7/28/2019 Retirement Plan,,,,,111

1/9

RETIREMENT PLAN A secured future , A Secured benefit

7/28/2019 Retirement Plan,,,,,111

2/9

LIFE ISNT STATIC

Web definition Retirement plan

An arrangement to provide people with an income during retirementwhen they are no longer earning a steady income from employment.

7/28/2019 Retirement Plan,,,,,111

3/9

STAGES OF RETIREMENT PLAN ?

Every retirement plan has a life span with four stages through which the plan evolves

Choosing, Establishing, Operating, and Terminating.

Stage One: Choosing

You begin thinking ahead:

towards retirement in general; and

towards learning specifically about ways that money can be put aside for your retirement and, as a

business owner, the retirement of your employees, as well.

Stage Two: Establishing

You take the necessary steps to put your plan in place. Depending on the type of plan, the range of

administrative steps may vary, such as:

arranging a fund for the plans assets adopting a written plan

notifying eligible employees

developing a recordkeeping system.

7/28/2019 Retirement Plan,,,,,111

4/9

Stage Three: Operating

You want to operate your retirement plan so it grows and evolves into the valuable retirement

vehicle you need. Depending on the type of plan established, there are a number of steps that you

need to take to operate your plan on an ongoing basis, such as:

covering eligible employees

making appropriate contributions

keeping the plan up-to-date with the retirement plan law managing the plan assets

providing information to employees participating in the plan

distributing appropriate benefit.

Stage Four: Terminating

When your plan no longer suits the purposes of your business, you will close out your retirement

plan and notify the appropriate parties

7/28/2019 Retirement Plan,,,,,111

5/9

Advantages Retirement Plan Why Should You Set Up an Employee Retirement Plan, and What are Some of the Benefits?

A retirement plan has lots of benefits - for you, your business, and your employees.

.1)AsContributions made to a pension plan are tax deductible.

2)Employer contributions do not result in any payroll taxes because they are not included in thecalculation to determine contributions to other programs, such as employment insurance etc.

3)Investment income generated by the pension fund in which contributions accumulate are tax

exempt.

4)The employer contributions are vested to the plan member as soon as his or her membership

begins.

5)In the event of a member's death, his or her spouse receive a pension or other benefit. If there is

no surviving spouse, a benefit can be paid to a designated beneficiary or to the member's heirs.

6)The pension fund does not belong to the employer; it cannot be seized if the business goesbankrupt.

7/28/2019 Retirement Plan,,,,,111

6/9

Retirement PlansDefined Benefit Plan

A defined benefit plan promises a specific monthly payout at retirement, according to a fixed formula that usuallydepends on the members salary and the number of years membership in the plan. For example, 1 % of average

salary for the last 5 years of employment for every year of service with an employer. The benefits in most traditional

defined benefit plans are protected, within certain limitations, by federal insurance provided through the Pension

Benefit Guaranty Corporation (PBGC).

Defined Contribution Plan

On the other hand, defined contribution plan does not promise a specific amount of benefits at retirement. Instead, it

will provide a payout at retirement that is dependent on the amount of money contributed to the employees individual

account by the employee or employer or both, and the performance of the investment vehicles being utilized. The

employee will then receive the balance in their account that is based on contributions, plus or minus investment gain

or losses. The fluctuation of the value of the account is due to the changes in the value of the investments. 401(k)

plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans.

Hybrid Plans

A cash balance plan is a defined plan made by the employer with the help of consulting actuaries, a group of businessprofessionals who deal with the financial impact of risk and uncertainty, to appear as if they were defined contribution

plans. They have notional balances in hypothetical accounts where, normally, each year the plan administrator

contributes an amount equal to a certain percentage of each participants salary; a second contribution, which is called

an interest credit is also made. These are not actual contributions and further discussion is beyond the scope of this

entry.0

Target Benefit plans are defined contribution plans made to match or look like defined benefit plans. This would only

work if all actuarial assumptions are actually realized

7/28/2019 Retirement Plan,,,,,111

7/9

VOLUNTARY RETIREMENT PLAN

Definition:

Voluntary retirement is an act on the part of employee to give up employment willingly and without

compulsion . It is a choice given to an employee. He need not disclose the reason for his voluntary

retirement. In other words, it is an unilateral act of the employee, to be exercised by him

unilaterally.

7/28/2019 Retirement Plan,,,,,111

8/9

REASONS FOR ACCEPTANCE OF VRS 1.Fear of uncertain future.

2.Financial Needs.

3.Dissatisfaction with the job.

4.Sickness or old age.

5.Allurement by management.

6.Dream of own business.

7.Miscellaneous

a)Wants to leave and settle in his own native place.

b)Family compulsions in case of female workers.

c)Fresh Employment.

7/28/2019 Retirement Plan,,,,,111

9/9