Question 2 - Chapter 5 :
Calculate the maximum contribution in 2018 for a 52-year-old
employee earning $140,000 annually, working in a company with the
following retirement plans: (1) a 401(k) with no employer match,
and (2) a money-purchase plan with an employer contribution equal
to 12% of salary:
A. $16,800 B. $18,500 C. $24,500 D. $41,300 E.
$55,000
Question 3 - Chapter 5 :
Jack and Jill own a successful engineering company, which
sponsors a 401(k) plan that requires standard eligibility. Sam, Tom
and Pat are the only other employees, who are between the ages of
25 and 29 and have been with the company for a couple of years.
Jack and Jill each have salaries of $200,000, while their employees
have salaries ranging between $28,000 and $30,000. Jack and Jill
both defer $10,000 each. Sam, who is Jack and Jill’s son, earns
$30,000 and defers $6,000 into the 401(k) plan. Tom, who makes
$28,000, defers $2,800, while Pat does not defer anything into the
401(k) plan. Which of the following statements is correct?
A. The ADP for the NHC employees is 6.67%
B. Jack and Jill are the only highly compensated
employees.
C. If the plan failed the ADP test, then the issue
could be solved by providing a qualified matching contribution to
all five employees.
D. If the company hired a new employee, it would not
increase the amount that Jack and Jill can defer during the first
year of the employee’s employment?
Please, help me to answer these questions. Thank you
2. answer is option D $41,300
Maximum contribution is lesser of $55000 (maximum limit) or $35300 (18500+(140000*12%)). Moreover, as an employee is above 50 years, there is an additional catch-up contribution of $6000. Therefore, the maximum contribution will be $41,300 ($35300+$6000).
3. answer is option D If the company hired a new employee, it would not increase the amount that Jack and Jill can defer during the first year of the employee’s employment
Jack and Jill defer $10000 each which gives the total of $20000. The salaries of employees range between $28,000 and $30,000, which are above the total deferred amount of Jack and Jill.
Question 2 - Chapter 5 : Calculate the maximum contribution in 2018 for a 52-year-old employee...
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