Bill has worked for Excellent Corp. for 4 years. During this period, Excellent Corp. has contributed $25,000 to his retirement plan. Assuming the company uses graded vesting, how much will Bill be able to roll into an individual retirement account (IRA) if he leaves Excellent Corp. at the end of 4 years?
A) $0
B) $5,000
C) $10,000
D) $15,000
E) $20,000

Question

Quizplus · Accepted Answer

Under a graded vesting schedule, employees gain ownership of employer contributions to their retirement plan over time. A common graded vesting schedule allows for 20% ownership after 2 years, with an additional 20% for each year thereafter. After 4 years, Bill would be 80% vested (20% for the second year, plus 20% for each subsequent year), so he would be able to roll 80% of $25,000, which is $20,000, into an IRA. However, there was a mistake in my calculation in the choice provided. The correct calculation based on the explanation is indeed 80% of $25,000, which equals $20,000, aligning with option E, not D.

Bill Has Worked for Excellent Corp