.07 "IRC Limited" Retirement Plan Benefit
BEP Benefit:
"Unlimited" Retirement Plan benefit of $21,296.74
Minus
"IRC-limited" Retirement Plan benefit of $19,078.07
Equals
BEP benefit of $2,218.67
Total Accrued Retirement benefit from the Retirement Plan:
$19,078.07 per year ($1,589.84 per month), assuming for this example that payment begins once Terry attains age 65 in the form of a single life annuity
Total Accrued Retirement benefit from the BEP:
$2,218.67 per year ($184.89 per month), assuming for this example that payment begins once Terry attains age 65 in the form of a single life annuity