Employee Retirement Options

What Retirement Options Can Businesses Provide to Employees?

There is a wide range of retirement options that businesses can provide to employees. However, depending on the size of the business, the benefits may vary as described below.

Why Offer Retirement Options to Employees?

In an ideal world, businesses and employees have a mutually beneficial, long-term relationship. Part of this includes the company helping employees plan and prepare for retirement. Therefore, offering retirement benefits to employees is an excellent way to increase employee satisfaction and reduce turnover. As a matter of fact, retirement benefits are one of the most persuasive points of a compensation package for recruiting potential employees. Retirement benefits has excellent commercial benefits, such as tax advantages and increased employee productivity. If the plan is based on profits, employees will be motivated to work safer, faster and more efficiently.

In brief, the employer is entitled to tax deductions for contributions, the income generated is not subject to income tax and beneficiaries receive special tax privileges. Plans must be permanent, well documented and communicated with all employees. The plan must have participation or coverage rules that set the minimum standard for the percentage of participating employees. However, the plan cannot discriminate between upper level employees, such as CEOs, and lower level employees, such as hourly workers. Vesting rules must be established, wish specific how many years of employment must be met before the employee can earn full benefits. There are two vesting methods: five years of uninterrupted employment or seven year vesting with annual 20 percent increases. Finally, every year the employer must distribute a Summary Plan Distribution that provides an overview of plan performance and other basic