Any organization wants to think of what its employees will do while they are on the job, but the fact is that all organizations, nonprofit as well as for-profit, must look ahead to the time when employees retire. With that in mind, retirement programs that will offer employees a nest egg when their working days have ended are essential both to attracting good employees and to retaining them once they are hired.
With new tax laws being passed on a routine basis, there are always changes of which an organization must be aware, but there are several standard programs that help employees provide for retirement security.
- Tax-deferred retirement savings programs. These are IRA accounts, with contributions paid by the employee while working. With traditional IRA programs, employers are not allowed to match employee contributions.
- Defined benefit pension programs. These traditional pension plans are becoming more and more rare because they guarantee a set payout upon retirement.
- Defined contribution pension plans. These are set up by employers and funded by employees. Employers may provide matching amounts. These are the standard 401 accounts.
- Cash balance pension plans. Employers establish an account containing a percentage of a worker’s salary plus interest each year. Upon separation from the organization, employees receive either lump-sum or annuity payments.
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