A solid retirement plan -- available to employers of all sizes -- can help attract good employees, establish the organization as a good corporate citizen and help their employees to build long-term savings and provide income when they retire.

The basic Retirement Plan widely provided by employers is a “defined benefit” plan that provides monthly lifetime income at retirement. Employers often pay the full cost for the plan and enrollment in the plan is automatic. Employees are “vested” in the Basic Retirement Plan after they are employed for five years. Accrued benefits are determined in two ways and employees receive whichever is greater:

1. Cash Balance Benefit (the 5% Account Method) -- Under this method, an account in the employee’s name is credited with 5% of their pay each month. The account earns interest and over the years, when the employees elect to receive their benefit, the balance in the account is converted to a monthly lifetime benefit (a “single life” annuity) that is based on certain assumptions about interest rates and life expectancy.

2. Career Average Benefit (the 1.65% of Pay Method) -- Under this method, employees earn an annual benefit equal to 1.65% of the pay earned while participating in the Plan. This annual benefit assumes that benefit payments will start on a normal retirement date (usually age 65) and will be paid for as long as the employee lives, with no survivor benefits.

There are many forms of annuities available when employees retire, some allow employees to have all or a portion of their benefit continue for another person (usually a spouse) after the employee dies. The actual benefit payments they receive depend on the employee’s age when benefits begin and the form of annuity they selected.

Many employers offer a voluntary Supplemental 401(k) Plan that allows eligible employees to pay a small percentage to the plan. Many employers pay a matching contribution dollar-for-dollar up to 5% of the employee’s pay. Employees are always 100% vested in all 401(k) Plan when contributions are made by both parties. Federal law imposes annual dollar limits on the amount employees can contribute: currently, $15,000 if you are below age 50 and $20,000 if the employee is 50 or older.

Typically, retirement plans are directed by professional plan administrators who are paid a fee to establish, maintain and monitor all elements of a Retirement Plan. The plan administrators prepare, file and distribute all reports, maintains all financial records and assure compliance with laws that regulate retirement plans. Administrators meet regularly with plan sponsors and participants to provide guidance on how plan assets should be maintained and invested to ensure the maximum safety and stability of the plan.