Retirement plans are the financial support plans for the employees of a particular organization after their respective retirement. Retirees receive either a lump sum payment or monthly payment over a longer period of time.
Government Pension Plans:
Government operated pension plans in United States of America include social security system, federal social insurance program. Beneficiaries of various needful population sectors are dependent on such pension contribution plans. Government employments pertaining to a certain department have their own pension plans in place.
Private Pension Plans
Private pension plans are the pension plans being operated by the private companies. These companies are heavily regulated with ERISA. Reason for the regulations is that money of the employees requires shear protection. Reason for investing in the pension plans is that their large pool of investment and exclusive regulations makes it one of the safest options for the employee pension plans. Private investors hold pension entities with the aim of profit against the managing of these pension plans.
Regulations of Pension Plans:
ERISA Declares a minimum funding requirement pertaining to employers to ensure that pension plans. It ensures that pension plans are providing for the vesting of employees’ pension benefit after a specific number of years.
ERISA also establishes the way in which pension is to be paid to the beneficiary. For example Joint and survivor annuity, this pays the surviving spouse until the spouse waives the survivor coverage.
ERISA established Pension and Benefit Guaranty Corporation in order to provide for the cover if pension plans do not have the sufficient funds to provide for the employee due benefit. Recently ERISA introduced a new provision which abolished the older practice and made compulsory on the employer to fill the gap between the pension plans and benefit due.
Normally ERISA doesn’t compel the employer to have health contribution plans but if an employer opts for this plan, then ERISA regulates it.
ERISA requires the pension plans to exhibit a document for the summary description of the pension plan. It explains how plan provides and operates. It develops the understanding between the stakeholders of the pension plan.
Types of Pension Plans
Defined benefit pension plan is as evident from the title as pension plan on which the liability of profit and loss lies on the employers. Risk of investment is entire placed on the employer. Employers have to fulfill the gap between the pension plan and entitlement due to the employees.
This plan as evident from its name, employer places a fixed contribution into the plan on regular basis. This is the most common used contribution plan because it waives off the employers liability to pay now if losses are occurring in the pension scheme.
Apart from weAccountax taxation and reporting services, business consultancy services can help the organizations to meet the compliance required by ERISA. WeAccountax can help the organization determine the shortfalls in their pension plans and provide reasonable solutions to overcome those shortfalls.