1: How the Vesting Schedule Affects Employee Assets An employee who separates from service prior to becoming

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1: How the Vesting Schedule Affects Employee Assets
An employee who separates from service prior to becoming 100% vested will forfeit the unvested portion of his or her account balance. The number of hours of service performed by the employee determines the employee's vesting service for each year. Generally, an employee who performs at least 1,000 hours of service for a year is credited with one year of vesting service for that year.

Vesting Schedule and Employee Assets
A. The ABC Corporation's profit-sharing contributions are subject to the following graded schedule:

Years of Vesting Service	Vested Percentage
1	20
2	40
3	60
4	80
5+	100

ABC Corporation requires each employee to perform 1,000 hours each year in order to be credited with one year of vesting service. Larry, a part-time employee whose 401(k) account had total employer contributions of $5,400 at the end 2013. Larry performed the following hours of service for these years:

Year	Hours of Service	Credit for Vesting Service (Yes or No)
2008	600
2009	1,152
2010	1,010
2011	800
2012	1,012
2013	40

Larry resigned from ABC Corporation in January 2013. How much of the $5400 contributed by his employer is Larry entitled to take with him? If he contributed on his own as well, how much of his own contributions is Larry entitled to take?

B. Rather using the vesting table above, Larry’s company had the following vesting schedule:

Year one: 0% vested
Year two: 25% vested
Year three: 50% vested
Year four: 75% vested
Year five: 100% vested

Larry resigned from ABC Corporation in January 2013. How much of the $5400 is Larry entitled to take with him using the second schedule rather than the first?

C. Now, assume that Larry’s plan offers cliff vesting which follows the ERISA maximum limit on time for when an employee is fully vested. Knowing this, in what year is Larry fully vested? How much of the employer’s contributions will Larry be able to take with him when he resigns? How much will Larry own prior to the time in which he is fully vested?