FRM Part I · FRM Exam Part I · Insurance Companies and Pension Plans
An employee joins a defined contribution plan and contributes 8% of salary annually, matched 4% by the employer. Salary is USD 50,000 and is paid once at year-end. What total amount is contributed to the employee's account for the year?
The total contribution is USD 6,000: the employee contributes 8% of USD 50,000, which is USD 4,000, and the employer adds 4%, which is USD 2,000. Together these sum to USD 6,000 going into the account for the year.
- AUSD 2,000
- BUSD 4,000
- CUSD 6,000Correct
- DUSD 8,000
Explanation
Employee contribution = 8% x 50,000 = 4,000. Employer match = 4% x 50,000 = 2,000. Total = 6,000. USD 4,000 omits the match and USD 2,000 counts only the match.
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