The retirement plan proposal and communication plan essay is a document that sets out all the retirement benefits for employees. This should be updated every year to ensure it reflects changes in legislation, retirement age, and other factors which have an impact on retirement arrangements. The first step of this essay is to set out the employer’s responsibility for providing retirement benefits.
I’ll provide practical examples, tips, and strategies to help you design your own retirement plan. You’ll learn how to prepare a Retirement Plan Proposal and Communication Plan HRM/324 that meets the needs of your organization.
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Employees can participate in employer-sponsored retirement plans and invest in individual retirement accounts (IRAs) that they establish on their own to take advantage of the potential for tax-deferred earnings and, in some cases, tax deferral on their contributions. This paper will examine a number of different types of retirement plans that may be made available to workers.
A 401(k) plan, so-called for the section of the Internal Revenue Code that describes the standards, is a savings plan in which employees may defer up to $12,000 (which rises by $1,000 per year from 2003 through 2006 and is adjusted for inflation thereafter). Employers generally match employee contributions at 50 percent.
Defined contribution plans are more popular among small and big businesses (Milkovich and Newman, 2008). Historically, these plans have taken longer to vest (the companies matched share of the contribution permanently migrates over to employee ownership, making them more portable—job hoppers can take their pension accruals with them) (Milkovich and Newman, 2008). An employee stock ownership plan is the second type of plan available to employees (ESOP) (2008).
In a nutshell, an ESOP is a trust that receives assets from the company in exchange for stock shares or cash. A contribution of stock shares or cash to the trust is made tax-deductible (Milkovich and Newman, 2008). The company’s stock (or stocks bought with cash contributions) is allocated to participating employee accounts (2008). Employee earnings are used to determine how much money will be given out. When an ESOP is utilized as a pension vehicle rather than an incentive program, employees get money at retirement based on the stock’s value at that moment.
Our management team has assigned our department the job of coming up with a proposal that will provide useful information based on an important topic surrounding retirement plans to the 150 workers who work for this firm.
When it comes to retirement benefits, there are several options where employees may research this topic; Disability Insurance, Social Security Old-Age, IRA/Roth IRA accounts, employer-sponsored contribution plans are just a few. We’ll be discussing and focusing on three critical retirement options that most people use while working for an employer, from these sources. Other topics that will be addressed include pension plans, contribution arrangements, profit sharing, and 401Ks.
When it comes to saving for retirement with traditional pensions and their plans, the objective is usually to arrive at payments that will be paid out to the employee when they retire. The 401(k) is a payment based on both the employer’s and employee’s contributions, as well as the number of interested parties who have completed their paperwork over time. Profit sharing revolves around gross sales or money that has been put out for distribution by the business to its employees.
Employees are generally entitled to a retirement plan from their employer since offering one is a great approach to hire and keep good staff (Garman & Forgue, 2009). Even though the Employer Retirement Income Security Act (ERISA) does not require businesses to offer retirement plans, it does oversee them.
The ERISA statute is an ACT that provides a framework for employers seeking to establish retirement benefit plans to help their employees retire and leave the firm. The legislation makes sure that those putting the plan into action are fully responsible for any problems that may arise. Participants are likewise guaranteed certain rights, which must be made known to them. Furthermore, ERISA requires organizations to submit accurate information regarding their plans to all affected participants.
This article discusses three different types of retirement plans that may be set up for employees. The Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE), and Qualified plans are the three options discussed. The proposed communications strategy is also outlined in this paper.
Retirement Benefits Plans
A retirement plan is often the largest single pool of money that most individuals will ever receive, and choosing the proper one may be beneficial to both the company and its employees. SEP, SIMPLE, or Qualified are three options that an organization may choose from when adopting a retirement program. The following are some of the fundamentals of these three types of retirement plans.
Simplified Employee Pension (SEP) Plans
Simplified employee pension plans are designed for businesses who may be put off by the intricacies of creating a qualified plan. Employers make contributions to individual retirement accounts (IRAs) for each eligible worker under a SEP. To set up a SEP plan, three conditions must be met. The first is that the organization must explain how employees will benefit from the plan in plain terms and this information should be made available to all affected workers within the firm.
