Certified Financial Planner (CFP) Practice Exam · Question
A client's Defined Contribution (DC) pension plan has the following characteristics: employee contributes 5% of salary, employer matches 100% up to 4% of salary. The client earns $75,000 annually. What is the total annual contribution to the client's DC plan?
The employee contributes 5% of $75,000 = $3,750. The employer matches 100% up to 4% of salary, which is 4% of $75,000 = $3,000. Therefore, the total annual cont
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Question: A client's Defined Contribution (DC) pension plan has the following characteristics: employee contributes 5% of salary, employer matches 100% up to 4% of salary. The client earns $75,000 annually. What is the total annual contribution to the client's DC plan?
Answer options:
- $3,000
- $3,750
- $6,000 ✅ $6,750
Correct answer: $6,750
Explanation: The employee contributes 5% of $75,000 = $3,750. The employer matches 100% up to 4% of salary, which is 4% of $75,000 = $3,000. Therefore, the total annual contribution is $3,750 (employee) + $3,000 (employer) = $6,750.
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