Approximately one-fifth (20 percent) of post retirement income sources today comes from qualified retirement plan assets. Within 20 years, that number will increase to just under one-third (30 percent) of post retirement income. These are broadly defined as assets on which you have not yet paid retirement income taxes, though there is one exception in the Roth IRA. (more…)

Having decided that a corporation can afford and should offer some type of employee benefits plan, the next step is to determine what type of plan or plans the company should adopt.

Employee benefit plans that provide some form of deferred benefits (that is, benefits deferred until after the employee retires) fall into two broad categories. A defined contribution pension plans provides an individual account for each participant and benefits are based upon the amount contributed by the company, or by the company and the employee, to that account, together with the investment results of the account. (more…)

Having determined the type or types of plans to be offered by the company, additional decisions regarding its features still must be made. The employees to be covered must be determined. Generally, employee eligibility is at the discretion of the employer, except that (under ERISA) employees must be eligible to participate one year after their first employment date (assuming they have reached the age of 25) and the plan must not discriminate in favor of executives, highly paid employees, or shareholders. (more…)

Still other decisions must be made about pension plans. The retirement age must be decided, and consideration must be given to provisions for advantages of early retirement and the resulting adjustment of benefits. Employees by law may work beyond age 65 until they have 10 years of participation in the plan.

When a retirement plan provides that a participant may take his benefits in the form of an annuity, (more…)

The financial crisis in the world has been on edge especially those who are related to private pension funds whether voluntary or with a solidarity contribution on the part of the state. Of course, in Colombia things are not as severe as in the United States, but with such a tremendous financial position the risk is latent, it does not entail a red alert, even more if one takes into account the disturbing news January 2008 when the Superintendency of Banks reported that the pension and severance (more…)

In the U.S. the laws that apply in a divorce fall under the jurisdiction of each state. Some things may vary from state to state but which is usually constant when the alimony of the spouses is meant is that this can be paid by both the husband and the wife. (more…)

Classification of Pension Plans

There are two main criterions to distinguish Pension Plans. The first criterion is the asset base for the liabilities for benefits promised to plan participants or employees:

1. Pension plans without a fund ( pay as you-go plans)
2. Pension plans with a fund (funded pension plans). (more…)

The federal government insurance agency, called the Pension Benefit Guarantee Corporation (PBGC), insures the funds of defined benefit plans. The PBGC does not guarantee that the pension is as large as if the company remains solvent. If the company you worked for with a defined benefit plan goes bankrupt, the PBGC takes over benefit payments — but only to a certain limit ($36,000 a year in 1999). (more…)

There is a huge debate if management of pension plan should be separated or integrated with the organization that sponsoring them. In some of popular pension funds, they were run separately from sponsoring organization. In other some pension funds in the market, it is still managed as if a part of the sponsor. (more…)

Private pension plans are different in several respects from the policy of optimal risk sharing plans. The economic environment is different with pension funds and are much riskier and having more dynamic nature than conventional pension funds investment. Therefore, the retirement contracts that work well in practice might be able to deviate from the optimal contracts in pension funds. (more…)