Second, each employee will be expected to receive certain information about the plan. Third, in order for an employer to establish a SEP-IRA, each employee must have at least $500 in compensation and have worked for the company at least three out of the previous five years (Johnson, 2008).
Each employee’s SEP-IRA account is funded with money contributed by the employer. An organization is not required to make payments every year, but it must do so in certain circumstances; it must contribute sums for each participant in particular years. Organizations are required to assign contributions to employees based on agreement, rather than showing any sort of prejudice. SEP-IRA contributions for workers by the firm are deductible as employee benefits and reduce company earnings (Johnson, 2008).
Savings Incentive Match Plan for Employees (SIMPLE) Plans
Under a SIMPLE plan, all of the workers are permitted to allow their employer to take agreed deductions from their pay for their own benefit in the future. As a result, this is something that an employee does not touch until it is time to do so.
SIMPLE IRA and SIMPLE 401(k) are the two distinct types of SIMPLE plans (Johnson, 2008). According to experts, 401(k) programs are a very popular type of employer-sponsored defined contribution retirement plan. These arrangements, also known as cash or deferred arrangements (CODAs), allow workers to defer a portion of their salaries or get them in cash. Employee benefits paid in cash are taxable and deducted from wages by the employer.
Extra amounts paid into an employee’s 401(k) plan by the employer are not subject to income tax withholding and are exempt from unemployment taxes, as a general rule. Employer contributions to employees’ 401(k) plans are also not included in the overall maximum yearly limit.
The qualified plan is set out in more detail than the SEP and SIMPLE, with significantly tighter requirements. However, it’s worth noting that businesses reap certain benefits from adopting the qualified retirement benefit plan. The qualified plan, among other things, is less restricted.
According to Johnson (2008), employers typically allow employees to deduct their contributions to qualified plans in the year they are paid, regardless of whether they are made using the cash or accrual method. The two most common forms of qualified retirement plans are defined benefit plans and defined contribution plans. A defined benefit plan provides certain benefits for a set number of years after which it stops providing benefits until the participant’s or his spouse’s death.
The amounts that may be expected after retirement are frequently determined by the employee’s job duties and the length of time he or she worked for the firm, as well as the earnings amount received throughout those years. The benefits are usually updated yearly to compensate for inflation. Each employee covered under a defined contribution plan can have his or her own specified contributions made on their behalf by the employer.
In most cases, the employer’s contribution is a minor amount of what the employees are expecting to get in return for their services. The contributions made under defined contribution plans are generally linked to each individual employee’s account, unlike those made to defined benefit plans. As a result, these accounts resemble individual retirement savings accounts. Employees at retirement age are entitled to whatever money has accumulated in their own accounts (Johnson, 2008).
Communicating the Plan to Employees
It will be critical to consider the employees’ perspective while creating the communication strategy. The organization may take the following approach to deliver its message. It will first be crucial to comprehend an employee’s morale within the company. It is important for the company to conduct a research in order to grasp workers’ feelings because anything excellent can be obtained from the communication plan if it is done correctly. If employees are dejected, find out why and address any burning issues so that the environment for communicating the plan becomes healthy.
Second, the organization should try to figure out how its employees feel about the present state of affairs. Employee perception questionnaires are frequently helpful in gathering information on how employees really feel about their company. After these two issues have been addressed, the business may move on and explain the strategy to its staff. To effectively convey the strategy, an organization should schedule a meeting for the employees at an appropriate time. It will be critical to ensure that all workers are kept informed throughout the process in order for it to be successful.
A formal method would be to engage the whole organization in order to present the plan. The team may be assigned by the corporation to lead the entire communication process. Email programs are one of the methods that may be utilized to communicate the plan. If meetings are required, either overhead projectors or flip charts might be used in some circumstances. In some cases, small group discussions may be used as another technique.
During these conversations, the facilitators must set up a context that encourages all workers to contribute and communicate their thoughts or feelings. To overcome resistance to participation, the company must convey its concepts as often as possible to all participants. It will also be necessary to praise staff for being active in the process.
