In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodic employee contributions come directly out of their paychecks, and may be matched by the employer. This legal option is what makes 401(k) plans attractive to employees, and many employers offer this option to their (full-time) workers. 401(k) payable is a general ledger account that contains the amount of 401(k) plan pension payments that an employer has an obligation to remit to a pension plan administrator. This account is classified as a payroll liability, since the amount owed should be paid within one year.
A pension is a fund into which amounts are paid regularly during an individual's working career, and from which periodic payments are made to support the person's retirement from work. A pension may be:
In the United States, a 403(b) plan is a U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers (only Internal Revenue Code 501(c)(3) organizations), cooperative hospital service organizations, and self-employed ministers in the United States. It has tax treatment similar to a 401(k) plan, especially after the Economic Growth and Tax Relief Reconciliation Act of 2001. Both plans also require that distributions start at age 72 (according to the rules updated in 2020), known as Required Minimum Distributions (RMDs). Distributions are typically taxed as ordinary income.
The Employee Retirement Income Security Act of 1974 (ERISA) is a U.S. federal tax and labor law that establishes minimum standards for pension plans in private industry. It contains rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries by:
A retirement plan is a financial arrangement designed to replace employment income upon retirement. These plans may be set up by employers, insurance companies, trade unions, the government, or other institutions. Congress has expressed a desire to encourage responsible retirement planning by granting favorable tax treatment to a wide variety of plans. Federal tax aspects of retirement plans in the United States are based on provisions of the Internal Revenue Code and the plans are regulated by the Department of Labor under the provisions of the Employee Retirement Income Security Act (ERISA).
The Canadian Institute of Actuaries (CIA) is the national organization of the actuarial profession in Canada. It was incorporated March 18, 1965. The FCIA designation stands for Fellow of the Canadian Institute of Actuaries. As the national organization of the Canadian actuarial profession, the CIA serves the public through the provision by the profession of actuarial services and advice by: representing the Canadian actuarial profession in the formulation of public policy; promoting the advancement of actuarial science; educating and qualifying CIA members; ensuring that actuarial services provided by its members meet accepted professional standards; and assisting actuaries in Canada in the discharge of their professional responsibilities.
A defined contribution (DC) plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts plus any investment earnings on the money in the account. In defined contribution plans, future benefits fluctuate on the basis of investment earnings. The most common type of defined contribution plan is a savings and thrift plan. Under this type of plan, the employee contributes a predetermined portion of his or her earnings to an individual account, all or part of which is matched by the employer.
The American Academy of Actuaries, also known as the Academy, is the body that represents and unites United States actuaries in all practice areas. Established in 1965, the Academy serves as the profession's voice on public policy and professionalism issues.
Pensions in the United States consist of the Social Security system, public employees retirement systems, as well as various private pension plans offered by employers, insurance companies, and unions.
The Pension Protection Act of 2006, 120 Stat. 780, was signed into law by U.S. President George W. Bush on August 17, 2006.
An enrolled actuary is an actuary enrolled by the Joint Board for the Enrollment of Actuaries under the Employee Retirement Income Security Act of 1974 (ERISA). Enrolled actuaries, under regulations of the Department of the Treasury and the Department of Labor, perform a variety of tasks with respect to pension plans in the United States under ERISA. As of July, 2020, there were approximately 3,500 enrolled actuaries.
An individual pension plan or IPP is a Canadian retirement savings vehicle. An IPP is a one-person maximum defined benefit pension plan which allows the plan member to accrue retirement income on a tax-deferred basis. As such, an IPP must conform to the Canadian Income Tax Act (ITA) and regulations (ITR) as well as the requirements of the Canada Revenue Agency (CRA) with respect to defined benefit pension plans. It is possible for an IPP to be a combination plan offering both defined benefits and defined contribution pensions.
The Conference of Consulting Actuaries (CCA) is a professional society of actuaries engaged in consulting in the United States and Canada, as opposed to those employed by insurance companies. CCA members assist their clients with respect to pension, health, and other employee benefit plans; life insurance; and property and casualty insurance.
The human resource consulting industry has emerged from management consulting and addresses human resource management tasks and decisions.
Retirement planning, in a financial context, refers to the allocation of savings or revenue for retirement. The goal of retirement planning is to achieve financial independence.
Mercer is an American consulting firm founded in 1945. It is one of the four operating subsidiaries of global professional services firm Marsh McLennan. Mercer is headquartered in New York City with offices in 43 countries and operations in 130 countries. The company primarily provides human resources and financial services consulting services to its clients.
Pension administration in the United States is the act of performing various types of yearly service on an organizational retirement plan, such as a 401(k), profit sharing plan, defined benefit plan, or cash balance plan. Increasingly, employers are also implementing these plan types in combination arrangements for greater contribution potential, such as the pairing of a cash balance plan with some variety of 401(k). The pension administration ensures that an organizational retirement plan neither discriminates against lower-level employees nor becomes an abusive tax shelter. Stress tests include the average benefits test, average deferral percentage, and minimum coverage. Yearly pension administration work involves filing a Form 5500 with the Internal Revenue Service (IRS). Organizations such as the National Institute of Pension Administrators and the American Society of Pension Professionals and Actuaries offer several professional designations to those who do this work. Pension Administration firms often rely on financial brokers for their business prospects, although they do have other referral sources. Some pension administration firms assign financial advisory work to an internal unit and also accept referrals from an independent broker network. These brokers are often associated with firms like Raymond James, Edward Jones Investments and Morgan Stanley. The brokers may be employees of these firms or independent contractors. The plan assets of the organizational retirement plans in question sometimes reside on a trading platform that the administration firm control. More often, large financial institutions that provide a variety of investment options for plan participants hold the assets. Large firms include Principal Financial Group, John Hancock Insurance, ING Group and Mass Mutual. Pension administrators often coordinate with public accounting firms, as the Employee Retirement Income Security Act of 1974 (ERISA) requires plans with more than one hundred participants to undergo an independent audit each year. For defined benefit plans, the pension administration firm must employ an actuary to certify the plan's present and future benefit liabilities and compliance with IRS minimum funding standards. Pension administration firms with a large block of defined benefit plans often directly employ an actuary. Firms that only work on a small collection of defined benefit plans tend to retain the actuary as an independent contractor. The actuary completes contribution calculations for the plan and provides a Schedule SB so that the administrators may file the yearly Form 5500. Without this Schedule the yearly filing for a defined benefit plan would be incomplete. Other than the IRS, organizational retirement plan operation and maintenance falls under the regulation of the United States Department of Labor.
Defined benefit (DB) pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum, or combination thereof on retirement that depends on an employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns. Traditionally, many governmental and public entities, as well as a large number of corporations, provide defined benefit plans, sometimes as a means of compensating workers in lieu of increased pay.
The American Benefits Council (the Council) is a national trade association based in Washington, D.C. that advocates for employer-sponsored benefit plans. The Council's members represent the private employee benefits community and either sponsor directly or provide services to retirement and health benefit plans both nationally and internationally.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, Pub. L.Tooltip Public Law 116–94 (text)(PDF), was signed into law by President Donald Trump on December 20, 2019 as part of the Further Consolidated Appropriations Act, 2020.
