Employee Retirement Income

Perhaps more important than state law, however, in determining one s legal rights under a pension plan is ERISA—the 1974 Employee Retirement Income Security Act. ERISA, by altering the requirements which employee retirement benefit plans must meet in order for an employers contributions to qualify for tax deductibility, has standardized private pension plans in ways most favorable to covered employees. Tax savings and protections are also available under either a qualified group retirement plan or an H.R. 10, Keogh, or I.R.A. plan wherein an individual may set up a tax-deferred retirement fund for himself. 

Employee Retirement Income Security Act of 1974, Public Law 93-406 (ERISA) this law mandates reporting and disclosure requirements for group life and health plans. It also exempts many self-insured employers from many state health insurance regulatory requirements, employer contribution the amount an employer contributes toward the premium costs of the contract. This amount carries widely among employers and is a critical variable in any risk analysis. Employer contributions can be based on dollar amounts, percentages, employment status, length of service, single or family status, or other variables or combinations of the above. 

A plan shall not be treated as failing to meet the requirements of this section solely because such plan provides a normal retirement age described in section 1002(24)(B) [section 2(24)(B) of the Employee Retirement Income Security Act of 1974] of this title and section 411(a) (8)(B) of Title 26 [the Internal Revenue Code of1986]. 

A) The terms employee pension benefit plan , defined benefit plan , defined contribution plan , and normal retirement age have the meanings provided such terms in section 1002 of this title [section 3 of the Employee Retirement Income Security Act of1974]. 

IV) Applicable defined benefit plan— For purposes of this subparagraph, the term applicable defined benefit plan has the meaning given such term by section 1053(f)(3) of this title [section 203(f)(3) of the Employee Retirement Income Security Act of 1974]. 

In offering pensions, U.S. employers and the federal government strive to replace a retiring worker s sakry with an equal retirement income. This income flows from three sources, which are Social Security payments, the employee s preretirement savings and investments, and pension benefits. Pensions strike a balance between lower present salaries and dependable future incomes when employees retire. 

A question many employees have is, How much money do I need to retire and maintain my preretirement lifestyle According to a growing field of research on investment withdrawals, in order to have a 100 percent inflation-adjusted probability of not running out of money over a 30-year period (based on the historical performance of stocks, bonds, cash, and inflation), retirees should not withdraw more than 4 to 5 percent of their investment portfolios on an annual basis (Cooley, Hubbard, and Waltz, 1998). A typical couple needs to plan for a minimum of 20 years of income at retirement (Burns, 1997). In essence, if you have 20 years of income in investments or some other vehicle, you will be secure. Where do you get those years of income ... 

With Medicare s Hospital Insurance Trust Fund, also known as Medicare Part A, workers make required contributions to the fund while fhey are employed. Upon retirement, workers receive health care benefits. By law, employers and their employees are required to pay equal portions of a payroll tax, which totals 2.9% of earned income.In 1997, almost 90% of the trust fund s income was from payroll taxes. The remaining income was generated from fhe inferesf earned from the trust fund. A beneficiary s Medicare Parf A insurance is limifed to only those hospitals accredited by the Joint Commission on Accreditation for Healthcare Organizations (JCAHO). The JCAHO accreditation standards include explicit and extensive professional pharmacy acfivifies, indirectly supporting professional trends for clinical pracfice (see Chapfer 18). 

Mandatory contributions are basically calculated on the basis of 10% of an employee s relevant income, with the employer and employee each paying 5%. Self-employed persons also have to contribute 5% of their relevant income. Mandatory contributions must be paid to registered MPF schemes managed by trustees. They mustbe paid for each period for which an employer pays relevant income to his or her employee. Investment managers will be appointed by the trustees of MPF schemes to make long-term investment of scheme assets and accrue benefits for the scheme members for their retire-... 

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