Question

Problem 5-13 Qualified Retirement Plans Including Section 401(K) Plans (LO 5.4) During 2020, Jill, age 39, participated in a Section 401(k) plan which provides for maximum employee contributions of 12%. Jill's salary was $80,000 for the year. Jill elects to make the maximum contribution. What is Jill's maximum tax-deferred contribution to the plan for the year

Answer 1

Answer:

Jill's maximum tax-deferred contribution to the plan for the year is $9,600.

Explanation:

Jill's maximum tax-deferred contribution to the plan for the year can be calculated as follows:

Maximum employee contributions provided for by Section 401(k) plan = 12%

Jill's salary = $80,000

Since Jill elects to make the maximum contribution, we have:

Jill's maximum tax-deferred contribution = Maximum employee contributions provided for by Section 401(k) plan * Jill's salary = 12% * $80,000 = $9,600

Therefore, Jill's maximum tax-deferred contribution to the plan for the year is $9,600.