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Subject:  Re: Question on 401K language Date:  10/20/2000  3:37 PM
Author:  TMFPixy Number:  25617 of 104777

Marcusfan asks:

<<My 22 year old nephew just got a new job. Since I'm a government employee, I have a 457 plan and could not answer his questions about the 401K offered by his new employer. Perhaps someone here can help???

The language in his benefit book says "The company will match to an average of 80% of the first 6% of your pay that you contribute to the plan" and of course they do so in company stock.

Now, with my urging, my nephew has been contributing to a Roth IRA since he was 19 and he wants to continue to do so. My question is, can anyone tell me what the above paragraph means? Let's assume his gross income is $2000 per month and he contributes $300 per month to a 401K (I don't know if that's the maximum he's allowed, but its certainly about the maximum he can afford). What will the company contribute or how does that work.>>

The company will contribute on average of 80% (based on market value of the shares contributed) of $120 (that's 6% of $2,000). That works out to about $96 per month contributed as stock. The company will contribute that much because your son will be contributing more than 6% of his pay, but the company stops at a maximum of 6%.

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