Pensions
Pensions
ACCT 302
Pensions help us live with an income as we get older and have retired. “A pension plan is a financial arrangement that allows individuals to continue receiving some type of regular income even after they are no longer active in the workforce.” (1) Most of the pension options out there are used when you retire however there are certain instances where you can collect a pension before retirement due to a disability. Pension plans are also interchangeable with retirement plans they are basically the same thing. Pensions are based on years of service and what has been put into them both by the employee and the employer over the years of service. There are also pensions offered by government so it is possible to have both pensions’ types. The types of pensions overseen by government are handled by the Social Security Administration. Then there are disability pensions to help people take care of themselves in the event that they become disabled and are not able to work. This is usually done through a medical professional who has to deem them incapable of work due to health reasons.
The first pensions came in 1717 when the “Presbyterian Church created a fund for Pious Uses to provide for retired ministers.” (2) However it was not until 1875 that the first pension was created for the United States and it was by the American Express Company. Then it took till 1884 for the first major employer to catch on and it was by the Baltimore and Ohio Railroad. They are also the ones who set the precedent that it was for workers age 65 that had worked at the railroad for at least 10 years. During the Revenue Act of 1913 is when the tax exempt nature of a pension was recognized. In 1940 General Motors designed the first modern pension fund. “He said that it should invest in all stocks, not just GM.” (3) In 1974 the Employee Retirement Income Security Act was established also known as ERISA. What this act did was founded the disclosure obligations
ACCT 302
Pensions help us live with an income as we get older and have retired. “A pension plan is a financial arrangement that allows individuals to continue receiving some type of regular income even after they are no longer active in the workforce.” (1) Most of the pension options out there are used when you retire however there are certain instances where you can collect a pension before retirement due to a disability. Pension plans are also interchangeable with retirement plans they are basically the same thing. Pensions are based on years of service and what has been put into them both by the employee and the employer over the years of service. There are also pensions offered by government so it is possible to have both pensions’ types. The types of pensions overseen by government are handled by the Social Security Administration. Then there are disability pensions to help people take care of themselves in the event that they become disabled and are not able to work. This is usually done through a medical professional who has to deem them incapable of work due to health reasons.
The first pensions came in 1717 when the “Presbyterian Church created a fund for Pious Uses to provide for retired ministers.” (2) However it was not until 1875 that the first pension was created for the United States and it was by the American Express Company. Then it took till 1884 for the first major employer to catch on and it was by the Baltimore and Ohio Railroad. They are also the ones who set the precedent that it was for workers age 65 that had worked at the railroad for at least 10 years. During the Revenue Act of 1913 is when the tax exempt nature of a pension was recognized. In 1940 General Motors designed the first modern pension fund. “He said that it should invest in all stocks, not just GM.” (3) In 1974 the Employee Retirement Income Security Act was established also known as ERISA. What this act did was founded the disclosure obligations
References: (5) http://news.morningstar.com/classroom2/course.asp?docid=4440&page=2 (6) The Kiplinger Letter, Vol 75, Issue 32, Aug 7, 1998