MGT509 - Human Resource Management Mod 4 SLP - Essay Example

Pension Plan for Frisk Technology Problem Our company is reputed for a being a leading player in Heavy Manufacturing. We pride for our generous treatment of employees demonstrated in our generous benefits. This is the reason Frisk Tech is staying afloat competitively. However, our company faces a serious problem in our retirement plan. Despite our company’s 401 k generous matching plan, over 70 percent of employees are not contributing. This company is not having well consolidated retirement plan.

Our employees have a discrepancy in allocation and our Money Market Fund do not provide the safest pillar that cares for our retirement funds. As the Compensation Manager, I have proposed a radical surgery that will affect our retirement plans and help our workers who are struggling financially to enact a retirement plan that will be helpful for the company and the welfare of our employees after retirement. Current Payment Plan 401 K Plan In order to understand this new policy, I will brief you of our old payment plan.

Under the 401 K plan that our company uses, a worker is allowed to direct compensation into the plan and avoid paying income taxes for the deposited amount. The taxes will be paid after the worker withdraws this amount. This system intends to be a profit sharing venture between the company and the workers. It has the advantage of deferring for a later date. In addition, it holds money in trust for customers that deter creditors from accessing the money for any debts owed. In a 401 K plan, the annual compensation can be as little as zero to as much as 25 percent of the total compensation for all participants (Slesnick, 2009).

Because of the unreliably of 401k and its inability to secure our workers retirement benefits, I have considered using the defined contribution plan or a defined benefit pension plan. Defined Contribution Plan Under this system, the company will commit to provide each employee with a specified amount of benefits upon retirement. Our workers must realize that benefits for this arrangement is for the future and not now. It will be the company’s responsibility to predict the exact amount that each worker is entitled and ensure that the retirement benefits are available in the asset funds.

The company will ensure that it has funds set-aside that cover future obligations so as not to interfere with worker’s rightful pension (Pratt, p. 488, 2009). Defined Benefit Pension Plan The new system will pay workers a specific benefit for life immediately after retirement. The amount expected is known in advance and is based on age, earnings, and length of work in the company. If we adopt this system, the company will have no contribution limits. The employee is responsible for making the decision about how much money to contribute to the retirement basket.

Defined benefits plan distributes the workers benefits through life annuities. In case of death, a married partner will receive 50 percent of the accrued benefits. If an individual wants, he can receive one lump sum payment (New York Insurance Company, 2010). Recommendations Since the 401 K plan is largely unpopular for workers in this company, I recommend the following so as to keep our company’s generous benefit plan while retaining an equally healthy retirement plan: The company will do away with the 401 K plan.

Instead, the company will give the workers to choose between defined contribution plan and Defined Benefit Pension Plan It is going to be a policy of the company to deduct the workers’ salaries in order to save them for retirement. The retirement account will be independent not subject for withdrawal. This will make retirement funds available for our workers when they need them. It is mandatory for workers to have a retirements plan with an active account that receives money from the worker based on the earnings and the worker’s preference.

The amount paid to the payment plan will depend on age, salary, health, and experience. Every employee will be subject to seminar that teaches why it is important to save for retirement. References Clark, R., & Ma, J. (2005). Recruitment, Retention, and Retirement in Higher Education. Northampton, MA: Edward Elgar Publication Limited. New York Life Insurance Company. (2010, November 16). What is a Defined Benefit Pension Plan? [Business Consultancy]. Retrieved May 7, 2012, from New York Life Insurance Company website: http://www.

newyorklife.com/‌nyl/‌v/‌index.jsp?contentId=11545&vgnextoid=9cd02f5a919d2210a2b3019d221024301cacRCRD Pratt, J. (2009). Financial Accounting in an Economic Context. New York: John Wiley & Sons. Slesnick, T. (2009). RAs, 401(k)s & Other Retirement Plans: Taking Your Money Out. New York: Margarent Livingstone.