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Matthew (48 at year-end) develops cutting-edge technology for SV Inc
Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2019, Matthew participates in SV's money purchase pension plan (a defined contribution plan) and in his company's 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee's salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee's 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV's contribution to the money purchase plan.
Assuming Matthew's annual salary is $418,000,
a-1) What amount will SV contribute to Matthew's money purchase plan?
a-2) What can Matthew contribute to his 401(k) account in 2019?
Expert Solution
a-1) Computation of the SV contribution to Matthew's money purchase plan:-
SV's contribution to money purchase plan = 15% of employee's salary
= 15% * $418,000
= $62,700
a-2) Mathew's money purchase plan has been reached by SV's $62,700 contribution. He can not contribute anything now to 401(K).
So, his contribution is $0.
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