Retirement Plan Proposal & Communication Plan
A good retirement plan has a wide range of benefits. One of these benefits is that employees would be motivated to stay longer with a company thus bringing down turnover rates. However, it is important to note that retirement plans adopted by the organization must specifically address the specific organizational needs. In this retirement plan proposal and communication plan, I come up with three retirement plans that could be offered in our organization and a communication plan that enhances the participation of employees for one of the proposed retirement plans.
Retirement plans that could be offered
According to Slenick et al. (2009), a good retirement plan varies depending with the organizational needs of an entity. With an appropriate retirement plan, employee’s ability to save for the future is enhanced and in that line, there are also some savings inform of tax to be made. Below are three of the most appropriate retirement plans that take into account our organizations specific circumstances.
Contrary to popular opinion, a 401(K) is not only for big businesses and neither is it costly in terms of creation as well as maintenance. Indeed, any business with 25 employees and above is eligible for a 401(K). Ezra et al. (2009) argues that the existing competition amongst the providers of a 401(K) makes the costs of the same drop lower.In terms of eligibility, any business is eligible for a 401(K) and as for its employees; they must have worked for a minimum of 1000 hours in the previous period i.e. year. In the absence of a vesting period, such employees must have worked for the same number of hours but in this case for two years.When it comes to contribution limits, for those employees who will be fifty years old or more as at 12th December 2010, the contribution limit is set as $22,000. For the others it is set as $16,500. However, in the case of employers, the combined contribution of the employee and the employer must not be above $49,000. The employer determines the vesting in the case of a 401(K).The main advantage of a 401(K) is the ability of an employee to contribute. However, when it comes to administration, Slenick et al. (2009) notes it can end up being a little bit costly. In addition to that, vesting of employer contributions can take years.
Defined benefit plan
The defined benefit plan provides employees with a good opportunity to save. Though the contribution limit for younger workers in a defined benefit plan is actually lower that that of their older counterparts, it still remains fairly impressive for a number of reasons. When it comes to eligibility, any individual who is self-employed or who own a business is eligible. In regard to employees, those who have worked for not less than 1000 hours in the previous period i.e. an year are eligible. However, in the absence of a vesting period, such employees must have worked for the same number of hours but in this case the period is two years. The contribution limits for the employer are not set and as such, they are largely based on assumption (actuarial). Employees in this case cannot make a contribution.In the case of a defined benefit plan, the employer in this case determines vesting. One of the main advantage of a defined benefit plan is that employees are guaranteed of a payout that is set on retiring. However, Ezra et al. (2009) notes that a defined benefit plan can be quite expensive for an employer. Further, there are no employee contributions in this case.
Profit sharing plan
A profit sharing plan gives employees a share of the profits made by the organization. With this in mind, it can be easily used by the organization for motivational purposes (Cassidy 2006). When it comes to eligibility, any individual who is self-employed or owns a business is eligible for a profit sharing plan. For employees, those who have worked for a minimum of 1000 hours in the previous period i.e. an year are eligible. In the absence of a vesting period, such employees must have worked for the same number of hours but in this case for two yearsIn the case of a profit sharing plan, employees cannot contribute. The employer contributes a quarter of the salary and the limit in this case is $49,000. It is also important to note that the employer determines the vesting period in the case of a profit sharing plan. The main advantage of the profit sharing is that it takes into consideration profit variations from year to year. However, Slenick et al. (2009) notes that with a profit sharing plan, the organization may have to hire a professional to do the computations.
Employee Retirement Income Security Act of 1974 requirements to be fulfilled
It is important to note that the organization would need to fulfill a number of requirements of the Employee Retirement Income Security Act (ERISA) of 1974. To begin with, the retirement plans provided must avail to all the participants pertinent information as to their (the retirement plans) funding and features. Towards that end, relevant information should be channeled periodically to the participants.Next, the organization must abide with the funding, benefit accrual as well as vesting standards set by ERISA. Under the act, pension plans must come up with a way of vesting pension benefits of employees on the passage of a given number of years (Mathis et al. 2007). As the organization offers the retirement plans to its employees, it must be well aware of the fact that participants of the same reserve the right to sue for benefits as well as for a fiduciary duty breach. A fiduciary in this case is the one charged with the management or control of the plan. The fiduciary duty of the employer is tied to both the plan as well as its participants.The organization must also know that as for the ERISA requirements, there is a regulation that dictates benefits payment by a pension plan (Mathis et al. 2007). For instance, when it comes to a defined benefit plan, the pension of a participant who is married must be paid as a joint-and –survivor annuity. This annuity must provide a surviving spouse with continuing benefits except in cases where the survivor coverage has been wavered explicitly by the participant as well as his or her spouse.
The communication plan
Employees numbering one hundred and fifty (150)
The purpose of the communication plan is to encourage employee participation for one of the proposed retirement plans. The communication plan in this case shall keep the message simple, clear and straight to the point.
The desired outcome of the communication plan is for the employees, numbering 150, to avail the pertinent information about the retirement plans and influence them to enroll in any of them by presenting the benefits as well as suitability of each plan. It is expected that after the communications program is over, the employees will have known all there is to know about the significance, benefits as well as importance of having a retirement plan. It is also expected that employees shall show desire to participate in any of the three retirement plans presented to them.
Encourage employee participation for one of the proposed retirement plans by pointing out he benefits of the same.
The method of communication should be effective so as to reach all the employees.
The method of communication must encourage the sourcing of feedback from the employees on what they think of the presentation or proposal.
It must be made easy for employees to follow up or seek clarifications on any issue not clear to them.
Rapport must be built and enhanced so as to support the communication of the issue at hand.
Method of communication
An internal memo shall be used to invite all the employees to a meeting which shall be held in the auditorium. This shall basically be a face to face meeting where we shall have several speakers presenting the topic and purpose of the gathering together wit the subject matter. Experts can be invited from the outside to help expound on the subject matter.The choice of the face to face meeting is informed by a number of things. To begin with, it shall offer a unique opportunity to for purposes of availing feedback. In addition to making it easy to put the various points regarding the retirement plans across, the meeting shall help clarify any issues, sentiments or stereotypes the employees may be having with regard to the retirement plan. Furthermore, the feedback is immediate.
Encouraging employee participation
Further, meeting the employees face to face shall be of great importance in eliminating or reducing any resistance to participation. The elimination of any resistance to participation in the retirement plan shall be through the immediate clarification of issues raised during the meeting. Similarly, resistance to participation shall be reduced by the show of commitment by the organizations management and a clear discussion of the benefits that the employees shall derive from any of the retirement plan if they participate in it.
In conclusion, there are many advantages of retirement plans. It is important to note that these advantages accrue from both sides, that is, on both the employee side as well as the employer side. While the organization gains by increasing the employee royalty as well as reducing employee turnover and having tax savings I some instances, employees are provided with a unique opportunity to shelter some dollars and save. As a result of the various benefits availed by retirement plans; adoption of the same as well as the encouragement of participation of workers in any of the presented retirement plan should be taken as a priority.
Cassidy, D. (2006). A manager's guide to strategic retirement plan management. John Wiley and Sons
Ezra, D.D. & Collie, B. (2009). The Retirement Plan Solution: The Reinvention of Defined Contribution. John Wiley and Sons
Mathis, R.L. & Jackson, J. H. (2007). Human resource management. Cengage Learning
Slenick, T. & Suttle, J.C. (2009). IRAs, 401(k) & Other Retirement Plans: Taking Your Money Out. Nolo