General Information on Pension and Retirement Issues
RSS Issue FeedAs the Baby Boom generation begins to retire, it is increasingly important to ensure the strength of the private retirement plan system. Millions of retired Americans rely on private pensions and employer-sponsored retirement savings as their most important source of income after Social Security. In an era where life expectancy has increased dramatically, it is more important than ever that policymakers foster the growth of employer-sponsored retirement plans.
There are two types of retirement plans sponsored by employers—qualified plans and nonqualified plans. Qualified plans are regulated by the Employee Retirement Income Security Act of 1974 (ERISA) and must meet certain requirements in order to obtain and maintain a tax-favored status. Nonqualified plans do not receive tax-favored treatment and are regulated by section 409A of the Internal Revenue Code.
Below is a summary of the types of qualified plans regulated by ERISA:
Defined Contribution Plans are employer-provided retirement plans that provide an individual account for each participant and the benefit is based solely upon the amount contributed to the account and any income, expenses, gains and losses attributable to such account. Profit sharing and 401(k) plans are examples of defined contribution plans.
Defined Benefit Plans are employer-provided retirement plans that provide a guaranteed retirement income. In these plans, the employer assumes all of the investment risk and the benefits are guaranteed by the Pension Benefit Guaranty Corporation.
Cash and Hybrid Plans are defined benefit plans that combine the advantages of a 401(k) plan with those of a traditional pension plan. Cash balance plans are part of a group of plans referred to as "hybrid plans". An employer may choose to implement a new cash balance plan, but a significant number of cash balance plans have arisen from conversions. In a conversion, an employer converts a traditional benefit plan into a cash balance plan. All benefits that have accrued under the traditional plan are protected and cannot be reduced. For some employees close to retirement, the cash balance conversion may upset future expectations. This change in expectations has led to accusations of discrimination. The U.S. Chamber believes that cash balance and other hybrid plans are not inherently discriminatory on the basis of wage and works to preserve this form of benefit for workers.
Multiemployer Plans are defined benefit plans that are maintained by two or more employers and are collectively bargained. Most multiemployer plans are required to have an equal number of employer and union representatives on the Board of Trustees. Due to this unique arrangement, multiemployer plans are often subject to different or additional rules from single employer plans.
Preparing the Form 5500 Schedule C Webinar
On January 12th, 2010, the U.S. Chamber of Commerce co-sponsored a webinar in conjunction with the Securities Industry and Financial Markets Association and the Profit Sharing/401k Council of America to help plan sponsors address the practical issues they may face when filing the Form 5500 Schedule C. For additional information on the webinar, a copy of the PowerPoint presented can be found here and an audio file of the webinar can be found here.
Employee Benefits 2010: The Next Decade of Benefits Practices and Designs
The U.S. Chamber of Commerce recently held a conference highlighting new trends in health and welfare plans, retirement plans and other benefit options. Attendees heard from innovators who have developed new ways of providing, delivering, comparing, and purchasing benefits for employers of all sizes. At the event, the Chamber released the "Employee Benefits Strategic Vision," which provides a proactive agenda for the Chamber that bridges the political and policy issues facing the employee benefits community. A copy of the document can be found here.
Comments in Response to a Request for Information Regarding Lifetime Income Options for Participants and Beneficiaries in Retirement Plans — May 3, 2010
Multi-Industry Letter to Congress Highlighting the Importance of the Private Employer-provided Retirement System. — February 26, 2010
