Exam Company provides a SIMPLE plan for its employees. Under the plan, employees can contribute up to 6% of their salary and Exam Corporation will match the employee's contribution up to 3% of the employee's salary. Ben, age 44, is an employee of Exam Corporation and elects to contribute the maximum amount of his $95,000 salary to the SIMPLE plan. What is the total contribution made to Ben's SIMPLE account? When does Ben's contribution vest? When does the contribution by Exam Company vest? What is the amount contributed to Ben's account if Ben's salary is $210,000?
What will be an ideal response?
Ben will contribute $5,700 to the SIMPLE plan ($95,000 × 6%). Exam Company will contribute an additional $2,850 ($95,000 × 3%). The contribution of Ben and the Company will vest immediately.
If Ben's salary is $210,000, a 6% rate would mean he could contribute $12,600 to his SIMPLE account. However, for taxpayers under the age of 50, the annual contribution is limited to $12,500. Thus, Ben's contribution would be $12,500 and the Company's contribution would be $6,300 ($210,000 × 3%) for a total of $18,800.
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