QUESTION 4 Q 7 Kathy has an account balance in her employer

QUESTION 4 Q 7. Kathy has an account balance in her employer s money purchase pension plan of $100,000 The plan has a 2-6 graded woshing poscy She has been a perticpant for three and a half years and has worked for the compary for five years Assuming the plan permits loans, what is the mxim loan that Kaltlry could take from the plan? O a 520,000 \"D $30,000- O c $10,000 O d $50,000

Solution

Vesting refers to the passage of rights in the assets to the employees. Under graded vesting the passage begins with 20% after an initial required period, and then increases 20% every year.

2-6 year graded vesting:

Under this example, Kathy has been participant for three and a half years(worked for 5 years but had no contribution for one and a half years). So, in this example Kathy is entitled to 40% (3 years as full 4 years are not yet completed and no vesting is done on half yearly basis). Therefore, Kathy is entitled to $40,000.

Correct option is: c. $40,000

YEARS	PERCENTAGE VESTED
0-1	0%
2	20%
3	40%
4	60%
5	80%
6	100%