Client Background:

TechSynergy Designs is a forward$-$thinking tech design agency located in Austin, Texas.

Founded by Jackson and Ava a decade ago, TechSynergy Designs has grown into a leading tech

development firm in the Texas area. The company offers an innovative $401($k$)/$profit sharing plan

with the following features:

$$ Eligibility: Employees become eligible if they are $21$ years of age and have completed

one year of service.

$$ Match: The company provides a dollar$-$for$-$dollar match on employee contributions.

$$ Vesting: Vesting occurs at a rate of $20\%$ per year, starting from the first year up to the

fifth year.

$$ Highly Compensated Definition: Uses top $20\%$ election.

$$ Profit$-$Sharing Contribution: TechSynergy Designs typically makes a substantial profitsharing contribution, although the exact percentage may vary.

$$ Rollovers: The plan allows for rollovers from other qualified plans and IRAs.

Employee Data:

EE# Employee Ownership $(\%)$ Age Tenure Salary Salary

Deferral

$1$ Jackson $504515$ Years $$195,000$ $$11,000$

$2$ Ava $304816$ Years $$155,000$ $$15,500$

$3$ Mia $103512$ Years $$80,000$ $$5,500$

$4$ Ethan $5406$ Years $$100,000$ $$6,000$

$5$ Sophia $2523$ Years $$85,000$ $$0$

$6$ Zoe $1275$ Years $$75,000$ $$4,800$

$7$ Emma $0\mathrm{.}5532$ Years $$50,000$ $$0$

$8$ Liam $0\mathrm{.}5241$ Years $$60,000$ $$0$

$9$ Lucas $0\mathrm{.}5298$ Months $$20,000$ $$0$

$10$ Olivia $0\mathrm{.}5236$ Months $$30,000$ $$0$

Note: Zoe is Ava's daughter. She graduated from the University of Texas School of Design five

years ago.

Your Task:

Explain your answers to the following questions in detail, providing support from the textbook or

other relevant sources. Your answers should be formatted as a report you are preparing for your

clients$$ financial planning team, so be professional and thorough.

$1.$ Who is not eligible for the $401($k$)$ plan?

$2.$ Who is highly compensated?

$3.$ What is the most that TechSynergy Studio could contribute to the profit$-$sharing plan for

the current year assuming the salary deferrals stay constant?

$4.$ What is the actual deferral percentage for the highly compensated employees?

$5.$ What is the actual deferral percentage for the non$-$highly compensated employees?

$6.$ Does the plan pass the ADP test? Why or why not and what can the company do if the

plan does not pass the test?

$7.$ How many years of service does Liam currently have for purposes of vesting?