Upon retirement, individuals are encouraged to have financial arrangements that can sustain them in the place of income. These financial arrangements are referred to as retirement plans. Different countries and business organizations provide different terms and plans of retirement to their employees. The retirement plans for employees can either be provided directly by the employers or via trade unions, insurance companies, and/or the government. Although some employers downplay the importance of retirement plans for their employees, *** () argues that these plans are vital, not only for personal planning after retirement, but also for financial management and planning after an employee retires.
Various types of retirement plans exist for employees, and this paper will develop a retirement plan for a small organization of 150 employees. The plan will be aligned with the requirements of Employee Retirement Income Security Act of 1974. In addition to the proposal, the paper will provide a communication plan encouraging the employees to participate in the proposed retirement plan.
Retirement Plan Proposal
Business organizations have a variety of retirement plans from which to choose when designing retirement plans for their employees. Some of the most common plans include government retirement plans, simple Individual Retirement Arrangements, IRAs, and Qualified Retirement Plans ().
Government Retirement Plans
Governmental plans are the most common types of retirement plans for both small and large business organizations. These plans are designed and maintained for United States employees, agencies, Subdivisions of state political and other instruments of US agencies. For employees of such organizations to qualify for this financial plan, the activities of these organizations must contribute to essential functions of the government, and not merely for commercial functions (). There are four categories of plans that fall under the government retirement plans; tax-sheltered annuity plans (403-b), deferred compensation plans (457), qualified excess benefit arrangements, and 401-k plans that were adopted by government agencies before 1986 ().
Tax sheltered annuity plans allows employees to contribute to their retirement financial plans through individual accounts (). This retirement plan is offered by business organizations that are exempted from tax, or by schools. Employers can also contribute to the retirement plan of their employees through their individual accounts. Deferred compensation plans allow the employees of qualified organizations to defer the taxation of saved retirement finances to later years (). This implies that the money saved for retirement is not taxed, until the employees receive it after their retirement. Eligibility of the organizations for deferred compensation plans is outlined in section 457 (b) and (f) of the IRC.
Qualified excess benefit arrangements is a governmental retirement plan that is identified under section 415(m) of the IRC. Under this plan, the annual benefits of participants must exceed the limit of the IRC section 415, must not allow the deferring of compensation by participants in this plan, and should maintain the benefits in an account solely operated for this purpose (). The 401-k plans are for organizations that became governmental entities before May 6, 1986 ().
SIMPLE Individual Retirement Arrangements, IRAs
SIMPLE (Savings Incentive Match Plan for Employees) individual retirement arrangement plan allows employers and/or employees to make contributions to their retirement plans through the traditional IRA employee arrangements (). This retirement plan is ideal for small businesses, especially those that lack a retirement plan for their employees.
