Retirement Plan Proposal and Communication Plan Essay

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Retirement Plan Proposal and Communication Plan HRM/324 Retirement Plan Proposal and Communication Plan Retirement pensions provides a source of retirement income employees can draw on after they stop working, they have to invest for retirement while they are still on the job (Lightbulb Financial, 2013). To take advantage of the opportunity to accumulate tax-deferred earnings and in some cases defer taxes on their contributions as well, employees can participate in employer-sponsored retirement plans and invest in individual retirement accounts (IRAs) that they set up on their own (Lightbulb Financial, 2013). This paper will propose several types of retirement plans that could be offered to employees. In addition, a…show more content…
A 401(k) plan, so named for the section of the Internal Revenue Code describing the requirements, is a savings plan in which employees are allowed to defer income up to a $12,000 maximum (which increases by $1,000 a year from 2003 to 2006, with amounts indexed for inflation thereafter) (Milkovich and Newman, 2008). Employers typically match employee savings at a rate of 50 cents on the dollar. Defined contribution plans are more popular than defined benefit plans in both small and large companies (Milkovich and Newman, 2008). Historically these plans are faster to vest (the companies matched share of the contribution permanently shifts over to employee ownership, and they are more portable—job hopping employees can take their pension accruals along to the next job) (Milkovich and Newman, 2008). The second type of plan is an employee stock ownership plan (ESOP) (Milkovich and Newman, 2008). In a basic ESOP a company makes a tax-deductible contribution of stock shares or cash to a trust (Milkovich and Newman, 2008). The trust then allocates company stock (or stock bought with cash contributions) to participating employee accounts (Milkovich and Newman, 2008). The amount allocated is based on employee earnings (Milkovich and Newman, 2008). When an ESOP is used as a pension vehicle (as opposed to an incentive program), the employees receive cash at retirement based upon the stock value at that time (Milkovich and
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