Question

Jacques, who is age 45, has just resigned from his current job. He worked for Ace, which sponsors a cash balance plan and a standard 401(k) plan. Each of the plans uses the longest permitted vesting schedule and both plans are top heavy. He has a balance of $40,000 in the cash balance plan, has deferred $20,000 into the 401(k) plan and has employer matching contributions of $10,000. If he has been employed for three years, but only participating in the plans for the last two years, how much does he keep if he leaves today? a. $60,000 b. $20,000. c. $64,000 d. $30,000.

Answer 1

Answer: c. $64,000

Explanation:

Cash balance plans can be claimed if the employee has worked for the employer at least 3 years which means he gets to keep the $40,000.

He will also keep the deferred balance of $20,000.

For working 3 years he also gets to keep 40% of the employer's contribution.

= 40,000 + 20,000 + (10,000 * 40%)

= $64,000