Amanda has been an employee of Robin, Inc., for almost five years. She is a participant in Robin’s defined contribution pension plan (money purchase plan). The total contributions made by Robin to the money purchase plan for Amanda are $60,000, and the balance in Amanda’s account is $89,000. Amanda is considering accepting a job with a competitor of Robin’s at an annual salary $7,000 higher than that received from Robin.
Her boss, who is trying to convince her to stay, points out that she will not be vested in the money purchase plan until she has been employed by Robin for at least five years. In addition she will have to start a new vesting schedule with the competitor.
a. What is vesting? How does it affect Amanda and her decision based on the information provided?
b. What have been the tax consequences to Amanda of Robin’s annual contribution of $17,000 to its money purchase plan for her?
c. What effect would it have on Amanda’s decision if the competitor did not provide retirement benefits?

  • CreatedMay 25, 2015
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