HRM 430 Retirement Programs

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HRM 430 Retirement Programs
In the United States, we have seen a trend towards defined compensation programs from defined benefit…

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HRM 430 Retirement Programs

HRM 430 Retirement Programs

Discussions Week 5 All Posts 39 Pages 

In the United States, we have seen a trend towards defined compensation programs from defined benefit programs. Many employers have moved in this direction to help them be more competitive. What are some reasons that these benefit programs are offered? How are they designed? What are some trends that you see with the design of the programs? What is the difference between defined contribution vs. defined benefit programs?  Which have become more cost-effective for employers? As you know from your readings and research, fewer employees today are receiving company-paid retirement benefits than 10 years ago. What are the primary reasons for this unfortunate circumstance?

Employers are going more toward the defined compensation plans more so then defined benefit plans because it leaves it more up to the employee to plan for their retirement then the company. By choosing to opt into a defined compensation plan the company saves money and the long term payments that are associated with a defined benefit plan.

A defined benefit plan is the specific payment that will be made to the employee at retirement. The basic benefit in this category is usually based on the number of years the employee works for the employer and their salary. These payments are provided to the retired employee regularly at the normal age of retirement. This type of plan is also known as a pension.

Defined Contribution plan is a plan to how much will go into a saving for retirement. The amount is either a percentage of the employee’s salary or a specific dollar amount. Those funds are then invested in mutual funds. The amount the employee has at retirement depends on how much the employer contributes to the plan and how much the employee saves in the plan, also how long the money is invested and how well the employee investment performs inside the plan.

The defined contribution plan reminds me of Enron many employees were vested in plans with Enron and when they folded many people lost everything.  I say this is also the dangers of defined contribution plan…