Question

Tom Grady earns $100,000 per year as a marketing executive at Patriot Marketing, Inc. He has a 401(k)-profit sharing plan with the company and he wants you to calculate his vested balance. He has provided you with the following information: • Mr. Grady's plan is on a 2 to 6 graduated vesting schedule He has completed 4 years of service. He has earned exactly $100,000 each year with no adjustments for inflation. Mr. Grady has elected the following deferrals over the following over the past 4 years: 1) $15,000 2) $16,000 3) $17,000 4) $12,000 • The company matched 50 cents on every dollar each year up to a maximum of 6% of his salary per year. • The company provided $2,000 profit sharing contributions each year over the last 4 years to Mr. Grady's account. • Mr. Grady's account earned the following investment returns (in dollars) over the last 4 years for each of the following: Mr. Grady's Elective deferrals $12,000 Company matching and profit-sharing contributions $3,500

this is the only information given

Answer 1

Grady's total account balance
Particulars	Year 1	Year 2	Year 3	Year 4	Total	Remarks
Elective Deferrals	15,000	16,000	17,000	12,000	60,000	Elective Deferrals are amounts contributed to a plan by the employer at the employee's election - so this should be included in account balance
Company matching contribution	6,000	6,000	6,000	6,000	24,000	(Refer table below)
Profit Sharing contributions	2,000	2,000	2,000	2,000	8,000	Profit sharing contribution is also given to Grady's account - so this should be included in account balance
Total contributions	23,000	24,000	25,000	20,000	92,000
Investment return
On Grady's elective deferral					12,000	Investment return also should be part of account balance
On company's matching cont.					3,500
Total account balance					107,500
Company matching contribution
Particulars	Year 1	Year 2	Year 3	Year 4	Total	Remarks
Elective Deferrals (A)	15,000	16,000	17,000	12,000	60,000
Salary (B)	100,000	100,000	100,000	100,000	400,000
50 cent of every dollar (C = A*50%)	7,500	8,000	8,500	6,000	30,000	50 cent of every dollar contributed by employee should be calculated
6% of salary (D = B*6%)	6,000	6,000	6,000	6,000	24,000	6% on salary earned Is calculated
Company matching contribution (C or D whichever is lower)	6,000	6,000	6,000	6,000	24,000	50 cent on each dollar up to a maximum of 6% of salary to be considered

Grady's plan is on a 2 to 6 graduated vesting schedule

Years of Vesting Service	Most restrictive Graded Vesting Schedule permissible for Defined contribution plans
1	0% or more
2	20% or more
3	40% or more
4	60% or more
5	80% or more
6	100% or more

As Mr. Grady completed 4 years of service

Grady's Vested balance = 60% or more

= 1,07,500 * 60% = $ 64,500