Employer sponsored retirement plan

(redirected from Employer-Sponsored Retirement Plans)

Employer Sponsored Retirement Plan

A retirement plan in which both an employer and an employee make contributions into an account each month. The contributions are invested on behalf of an employee, who may begin to make withdrawals after retirement. Typically, employer sponsored retirement plans are tax-deferred, meaning that the employee does not pay taxes on the funds in the pension until he/she begins making withdrawals. However, some plans are not tax-deferred, and, instead, employees make tax-free withdrawals. Employers are not legally required to offer retirement plans, though most major companies do. Plans may have defined contributions, defined benefits, or both. See also: 401(k), IRA.

Employer sponsored retirement plan.

Employers may offer their employees either defined benefit or defined contribution retirement plans, or they may make both types of plans available.

Any employer may offer a defined benefit plan, but certain types of defined contribution plans are available only through specific categories of employers.

For example, 403(b) plans may be offered only by tax-exempt, nonprofit employers, and 457 plans only by state and municipal governments. SIMPLE plans, on the other hand, can only be offered by employers with fewer than 100 workers.

Corporate employers who contribute to a retirement plan can take a tax deduction for the amount of their contribution and may enjoy other tax benefits. However, the plan must meet certain Internal Revenue Service (IRS) guidelines.

Offering a retirement plan may also make the employer more attractive to potential employees. However, employers are not required to offer plans. If they do, they can make the plan as generous or as limited as they choose as long as the plan meets the government's non-discrimination guidelines.

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Since 1999, he has served as head of Wells Fargos Institutional Retirement & Trust business, where he has overseen more than 5,000 employer-sponsored retirement plans and custody accounts with 4 million employees representing almost $750 billion in assets.
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"With $7.4 trillion in assets invested, traditional and Roth IRAs are successfully meeting their dual mission as contributory savings vehicles and as a place to transfer or consolidate assets from employer-sponsored retirement plans," observes Sarah Holden, senior director of retirement and investor research at ICI.
The company brought three high-level retirement plan unit executives -- Douglas McIntosh Jr., vice president for full-service solutions; Srinivas Reddy, senior vice president and head of full-service investments; and John Kalamarides, head of full-service solutions -- to New York to tell the reporters what annuitization is, why workers need protection against longevity risk, and why they think adding income guarantees to employer-sponsored retirement plans could help everyone.
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A recent example of this is a December 2016 DOL letter to TIAA authorizing the use of delayed liquidity fixed annuities as a non-qualified default investment alternative option in targets-date funds of employer-sponsored retirement plans. Though failing to meet ERISA liquidity requirements -- after a 12-month, restriction-free period, funds invested in these annuities can be transferred to another investment only in installments over an 84-month/7-year period -- the DOL determined that plan fiduciaries could "prudently select an investment with lifetime income elements as a default investment under the plan if it complies" with ERISA law.

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