As we’ve seen, all retirement benefit plans have a number of advantages for both the company and its employees. As a result, it is the obligation of management to select which plan to implement. It’s also critical to note that informing staff about the plan is equally important in terms of any one of these options’ success.
Concessions will have to be made so that the institution may build a communication strategy that motivates all staff members to participate in the entire process. Without an effective communication plan, regardless of how excellent a retirement benefits program is, it won’t matter. Any barriers to the communication plan must be addressed, and every effort should be made to keep them from derailing the process of putting the plan into action.
This paper introduces a variety of retirement plans for employees. In addition, a communication strategy will be created to encourage employee participation in one of the suggested retirement plans. Retirement Plans. Employer-sponsored retirement plans give people money when they retire after having completed a particular age and left their job (Milkovich and Newman, 2008).
Employer-sponsored retirement or pension plans may be established in one of three fashions: a defined benefit plan, a defined contribution plan, or hybrid plans that combine characteristics of traditional defined benefit and defined contribution schemes. Employees with employer-provided retirement plans are more likely to have adequate savings for a comfortable retirement than those without them, according to a recent research (Milkovich and Newman, 2008).
Retirement Plan Proposal and Communication Plan Essay Example
Defined benefit plans and defined contribution plans (also known as “DC” pension arrangements) are the two primary kinds of pension plans that will be accessible (Milkovich and Newman, 2008). A defined benefit plan is a retirement arrangement in which a participant’s retirement benefits are specified in the plan document. This perk is most often measured in terms of a monthly sum equal to a percentage of a participant’s pre-retirement wages multiplied by the number of years he or she has worked for the employer (Milkovich and Newman, 2008).
Defined contribution plans are more expensive to set up and administer than defined benefit plans since they require the employer and employee to contribute yearly sums to separate retirement fund accounts according on a plan formula (Milkovich and Newman, 2008). Defined benefit pension plans are more expensive for employers than defined contribution programs because they are difficult to maintain in order that retirees receive proper compensation for the rest of their lives (Milkovich and Newman, 2008). Defined contribution schemes.
Under a defined contribution plan, employers and employees make annual contributions to separate accounts established for each participating employee under the plan document according to a formula provided in the plan document (Milkovich and Newman, 2008). Employers are typically expected to contribute a specific percentage of each participant’s compensation each year (Milkovich and Newman, 2008). On behalf of the employee, employers invest these funds in a number of investment vehicles including company equities, diversified stock market funds, or federal government bond funds.
Employees may be given a selection of investment options in accordance with the employer’s parameters (Milkovich and Newman, 2008). The amount of yearly contributions is determined by defined contribution plans. These plans, unlike defined benefit plans, do not promise specific benefit amounts (Milkovich and Newman, 2008). Participants are responsible for any possible investment profit or loss.
Various variables impact the amount of benefits paid out, including contribution amounts, investment performance, and forfeitures transferred to participant accounts (Milkovich and Newman, 2008). Companies may opt to offer one or more specific types of defined contribution plans (2008). Profit-sharing plans, stock bonus plans, and employee stock ownership arrangements are examples of common kinds of defined contribution plans. There are three main varieties of defined contribution plans.
A 401(k) plan, named for the portion of the Internal Revenue Code that describes its requirements, is a savings plan in which employees may defer income up to a $12,000 maximum (which will increase by $1,000 each year from 2003 to 2006 and be adjusted for inflation thereafter). Employers generally match employee savings at a rate of 50 cents on the dollar. In both small and large businesses, defined contribution plans are more popular than defined benefit plans (Milkovich and Newman, 2008).
Historically, these plans have taken longer to vest (companies transferred the full share of the contribution permanently to employee ownership, and they are more portable—job-hopping employees can take their pension accruals with them to the new job) (Milkovich and Newman, 2008). The second form of plan is an employee stock ownership plan (ESOP) (Milkovich and Newman, 2008). A company makes a tax-deductible gift of stock shares or cash to a trust in a basic ESOP (Milkovich and Newman, 2008).
