美国人力资源管理—福利管理-教学课件5.ppt

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1、Employer-Sponsored Retirement Plans Chapter 5McGraw-Hill/IrwinCopyright 2011 The McGraw-Hill Companies,Inc.All rights reserved.LEARNING OBJECTIVESDifferences between qualified and non-qualified plansFeatures of defined benefit plans and defined contribution plansSpecific types of defined contributio

2、n plansHybrid plans&controversy around cash balance plansFundamentals of Company-Sponsored Plan DesignIndividuals may receive retirement benefits from as many as three sources:1.Employer-sponsored retirement plans2.Social Security Old-Age,Survivor,and Disability Insurance (OASDI)Program3.Individual

3、retirement accounts(IRAs)or Roth IRAsTYPES OF RETIREMENT PLANSDefined Benefits Plans(guaranteed payments,substantial cost)Defined Contribution Plans(depends on portfolio performance)Hybrid Plans(combine features of plans above)What Is A Retirement Plan?Retirement or pension plans provide retirement

4、income to employees for a period of time extending past their active employment.Trends in Retirement Plan ParticipationThere has been a shift in this country to part time employment which often does not offer employee benefits.Union negotiations traditionally included highly lucrative retirement ben

5、efits;current negotiations reflect the economic downturn and ability of the company to pay for those benefits in the short and long term.Service-oriented and good producing industries have grown;however their workforce either do not have retirement plans offered to them and/or their participation ra

6、te is quite low.TAXES Employers and employees do not pay tax on their contributions within dollar limits that differ for defined benefit and defined contribution plans.In addition,the investments earnings of the trust in which plan assets are held are generally exempt from tax.Finally,participants o

7、r beneficiaries do not pay taxes on the value of retirement benefits until they receive the benefit.Qualified Plan RequirementsParticipation RequirementsCoverage RequirementsVesting RulesAccrual RulesNondiscrimination Rules TestingKey Employee&Top-Heavy ProvisionsPLAN CHARACTERISTICSMinimum Funding

8、StandardsSocial Security IntegrationContribution&Benefit LimitsPlan Distribution RulesQualified Survivor Annuities Qualified Domestic Relations OrdersTermination Rules&Procedures See Exhibit 5.1 for the full list of the 13 fundamental characteristics.Fairness and EquityFairness and EquityRatio Perce

9、ntage70%of Participants NOT in Highly Compensated Group Average Benefit TestBenefit Amount is 70%of Benefit Amount for Highly CompensatedAdditional treasury rules for defined benefit plans which must benefit at least 50 employees or 40%of the workforce on a representative workforce day.Vesting for D

10、efined Benefit&Contribution PlansCliff Vesting Vested after 3 Years Service;if you leave before this,you get nothing!Gradual VestingSix year gradual vesting as described in Chapter 4SAFE HARBORS(fairness,equity&nondiscrimination)Rules and laws exist to determine if a plan is top-heavy(total accrued

11、of key employees exceeds 60%of total);the text also contains formulas for defined benefit plans and defined contribution plans for non-key workers.There are maximum life time accrued contribution anddistribution limits;the limits are underlegislative review.Examples of Benefit LimitsPension Protecti

12、on Act of 2006Extended limits to the employers contributions to both defined benefit and defined contribution plans.Social Security IntegrationPermitted disparity rules allows employers to take into consideration Social Security retirement benefits when determining company-sponsored pension benefits

13、.Defined benefit plansDefined benefit plansGuarantee retirement benefits specified in the plan document.This benefit usually is expressed in terms of a monthly sum equal to a percentage of a participants preretirement pay multiplied by the number of years he or she has worked for the employer.The pl

14、an also includes calculations to project the possible life expectancy of the participant and to adjust the rate to coincide with average expected life span.Flat&Unit Benefit FormulasA flat benefit is based upon the employees compensation(not years of service).Annual benefits are usually expressed as

15、 a percentage of final average wage or salary usually computed on the last 3-4 years of service.Because length of service is not considered,long term employees may consider flat benefits unfair.A unit benefit recognizes the length of service.Typically employers contribute a certain dollar amount for

16、 each year worked or they may choose to contribute a specified percentage amount for years of service.Annual benefits may be based on age,years of service or final average wages or salary.Accrual RulesThree Percent Rule(participants accrued benefit cannot be less than 3%of the normal retirement bene

17、fit)133 1/3 Rule(annual accrual rate cannot exceed 133 1/3 percent of the rate of accrual for any prior year)standardizing incremental changes in the plan reliant upon years of serviceFractional Rule(participants who terminate prior to age 65;benefit accrual be proportional to that of normal retirem

18、ent benefits)Rules are established to discourage a practice known as back loading;a practice where employers pay an employee substantially more during their last years of service in order which inordinately increases the retirement benefit.DEFINED CONTRIBUTION PLANSEmployees&Employers ContributeEmpl

