Calculating Total Annual Compensation

Question

Jason works for ABC motors, where he earns $50,500 annually. He contributes $150 per month to his 401(k), of which his employer matches half of his contribution. The company contributes $260/month to his health insurance, $80/month to his life insurance, and $60/month to his AD&D policy. He receives a 2% profit-sharing bonus at the end of each year and $9,000 in tuition reimbursement. ABC pays employer-only taxes and insurance that comprises an additional 18% of Jason’s annual salary. What is Jason’s total annual compensation?

Answer 1

Let's calculate Jason's total annual compensation:

1. Base Salary:

$50,500 per year

2. 401(k) contributions:

Jason's contribution: $150 × 12 months = $1,800 per year

Employer match: $150 / 2 × 12 months = $900 per year

3. Insurance contributions (monthly):

Health insurance: $260

Life insurance: $80

AD&D policy: $60

Total monthly insurance: $260 + $80 + $60 = $400

Annual insurance contribution: $400 × 12 = $4,800

4. Profit-sharing bonus:

2% of annual salary = 0.02 × $50,500 = $1,010

5. Tuition reimbursement:

$9,000 per year

6. Employer-only taxes and insurance:

18% of annual salary = 0.18 × $50,500 = $9,090

Now, let's sum up all these components:

Base Salary: $50,500

Employer 401(k) match: $900

Insurance contributions: $4,800

Profit-sharing bonus: $1,010

Tuition reimbursement: $9,000

Employer taxes/insurance: $9,090

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Total: $75,300

Therefore, Jason's total annual compensation is $75,300.

Note: We don't include Jason's personal 401(k) contribution in the total compensation because it's already part of his base salary. The compensation package represents what the employer provides, not what the employee contributes from their own salary.