We are searching data for your request:
Upon completion, a link will appear to access the found materials.
Pension plans are one of the key methods to successfully saving for retirement in the United States, and though the government does not require businesses to provide such plans to its employees, it does offer generous tax breaks to companies that establish and contribute to pensions for their employees.
In recent years, defined contribution plans and Individual Retirement Accounts (IRAs) have become the norm in terms of small businesses, self-employed individuals, and freelance workers. These monthly set amounts, which may or may not be matched by the employer, are self-managed by the employees in their personal savings accounts.
The primary method of regulating pension plans in the United States, though, comes from its Social Security program, which benefits anyone who retires after the age of 65, depending on how much one invests over the course of his or her life. Federal agencies ensure that these benefits are met by every employer in the U.S.
Are Businesses Required to Offer Pension Plans?
There are no laws that require businesses to offer their employees pension plans, however, pensions are regulated by several governing agencies in the United States, which largely helps define what benefits larger businesses must offer their employees - like health care coverage.
The Department of State website details that "the federal government's tax collection agency, the Internal Revenue Service, sets most rules governing pension plans, and a Labor Department agency regulates plans to prevent abuses. Another federal agency, the Pension Benefit Guaranty Corporation, ensures retiree benefits under traditional private pensions; a series of laws enacted in the 1980s and 1990s boosted premium payments for this insurance and stiffened requirements holding employers responsible for keeping their plans financially healthy."
Still, the Social Security program is the greatest way in which the United States government requires businesses to offer their employees long-term pensions options - a just reward for working a full career before retirement.
Federal Employee Benefits: Social Security
Employees of the federal government-including members of the military and civil service as well as disabled war veterans-are offered several types of pension plans, but the most important government-run program is Social Security, which is available after a person retires at or above the age of 65.
Although run by the Social Security Administration, the funds for this program come from payroll taxes paid by both employees and employers. In recent years, however, it has come under scrutiny as the benefits received upon retirement only cover a portion of the income needs of its recipient.
Especially because of the retirement of many of the post-war baby-boom generation early in the 21st century, politicians feared the government wouldn't be able to pay all its obligations without increasing taxes or decreasing benefits for retirees.
Managing Defined Contribution Plans and IRAs
In recent years, many companies have switched over to what is known as defined contribution plans wherein the employee is given a set amount as part of their salary and is thus tasked with managing their own personal retirement account.
In this type of pension plan, the company is not required to contribute to the savings fund of its employee, but many choose to do so based on the result of the employee's contract negotiation. In any case, the employee is responsible for managing his or her salary allotment intended for retirement savings.
Although it is not difficult to set up a retirement fund with a bank in an Individual Retirement Account (IRA), it can be daunting for self-employed and freelance workers to actually manage their investments into a savings account. Unfortunately, the amount of money these individuals have available at retirement entirely depends on how they invest their own earnings.