Wednesday, October 10, 2007

Planning Staff Retirements

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.

Among these:
  • 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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