Term Paper on "Retirement Plan Proposal and Communication"

Term Paper 4 pages (1281 words) Sources: 4 Style: APA

[EXCERPT] . . . .

Retirement Planning Memo

Management Board

HR Strategic Planning

RE:

XYZ Corporation Retirement Planning Options

Dear Management Board: You have asked that we prepare a proposal that describes proposed retirement plans we can offer, all based on the 1974 Employee Retirement Income Security Act. We have outlined two proposals for your review that we believe to be viable in our business sector, economic situation, and as a recruitment/retention, tool. In addition, you will find a Marketing Communications Plan that will allow us to roll out whichever plan you select, communicate that plan to employees, and more effectively management enrollment.

Overview- We know that fewer and fewer companies are offering retirement benefits. In general, this is due to a number of factors. Many employees do not stay with a company long enough to realize retirement benefits, and those that do are often unwilling to participate in company sponsored programs. Because of the longevity factor, many organizations believe that their fiscal investments can be better used elsewhere. Social Security, for most, is not really a retirement option, and was never intended to be a living wage for 20-30 years after retirement (Perman, 2010).

ERISA, or the 1974 Employee Retirement Income Security Act, establishes a minimum standard for pension plans in private industry. This was designed to protect the interests of employee benefit plans by requiring the disclosure of financial information, establishing standards of conduct and providing appropriate remedies and access to the Federal Court system if there are irregularities. ERISA does not, however, require employers to establish plans, but if a plan is offered, then it must be viable for vesting and has provisions regulating benefit pay outs for employees or surviving family members. For our company, the ERISA regulations would indicate that we provide a written document that shows just how dollars will be invested, when those dollars would be available, what minimum contributions we expect made by employee and the organization, and the long-term viability of the plan (United States Department of Labor, 2012)

We must first decide if our proposed retirement plan is based on a benefit to the employee or a strategic allocation for human resources (recruitment, retention, etc.). We perceive the goal to be multidimensional; retain qualified workers and offer a plan that will assist them in meeting their medium and long-term fiscal goals.

Plan a- Defined Benefit (DB) and Defined Contribution (DC) plan. The DB plan includes a benefit formula that specifies exactly the amount an employee will receive upon retirement. The benefits are safe, usually in the form of an annuity. The more years of service an employee has, the more pension they will receive. For example, with this plan the Annual Pension would equal $1,000 X years of service -- an employee who works for 25 years would receive $25,000/annum, or $2,083/month from the annuity. These plans are backloaded in that the benefits do not really accrue until the end of the employee's career. The money for these plans is supplied by the company, but we could offer an option that the employee could contribute X$/annum to increase their annuity payout at a competitive rate of interest; let us say 6% in this example. This is a simple plan, requires long-term investing, but allows for market fluctuation and investment opportunities over time. Typically, the employee would be partially vested after 5 years, but would lose their benefits if they left the company prior to that.

Plan B - Hybrid Plan combining 401K, stock options, and year of service options. In this option, the company would contribute up to X% of matching funds for the employee per annum, offer discounted stock options on an annual basis, and bonuses for 5, 10, 15, 20+ years of service. This would encourage employees to participate more in their retirement benefits, while still allowing the company to contribute to an… READ MORE

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