Melissa's retirement plan is described in her employee handbook as follows: Noncontributory
Cliff vesting (100 percent)after 3 years of full-time employment
Monthly retirement benefits based on average salary over the last 3 years of employment and the total number of years worked for the company
Which of the following statements about this retirement plan is true?

Question

Quizplus · Accepted Answer

Melissa's retirement plan is noncontributory, meaning that she does not have to contribute any money to the plan. However, cliff vesting (100 percent) only takes place after three years of full-time employment, which means that if Melissa leaves the company before then, she will not receive any benefits. The retirement benefits that Melissa will receive are based on her average salary over the last 3 years of employment and the total number of years worked for the company. This retirement plan is not a defined contribution plan, which would require Melissa to make investment decisions. Finally, vesting in this plan takes place all at once (cliff vesting) after three years of full-time employment, so vesting does not take place gradually over six years.

Melissa's Retirement Plan Is Described in Her Employee Handbook as Follows