Question

Sam has been with SS Co. for 3.5 years. His employer uses 3 year cliff vesting for the 401(k). There is $80,000 in the 401(k), 60% of which is attributable to Sam's contributions and 40% of which is attributable to his employer's contributions. Sam quits his job. How much may he roll over to an IRA or to another qualified plan?

a.) $0
b.) $48,000
c.) $32,000
d.) $80,000

Answer 1

Sam can roll over the full amount of $80,000 from his 401(k) to an IRA or another qualified plan because he has surpassed the required 3 year cliff vesting period of his employer's retirement plan. The correct option is D.

Step-by-step explanation:

The question posed revolves around determining how much Sam can roll over to an IRA or another qualified plan after quitting his job with SS Co., considering the company's 3 year cliff vesting policy for its 401(k) plan. Since Sam has been employed for 3.5 years, he has surpassed the cliff vesting period, which allows him to roll over the entire amount that is vested. It is stated that 60% of the $80,000 in the 401(k) corresponds to Sam's contributions, and 40% to his employer's contributions.

As per the 3 year cliff vesting rule and the percentages given, Sam has 100% rights over both his contributions and his employer's contributions because he has been employed for longer than 3 years. Therefore, the total amount Sam can roll over is the full $80,000, which includes his contributions and his employer's contributions.

The answer to the question is d) $80,000.