Retirement Proposal and communication plan
Retirement Plans
Heidi G.
HRM/ 324
July 13, 2015
Professor
Retirement Plans Retirement is often the topic of many US workers during the end of their employment years. However, the topic of retirement is most important during the first years of employment. By law, an individual can collect retirement funds from three different sources! There are many retirement options available to both employees and the employers and to make the best decision one must have a basic understanding of the retirement options available. This paper will discuss some of those retirement plans available such as 401(k) plans and individual retirement arrangements (IRS) and what role the Employee Retirement Income Security Act of 1974 plays.
401(k) Plans 401 (k) plans are defined as contribution plans and were named after the section of the IRC that created them. A 401(k) offers three significant tax benefits. “First, employees do not pay income taxes on their contributions to the plan until they withdraw funds. Second, employers deduct their contributions to the plan from taxable income. Third, investments gains are not taxed until participants receive payments” (Martocchio, 2009, Chapter 11). 401(k) plans allow employees to decide how much of their salaries (this is done by percentage, ex. 3% of total income) they want to contribute into their account. Some employers also choose to match their employee’s contributions! Besides the tax benefits, if an employee decided to make a career move all contributions can be transferred to the new organizations plan. As with all things, there are some disadvantages to a 401(k) plan. One disadvantage is that if under the age of 59 ½ it may be difficult to make a withdrawal without having to pay a penalty. Another disadvantage to a 401(k) plan is that although an organization may match contributions, employer contributions are not vested until after three years after the contribution. Set by the IRS a 401(k) plan
Heidi G.
HRM/ 324
July 13, 2015
Professor
Retirement Plans Retirement is often the topic of many US workers during the end of their employment years. However, the topic of retirement is most important during the first years of employment. By law, an individual can collect retirement funds from three different sources! There are many retirement options available to both employees and the employers and to make the best decision one must have a basic understanding of the retirement options available. This paper will discuss some of those retirement plans available such as 401(k) plans and individual retirement arrangements (IRS) and what role the Employee Retirement Income Security Act of 1974 plays.
401(k) Plans 401 (k) plans are defined as contribution plans and were named after the section of the IRC that created them. A 401(k) offers three significant tax benefits. “First, employees do not pay income taxes on their contributions to the plan until they withdraw funds. Second, employers deduct their contributions to the plan from taxable income. Third, investments gains are not taxed until participants receive payments” (Martocchio, 2009, Chapter 11). 401(k) plans allow employees to decide how much of their salaries (this is done by percentage, ex. 3% of total income) they want to contribute into their account. Some employers also choose to match their employee’s contributions! Besides the tax benefits, if an employee decided to make a career move all contributions can be transferred to the new organizations plan. As with all things, there are some disadvantages to a 401(k) plan. One disadvantage is that if under the age of 59 ½ it may be difficult to make a withdrawal without having to pay a penalty. Another disadvantage to a 401(k) plan is that although an organization may match contributions, employer contributions are not vested until after three years after the contribution. Set by the IRS a 401(k) plan
References: IRS. (2015). Retrieved from http://www.irs.gov/Retirement-Plans/Traditional-IRAs Martocchio, J.J. (2009). Strategic Compensation: A human resource management approach (5th ed.). Retrieved from The University of Phoenix eBook Collection database. United States Department of Labor. (n.d.). Retrieved from http://www.dol.gov/ebsa/faqs/faq_consumer_pension.html