Question

Company XYZ has the following vesting schedule in place for its 401(k) plan.

Years of Service Vested Percentage
Less than 1 0%
1 25%
2 50%
3 75%
4 or more 100%
Which statement describes how Company XYZ uses vesting with employer contributions to 401(k) plans?

A.
When employer contributions are added to a 401(k) account, the funds are immediately owned by the employee.
B.
After working a specific amount of time for the employer, the employer contributions become the full property of the employee.
C.
Employees keep employer contributions when they move to a different job, no matter how long they have worked for the employer.
D.
Employees in managerial positions own employer-contributed funds immediately, while other employees must work for the employer a minimal period of time to own employer-contributed funds.

Answer 1

B. After working a specific amount of time for the employer, the employer contributions become the full property of the employee.

Step-by-step explanation:

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Answer 2

B.

After working a specific amount of time for the employer, the employer contributions become the full property of the employee.

Step-by-step explanation:

401k is retirement savings plan where an employee chooses to contribute a portion of their salary and the employer also contributes to that account. The latter can match dollar for dollar, 50% or any percentage as stated in the employment contract. Vesting in itself means full ownership of the account balance by the employee. Based on XYZ company, an employee would own 100% of account balance without it being forfeited by employer but only after working for at least 4 years.