In 2020, Maggy (34 years old) is an employee of YBU Corp. YBU provides a 401(k) plan

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In 2020, Maggy (34 years old) is an employee of YBU Corp. YBU provides a 401(k) plan for all its employees. According to the terms of the plan, YBU contributes 50 cents for every dollar the employee contributes. The maximum employer contribution under the plan is 15 percent of the employee’s salary (if allowed, YBU contributes until the employee has contributed 30 percent of her salary).

a. Maggy worked for YBU Corporation for 3½ years before deciding to leave effective July 1, 2020. Maggy’s annual salary during this time was $45,000, $52,000, $55,000, and $60,000 (she only received half of her $60,000 2020 salary). Assuming Maggy contributed 8 percent of her salary (including her 2020 salary) to her 401(k) account, what is Maggy’s vested account balance when she leaves YBU (exclusive of account earnings)? Assume YBU uses three-year cliff vesting.

b. Using the same facts in part (a), assume YBU uses six-year graded vesting. What is Maggy’s vested account balance when she leaves YBU (exclusive of account earnings)?

c. Maggy wants to maximize YBU’s contribution to her 401(k) account in 2020. How much should Maggy contribute to her 401(k) account assuming her annual salary is $100,000 (and assuming she works for YBU for the entire year)?

d. Using the same facts in part (c), assume Maggy is 55 years old rather than 34 years old at the end of the year. How much should Maggy contribute to her 401(k) account?

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Taxation Of Individuals And Business Entities 2021

ISBN: 9781260247138

12th Edition

Authors: Brian Spilker, Benjamin Ayers, John Barrick, Troy Lewis, John Robinson, Connie Weaver, Ronald Worsham

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