19、oyers Invest Contributions in Stocks and BondsNo Guarantee of Benefits AmountsPossible Types Profit-Sharing Plans Stock Bonus Plans Employee Stock Ownership PlansDefinition:Distribution refers to the payment of vested benefits to participants or beneficiaries.When is a pay out required?1.10th Annive

20、rsary of plan enrollment(participation);or2.Participant reaches 65th birthday or dob defined by the plan;or3.Termination of service from the employer.How does the pay out occur?Lump Sum Distribution(single payment)Annuities(series of payments for the life of the participant or their beneficiary)or i

21、ncome annuities which are underwritten(assumed)by an insurance company and have a guaranteed monthly amountPeriodic Payments(money put in trust fund)Payouts are made to qualified joint survivors and/or to domestic partners per the plan.DEFINED CONTRIBUTION PLANSSection 401(k)Profit SharingStock Bonu

22、sESOPsSIMPLESection 403(b)Tax Deferred Annuities Section 457 Defined plans guarantee retirement benefits as specified in the plan document.The plan contains individual accounts managed by fiduciary.Some plans allow employees to choose the investments made in their individual portfolios.SECTION 401(k

23、)PLANS Also Cash or Deferred Arrangements (CODAS)Defer Income to Defined Contribution Plan For Employees of Private Sector or Tax-Exempt Companies Investment Gains Taxed when Received,Income Invested is Not Taxed as Income.named after the section in the IRCProfit Sharing PlansCompany profits are dis

24、tributed to employees from the profit sharing pool;up to 25%of the total gross revenue of the company;Fixed first-dollar-of-profits formula:uses a specific percentage of either pretax and after tax annual profits contingent upon company reaching its financial goals;Graduated first dollar of profits

25、formula;x%of first X amount of sales;and then X%of the subsequent profits;Profitability threshold formulas only if the profits exceed a predetermined minimum level but fall below some established maximum level.STOCK BONUS PLANInvest in Company SecuritiesMust Meet Nondiscrimination TestEmployees Vote

26、 May Like ShareholdersMay be Basis for 401(k)planKey is that employees are reinvesting in their own company!ESOPsSimilar to Stock Bonus Plans Except:Borrowed Money to Purchase StockUsed Money for Other BusinessMay be Leveraged or NonleveragedCompany Repays ESOP to Repay LoanSIMPLEs(Savings Incentive

27、 Match Plans for Employees)For Companies with up to 100 Employees&$5,000 in Compensation Must be Only Retirement PlanCan be IRAs or 401(k)sMeet Nondiscrimination&VestingEmployees may contribute up to$11,500 annuallyTax Deferred Annuity PlansSection 401(b)of the IRC established tax-deferred annuity(T

28、DA)programs.It is a type of retirement program for employees of public educational institutions or private tax-exempt organizations.HYBRID PLANSCombinations of Defined Benefit&Defined Contribution PlansTypesCash Balance&Pension Equity Target BenefitMoney PurchaseAge-Weighted Profit SharingConversion

29、 Many companies have chosen to convert their defined benefit plans to cash balance plans for three reasons:1.Cash balance plans are less costly to employers than defined benefit plans2.They pay out benefits in a lump sum instead of a series of payments 3.(this increases the portability of benefit)4.

30、They are more attractive to the younger,more mobile and potentially more valuable employee.CASH BALANCE PLANS“Defined benefit plan that defines benefits for each employee be reference to the amount of the employees hypothetical account balance.”IRSLess costlyPay out a single lump sumThis increases t

31、he portability of the benefit to encourage recruitment/retention of young,mobile talent Similar to pension equity plan except for the way benefits are calculatedCASH BALANCE PLANS CONTROVERSIES Age-related treatment do not look at aggregate earnings over time or pay a flat amount per years of servic

32、eFavorable for younger workers cash balance plans award annual pay related credits with a specific interest rate;no accrual or credit for years of serviceFederal agencies are considering the issues of whether cash balance plans violate age discrimination statutes.CASH BALANCE PLANS OTHER ISSUESProbl

33、ems for older workers when converting from defined benefit to cash balance.GAO compared lump sum distributions for a traditional defined benefit plan following conversion at various ages at separation of employment.They found increasing disparity in lump sum distributions for older workers after a c

34、onversion from a defined benefit plan to a cash balance plan.Another problem is“wearaway”.According to the U.S.Dept of Labor,wearaway occurs when the employee benefit earned under the cash balance plan is less than the original amount accrued under the defined benefit plan.The Pension Protection Act

35、 of 2006 TARGET BENEFIT PLANIndividual AccountsTotal Benefits NOT GuaranteedEmployers Use Actuarial Calculations Benefits Invested by TrusteeLess Expensive for Employers no guarantee that goals will be metMONEY PURCHASE PLANSBenefit Based on Account Balance at RetirementContributions Based on FormulaContributions NOT Tied to Companys PerformanceExcise Tax Penalties for Failure to Make Contributions