Objective
As the Head of Human Resources Department in XYZ Company, I would like to make the following proposal for a guaranteed retirement plan with social security that would help the company meet its employees’ needs. The retirement plan proposed in this document includes details of identified benefits for the employees of the company, and it also highlights the opportunities for the government sponsored programs, personal plans, and annuities. Furthermore, this proposal highlights the importance of communication within the organization and providing education to employees.
Goals
The main goal is to propose a guaranteed retirement plan that entitles the company’s employees to a secured retirement plan according to the Employee Retirement Income Security Act of 1974 (ERISA). It would help employees boost their confidence and become successful citizens of the United States.
Retirement Plans
Pension: The Company feels obliged to put forward a pension plan that would be offered to employees on the basis of their salary history and past performances. Moreover, the amount of pension to be paid depends on the number of years an employee has worked for the company, and a fixed percentage rate would be paid to the employee (Dogu, Ferri, Lindauer, & Larimore, 2009). Every employee would be eligible to receive pension as per the company’s policy. If an employee leaves the company then the employer would withdraw the pension plan.
The pension plan would be based on the requirements of the Employee Retirement Income Security Act of 1974 to provide benefits to employees after the completion of the established period of two years in service. Moreover, employees would need to satisfy the funding requirements specified by the company.
Annuities
Annuities would be served to employees as a part of the defined benefit plan when they reach the retirement age (Dogu, Ferri, Lindauer, & Larimore, 2009). These annuities cannot be moved to the Individual Retirement Account (IRA), but they would be taxed as the income would be received on a regular basis. The options of annuities would include the following.
- “Joint 50%: The annuity is paid to the spouse who is entitled to receive half of the payable amount for the rest of his or her life.
- Joint 66 2/3%: The spouse would be entitled to receive two thirds of the payable amount for the rest of his or her life.
- Life Only: The annuity would be given to individuals till the end of their lives, and all payments would be stopped after the death of the individual” (Clark, Craig, & Sabelhaus, 2011).
As per the requirement of ERISA, these annuities would offer retirees a choice of joint and survivor annuities without any discrimination or bias.
401 (k) Plan
401 (k) Plan is also suggested that helps an employer to form a tax qualified plan. The plan would allow the company to allocate a certain proportion of its income to a tax-deferred trust. As the earnings from these offerings are left out or excluded from tax calculation, it could be suggested that the company’s retirement assets would expand (Dogu, Ferri, Lindauer, & Larimore, 2009).
Under this plan, contributions made by the employer are not taxed, and when an employee leaves the organization he or she gets the money, which he or she contributed along with the amount of interest earned. It would allow employees to have control on the investing options to choose from different assets they want to acquire using the plan’s funds (Clark, Craig, & Sabelhaus, 2011). In addition, these funds could be transferred to any other retirement plan of employees or could be withdrawn at the time of emergency (Dogu, Ferri, Lindauer, & Larimore, 2009).
Communication Plan
In order to successfully communicate the retirement plan to employees, it would be essential to share the knowledge, reasons, and significance of participation in the above-mentioned plan. It would be feasible to be direct and clear in the message and allow the message to pass to all employees (Dogu, Ferri, Lindauer, & Larimore, 2009). The company should design a plan and its features based on the Pension Protection Act. The company should use an automatic plan design to communicate the plan with its employees (Dogu, Ferri, Lindauer, & Larimore, 2009). The employer should provide various retirement options of the pension plan and brief employees about the annuity that the insurance company would pay on a particular option they chose i.e. the company should provide an open market option to employees (Clark, Craig, & Sabelhaus, 2011). The investment choices should be made through automatic enrolment and default investment for individuals who are not willing to make a choice of investment. However, it is important that the staff should be provided a description of funds available and charges that are applicable to the investment amount.
Furthermore, costs and charges of the pension plan should be reported in order to inform employees about the actual value of money and to provide justification for costs and charges (Dogu, Ferri, Lindauer, & Larimore, 2009). Therefore, the company is required to provide information relating to the contribution amount, cost and charges that are being applied to the fund. Moreover, the automatic feature should be selected as it provides up to date information regarding the escalation and enrollment of the plan. In addition, four main types of publications should be used to communicate the plan with members and retirees (Clark, Craig, & Sabelhaus, 2011). First is a handbook of members that should provide information about the available pension plans including their defined benefits offered to employees. Second is a pamphlet that provides detailed information about the pension plan and pension benefits in addition to handbooks (Dogu, Ferri, Lindauer, & Larimore, 2009). The employees can gain a deeper insight about available plans and their benefits. Third is a periodical newsletter that provides information to employees about the change and any new amendments in a pension plan (Clark, Craig, & Sabelhaus, 2011). In addition, it regularly updates employees with the information of the pension plan. Fourth is an annual statement that is sent to members and retirees and contains information regarding the membership, benefits, services, and project benefits that they gain from the plan (Clark, Craig, & Sabelhaus, 2011).
Communication and educating employees are best methods to overcome the resistance of employees for the pension plan (Clark, Craig, & Sabelhaus, 2011). Open communication can give them a deeper insight to the benefits of the plan and develop logical consciousness about the change in the organization. One of the major causes of resistance is poor communication. If employees do not receive full facts of the pension plan, then they may resist enrolling for the pension plan (Dogu, Ferri, Lindauer, & Larimore, 2009). Proper guidelines and education can encourage individuals to participate in the plan. Sharing experiences of retiree and members can be a useful step to overcome resistance of participation of employees in a pension plan.
In addition, before making any change in the plan it is important that employees’ participation is ensured, and the consent of employees is obtained. The involvement of employees can be an efficient source to increase the participation of employees and to overcome the negative perception of employees (Dogu, Ferri, Lindauer, & Larimore, 2009). Therefore, the first method that should be adopted by the company is to communicate with its employee by mailing information packets to them. These packets should have detailed information about options, employee and employer contribution, dates and contact information. The second method is to carry out question and answer sessions involving management and employee. It allows employees to get information about the plan and give their views on it (Dogu, Ferri, Lindauer, & Larimore, 2009).
The members of management should persuade employees by communicating benefits they receive upon enrollment in the pension plan. It is important that the company develops attractive packages and provides detailed information about the contribution of the employer and employees to the pension plan (Clark, Craig, & Sabelhaus, 2011). Furthermore, sharing experiences of ex-employee and retirees can be an effective source to motivate employees to enroll and increase their participation in pension plans. In order to make the communication attractive, the company can make use of multimedia communication methods, social media groups and web pages to share public comments and opinions about the policy (Clark, Craig, & Sabelhaus, 2011). Through effective communication, employers can review their pension plans and benefits on a regular basis.
References
Clark, R. L., Craig, L., & Sabelhaus, J. (2011). State and Local Retirement Plans in the United States. New York: Edward Elgar Publishing.
Dogu, L., Ferri, R. A., Lindauer, M., & Larimore, T. (2009). The Bogleheads’ Guide to Retirement Planning. New Jersey: John Wiley and Sons.