The trust invests company stock (or shares acquired with cash contributions) in employee accounts (Milkovich and Newman, 2008). Employee earnings determine how much money is given to the employees. When an ESOP is utilized as a pension vehicle rather than an incentive program, retirees receive cash based on the value of their holdings at retirement (Milkovich and Newman, 2008). The major disadvantage of ESOPs is that they do not accumulate wealth as readily as other types of plans.
A third type of plan is a hybrid defined benefit and defined contribution plan that has been popular in recent years. Cash balance plans are characterized as defined benefit plans that appear to be defined contribution plans (Milkovich and Newman, 2008). The amount increases both from employer contributions and from a set interest rate (2008).
Many firms are hesitant to use this platform due to the Internal Revenue Service’s uncertainty that conversions fairly affect older individuals (Milkovich and Newman, 2008). Employee Retirement Income Security Act of 1974. Organizations are required by the government to follow a set of rules. ERISA was created with the aim of regulating various employee benefits programs, such as medical, life, and disability insurance plans, as well as retirement and pension plans. The implementation of certain benefit programs is regulated by ERISA (Martocchio, 2009).
The goal of ERISA is to safeguard employee benefits rights (Martocchio, 2009). ERISA regulates the reporting and disclosure obligations of employers, the funding of benefits, fiduciary obligations for these plans, and vesting rights (Martocchio, 2009). Companies must provide their workers with clear explanations of their benefit plans as well as annual synopses on plan financing and administration if required.
The funding need necessitates that organizations comply with tight standards to ensure they have adequate cash when employees retire (Martocchio, 2009). The ERISA protections only apply to private employers (non-government) who provide employee-sponsored health insurance coverage and other benefit plans to their staff (Wolfe, 2013). Employers are not required by ERISA to provide plans; it merely regulates benefits that they wish to provide.
Not only are the ERISA rules inapplicable to privately purchased, personal insurance policies and benefits, but they also do not apply to privately purchased health insurance (Wolfe, 2013). Communication strategy. It is crucial for the success of any employee retirement plan that employees, their employers, and third-party administrators be informed about it. The effectiveness of a program depends on how effectively employees participate and get value from it (Lyceum, 2013). A strong communication strategy can go a long way toward boosting participation and enjoyment among employees who have plans tailored to their specific requirements (Lyceum, 2013).
The intended audience is the organizations’ 150 workers. The targeted audience of the communication plan is the companies’ 150 employees. Objectives and goals. The objective of the communication strategy is to inform employees about alternative retirement plans, encourage them to participate in one of them, and combat disinterest in participating. Type of message delivery. There are a number of methods through which the organization may communicate information on different plans and employee perceived value (Watson, 2010).
Higher status and satisfaction are associated with specific styles of communication (Watson, 2010). The organization may utilize interactive modeling tools, financial planning seminars, and web site conferences to give the greatest boost to a plan’s importance and satisfaction (Watson, 2010). Holding group meetings once a month, providing one-on-one meetings between independent investment advisers and employees held quarterly, and utilizing e-mail occasionally can all help boost workers’ interest in participating in plans.
Meetings, written communication, and one-on-one meetings with staff are all effective strategies for reducing or eliminating employee participation in retirement plans that they are eligible to participate in. Employee enrollment is crucial. There are a variety of techniques for encouraging employees to join a retirement plan that meets their requirements. Automatic enrolment is the most successful approach; it has been confirmed to increase participant engagement in retirement plans.
Enrollment programs, such as My Covered California, and meetings with financial counselors to discuss the many types of plans are other ways to encourage employee enrollment. Finally, retirement plans are costly; however, if employees do not fully understand or appreciate their options, employers are not getting the most out of their investments in terms of attraction and retention (Watson, 2010). Many businesses overlook the value that workers’ knowledge and appreciation of their retirement plans might bring (Watson, 2010).
Defined benefit and defined contribution plans that are highly valued by workers can be extremely useful in human resource management (Watson, 2010). A company’s retirement plan is also seen to have a lot more value if employees know what it offers.Effective communication about a firm’s retirement plan has a significant impact on its perceived value (Watson, 2010).