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Dustin, who is 48 years old, works for Pinnacle Inc., with a salary of $300,000, a...

Dustin, who is 48 years old, works for Pinnacle Inc., with a salary of $300,000, a car allowance, and a very nice expense account. Pinnacle is a Fortune 1,000 company that sponsors a defined benefit plan that pays 2 percent times years of participation times the average of the three final years of compensation. In addition, Pinnacle sponsors a 401(k) / profit sharing plan and contributes 18% of employees salary to the profit sharing plan. There is no additional match. If the ADP of the NHCEs is 3%, what is the maximum that Dustin can defer this year (2020)?

a. $5,700

b. $14,250

c. $17,100

d. $19,500

Solutions

Expert Solution

D.5700

Whether you are nearing retirement or just startingyour career, it is always the right time to begin planning for yourfinancial future. If your employer offers a 401(k), it can be oneof the simplest and most effective ways to save for yourretirement. While thecheif advantage of this plan is that it allowsyou to defer a portion of your paycheck to your retirement accounteach month automatically, there are some limitations on how muchyou can save.

Each year, usually in October or November, the Internal RevenueService (IRS) reviews and sometimes updates the maximumcontribution limits and other retirement savings vehicles.Depending on your age and compensation level, you may be subject todifferent limits. Stay up-to-date on the most current regulationsto ensure you make the most of your employer-sponsored plan.

Dustin can defer $5700

The 2020 401(k) contribution limit. As I mentioned, the 401(k)contribution limit in 2020 is increasing by $500 over the 2017limit to $19500. This limit also applies to other qualifiedretirement plan types, such as 403(b) plans, most457 plans, and Thrift Savings Plan accounts

jeff jeffy answered 1 year ago
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