Retirement Paper

1261 Words6 Pages
Abstract
Each employer 's retirement benefits are different. Employees need to know exactly what benefits their employer offers and what each type of benefit does for the employee. Employees that understand defined contribution plans, defined benefit plans, 401(k), 403(b), the fiduciary requirements imposed by ERISA, and non-discrimination rules imposed by ERISA will help employees make good decisions regarding their retirement. Each plans has its good points and its bad points and employees need to know what there options are and which will benefit them. Not each plan is offered by employers, but knowing the rules and laws that they have to follow on the plans the do offer will assist the employee in learning how to save for retirement.
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Tax-deferred annuities or tax-sheltered custodial accounts are offered through the employer and the contributions the employee makes come out of their paycheck before taxes. Because the money is coming out before taxes employees receive more in there pay checks. (OppenheimerFunds, 2006) The tax law also includes an added savings incentive for participants age 50 or older permitting them to make annual "catch-up" contributions. The catch-up amount is $4,000 in 2005 and then increases by $1,000 per year until reaching $5,000 in 2006 (indexed in $500 increments after 2006). (OppenheimerFunds, 2006) On top of that, a special rule for 403(b) participants allows certain employees with 15 or more years of service to contribute up to an additional $3,000 from their salary. Employees are also able to take a loan from some 403(b) plans. Generally, employees may borrow up to half of the vested account balance to a maximum of $50,000 without tax consequences as long as the loan is paid back within five years (unless it is for the purchase of a home, in which case the loan period may be extended). In general, the minimum loan allowed is $1,000. (OppenheimerFunds, 2006)
Fiduciary Requirements imposed by ERISA The primary responsibility of fiduciaries is to run the plan solely in the interest of
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