Let's break down the vesting schedule provided by Company XYZ for its [tex]$401(k)$[/tex] plan and match it with the statements to find the correct answer.
The vesting schedule is as follows:
| Years of Service | Vested Percentage |
|------------------|-------------------|
| Less than 1 | 0% |
| 1 | 25% |
| 2 | 50% |
| 3 | 75% |
| 4 or more | 100% |
### Analysis of the Statements:
A. When employer contributions are added to a $401(k) account, the funds are immediately owned by the employee.
- This statement is false because the vesting schedule shows that the employee begins with 0% ownership and gains ownership incrementally over time, up to 100% after 4 years.
B. After working a specific amount of time for the employer, the employer contributions become the full property of the employee.
- This statement accurately describes the vesting schedule. Employees gain ownership of employer contributions incrementally and gain full ownership (100%) after working for 4 years.
C. Employees keep employer contributions when they move to a different job, no matter how long they have worked for the employer.
- This statement is false as well. Employees' ownership of the employer contributions depends on their vested percentage, which is determined by their years of service. They only get to keep the portion that is vested.
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.
- This statement is not supported by the given schedule and cannot be verified or inferred from the vesting schedule. There is no distinction in the provided schedule between managerial and other positions.
### Conclusion:
The statement that best describes how Company XYZ uses vesting with employer contributions to [tex]$401(k)$[/tex] plans is:
B. After working a specific amount of time for the employer, the employer contributions become the full property of the employee.
So, the correct answer is B (2).
