Retirement Plan Proposal

Topics: Pension, Cash balance plan, 401(k) Pages: 5 (735 words) Published: July 22, 2015


Retirement Plan Proposal and Communication Plan
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Retirement Plan Proposal and Communication Plan
The Employment Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans. It was established to regulate the implementation of employee benefits, such as medical and disability programs (Martocchio, 2009). With federal laws like this in place, it is very imperative that every organization offer a variety of retirement plans to their employees. A retirement savings is an essential part for future financial security (Department of Labor, 2015). The primary function of providing retirement plans to employees is to assure that employees are protected during periods extending their employment with the organization. Types of Retirement Plans

There are three retirement plans that employees can choose from, which are the defined benefit plan, the defined contribution plan, and the hybrid plan. Each retirement plan is designed to help employees contribute towards their retirement. The first retirement plan is a defined benefit plan. The defined benefit plan guarantees retirement benefits based on a fixed formula. This type of benefit is usually expressed in terms of a monthly sum equal to percentage of a participant’s preretirement pay multiplied by the number of years the employee has worked for the organization (Martocchio, 2009). The next type of retirement plan is the defined contribution plan. Employers and employees make annual contributions to separate accounts established for each participating employee based on a formula (Martocchio, 2009). There is a variety of defined contribution plans. Some of these plans include Section 401(k) Plans, profit sharing plans, stock bonus plans, and savings incentive match plans for employees (SIMPLEs). A section 401(k) is a retirement plan that employees can defer a portion of their compensation to a trust of a qualified defined contribution plan (Martocchio, 2009). A profit sharing plan is a plan that gives employers for the discretion on how much and when the company pays into the plan. A stock bonus plan can be considered the basis for a company’s 401(k) plan (Martocchio, 2009). The savings incentive match plans (SIMPLEs) is probably one of the most simplified retirement plans. Like the other retirement plans, employers and employees make contributions towards retirement. It also offers a lower start up and annual costs (Department of Labor, 2015). Another type of retirement plan that employees may consider is the hybrid plan, which is a combination of features of a traditional defined benefit plan and a defined contribution plan. There are quite a few types of hybrid plans. The cash balance plan defines benefits in terms of a current lump-sum value rather than a deferred annuity (EBRI, 1996). Another type is the age-weighted profit-sharing plan. This hybrid plan has defined benefit properties. The age-weighted profit-sharing plan option provides larger contributions for older employees who have fewer years to accumulate sufficient funds for retirement (EBRI, 1996). Communication and Overcoming Resistance

Communicating the retirement plan and employee participation are very important. The retirement plan proposal will be communicated during an initial enrollment period. There are several methods that can be used to inform employees of the various retirement plans that are offered. The employees will be handed booklets that will include very detailed information about all of the offered retirement plan. Employees will also have the opportunity of attending an informative meeting instructed by a consultant. The meeting which will give them a chance to ask any questions they may have about the retirement plans. Employees will also have the option of setting up a one on one meeting with a consultant. Change is always accompanied by...
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