Retirement Plan Proposal and Communication Plan

Only available on StudyMode
  • Download(s) : 1922
  • Published : May 22, 2013
Open Document
Text Preview
Retirement Plan Proposal and Communication Plan
HRM/324

Retirement Plan Proposal and Communication Plan
Retirement pensions provides a source of retirement income employees can draw on after they stop working, they have to invest for retirement while they are still on the job (Lightbulb Financial, 2013). To take advantage of the opportunity to accumulate tax-deferred earnings and in some cases defer taxes on their contributions as well, employees can participate in employer-sponsored retirement plans and invest in individual retirement accounts (IRAs) that they set up on their own (Lightbulb Financial, 2013). This paper will propose several types of retirement plans that could be offered to employees. In addition, a communication plan will be designed to encourage employee participation for one of the proposed retirement plans. Retirement Plans.

Employer-sponsored retirement plans provide employees with income after they have met a minimum retirement age and have left the company (Milkovich and Newman, 2008). Companies establish retirement or pension plans following one of three different designs: a defined benefit plan, a defined contribution plan, or hybrid plans that combine features of traditional defined benefit and defined contribution plans (Milkovich and Newman, 2008). The importance of employer-provided retirement plans is evidenced by a recent study showing that employees with employer-provided retirement plans are more likely to have sufficient savings for a comfortable retirement than those who do not have these plans (Milkovich and Newman, 2008). Two basic types of pension plans that will be offered are: defined benefit plans and defined contribution plans (Milkovich and Newman, 2008). Defined benefit plan. Defined benefit plans guarantee retirement benefits specified in the retirement plan document. This benefit usually is expressed in terms of a monthly sum equal to a percentage of a participant’s preretirement pay multiplied by the number of years he or she has worked for the employer (Milkovich and Newman, 2008). Defined contribution plans require that employers and employees make annual contributions to separate retirement fund accounts established for each participating employee, based on a formula contained in the plan document (Milkovich and Newman, 2008). Defined benefit plans are quite costly to employers compared with defined contribution plans: Companies struggle to fund these plans adequately to ensure that retirees receive entitled benefits for the remainder of their lives (Milkovich and Newman, 2008). Defined contribution plans. Under defined contribution plans, employers and employees make annual contributions to separate accounts established for each participating employee, based on a formula contained in the plan document (Milkovich and Newman, 2008). Formulas typically call for employers to contribute a given percentage of each participant’s compensation annually (Milkovich and Newman, 2008). Employers invest these funds on behalf of the employee, choosing from a variety of investment vehicles such as company stocks, diversified stock market funds, or federal government bond funds. Employees may be given a choice of investment vehicles based on the guidelines established by the employer (Milkovich and Newman, 2008). Defined contribution plans specify rules for the amount of annual contributions. Unlike defined benefit plans, these plans do not guarantee particular benefit amounts (Milkovich and Newman, 2008). Participants bear the risk of possible investment gain or loss. Benefit amounts depend upon several factors, including the contribution amounts, the performance of investments, and forfeitures transferred to participant accounts (Milkovich and Newman, 2008). Companies may choose to offer one or more specific type of defined contribution plans (Milkovich and Newman, 2008). Common examples of defined contribution plans include profit-sharing plans,...
tracking img