Question

N Company has a defined contribution qualified plan which uses standard eligibility and 2-6 year graduated vesting. Nate has worked for N Co. for 5 years and has $100,000 in the plan, $40,000 of which he contributed and earned on his contributions when he quits his job. How much may he roll over to an IRA or another qualified plan?

a.) $100,000
b.) $80,000
c.) $88,000
d.) $40,000

Answer 1

Nate may roll over $40,000 to an IRA or another qualified plan.

Step-by-step explanation:

To determine how much Nate may roll over to an IRA or another qualified plan, we need to understand the vesting schedule and the contributions made by Nate and the employer. In this case, Nate has worked for N Co. for 5 years and has $100,000 in the plan, out of which $40,000 is his own contribution.

Since the plan uses a 2-6 year graduated vesting schedule, Nate is fully vested in his own contributions. Therefore, he can roll over his own contributions of $40,000 to an IRA or another qualified plan. The remaining $60,000, which represents the employer's contribution, may not be rolled over as Nate is not yet fully vested in that portion. Therefore, the correct answer is d) $40,000.