The correct answer is A - $4220
Explanation:
Working
Employee Name Annually Salary Salary for 4 Years
John $ 300,000.00 $ 1,200,000.00
Sally $ 20,000.00 $ 80,000.00
Calculation:
List Of Account Balance Actual Balance Deductions as per 401(k) rule As per 401(K) provisions balance
Employee Contribution $ 1,500.00 $ 0.00 $ 1,500.00
Employer Contribution $2,000.00 $800.00 $ 1,200.00
Earnings on Employee Contribution$800.00 $0.00 $ 800.00
Earnings on Employer Contribution $1,200.00 $480.00 $720.00
Sally's Total Balance $5,500.00 $1,280.00 $4,220.00
Clarification of above working: After 3 years but before 5 years completion of service, Miss Sally will be entitled only 60% of the amount of money that XYZ contributed in 401(k) provision, hence out of total employer contribution and earnings on that will be reduced by 40%. Employee contribution part remains constant.
Answer:
$4220
