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Using Taiwan's Labor Insurance dataset and the difference-in-differences model, this study investigates the possible incentives of utilizing the average insured monthly earnings for the period beginning 3 years prior to retirement as the basis for old-age benefit calculations. In the study, those who had retired in 2007 were categorized into the experimental group, while those whowere qualified to retire but had not retired for the ensuing 3 years were categorized into the control group. The results indicate that after controlling for all influential factors such as gender and years of service, the incentive displayed a positive impact. On average, it had increased the insured earnings by 10.7%. Changing the benefit calculation formula to using the average monthly amounts of the highest 60 months of insured earning would not generate much impact. Using a much longer period as the basis for benefit calculation can help to alleviate or even eliminate the incentive impact, thus removing the extra financial burden caused by the incentive mechanism embedded in the benefit calculation formula of the labor insurance system. [ABSTRACT FROM AUTHOR]