State:

National
What do employers need to consider regarding retirement? The federal Employee Retirement Income Security Act (ERISA) and the requirements of the Social Security and Medicare systems are the major laws that affect the retirement process. In addition, the federal Age Discrimination in Employment Act (ADEA) necessitates that the entire retirement process be monitored to avoid age discrimination.
With individuals over age 65 becoming a larger segment of the population, their financial needs in retirement are a major national issue. Preretirement planning is crucial assistance that can help retirees achieve financial security. The aging of the workforce, along with financial issues from the economic downturn, are resulting in employees delaying retirement, returning to work after retirement, or using phased retirement.
Employers must pay close attention to the following issues:
Age discrimination. Federal law prohibits discrimination against persons aged 40 and over. Almost all mandatory retirement requirements are illegal. Please see the national Age Discrimination section.
Please see the state Age Discrimination section.
Benefits. No employee benefit plan may cease pension accrual or suspend plan contributions for an employee because of age. Please see the national Age Discrimination section.
Please see the state Age Discrimination section.
Healthcare insurance. Employers must allow employees who lose their group health insurance because of termination to continue their healthcare coverage at their own expense. Please see the national Healthcare Insurance section.
Please see the state Healthcare Insurance section.
Hiring. Job applicants seeking to return to work cannot be discriminated against because they are retired. Please see the national Age Discrimination section.
Please see the state Age Discrimination section.
Medicare. Employees should apply for Medicare coverage three months before the month in which they reach the age of 65 to ensure that coverage begins promptly. Please see the national Social Security/Medicare section.
Employer-sponsored health plans must disclose to all individuals eligible for the Medicare Part D drug benefit who are covered under, or who apply for, the plan's prescription drug coverage whether the coverage is “creditable prescription drug coverage” or not. This requirement applies whether the employer-sponsored coverage is primary or secondary to Part D coverage. Thus, the notice must be provided to Medicare-eligible retirees and their Medicare-eligible dependents who are covered under an employer-sponsored plan and Medicare-eligible active employees and Medicare-eligible dependents of active employees who are covered under the plan. A plan must also provide a disclosure of creditable coverage status to the Centers for Medicare & Medicaid Services (CMS) on an annual basis. CMS regulations require that plans make the disclosure using the disclosure form on the CMS Creditable Coverage Disclosure website at https://www.cms.gov. Please see the national Benefits Recordkeeping and Disclosures section.
Pension plans. ERISA has established participation, vesting, and survivors' benefit requirements for profit-sharing, pension, and 401(k) plans. Please see the national ERISA, national Retirement Savings/401(k) sections.
Social Security. Full retirement age (also called “normal retirement age”) has been 65 for many years. However, beginning with people born in 1938 or later, that age will gradually increase until it reaches 67 for people born after 1959. Employees may begin receiving reduced benefits at the age of 62, full benefits at their normal retirement age, or increased benefits by delaying retirement. Employees should contact the Social Security Administration well in advance of actually retiring to ensure that benefits begin promptly. Please see the national Social Security/Medicare section.
Taxation. The Internal Revenue Code sets minimum distribution and withholding requirements for pension, profit-sharing, and 401(k) plans, as well as individual retirement accounts. Please see the national Withholding section.
Please see the state Withholding section.
Welfare and pension reports. Employer reporting requirements on pension and welfare plans under ERISA are extensive. Please see the national Benefits Recordkeeping and Disclosures section.
Many (if not most) full-time employees in private industry have access to some type of retirement benefits. Part-time workers' access is usually more limited. However, the decline in defined benefit pension plans and the replacement by defined contribution plans makes preretirement planning more important than ever. While all financial planners advise individuals to invest more and more conservatively as they near retirement, this message often does not get through. Many workers have had to put off retirement as they saw their investments tumble with the stock market, even as they were one or two years away from their planned retirement.
As would be expected, surveys indicate that larger firms (500 or more employees) are more likely than smaller ones to have preretirement planning programs, and, of those, more healthcare/educational organizations have formal programs compared to other industries. Preretirement planning programs can be simple or extensive and inexpensive or costly. In some companies, the programs are developed and operated totally by persons outside the organization, and in others, by internal personnel or a combination of both.
Participation. Most organizations with formal preretirement planning programs invite employees to participate at age 55; however, some start at the age of 50 and others at 60. Some programs let employees of any age attend the program.
Subjects covered. The most frequently covered topics in preretirement planning sessions are financial matters (e.g., pensions, Social Security, investments), health care, insurance, real estate (relocation, living options, etc.), personal relationships (spouse and family), volunteerism, second careers, and education. Some organizations also cover legal matters, estate planning, psychological and physiological effects of aging, and nutrition.
Course materials. Most preretirement planning programs provide their participants with a course guide and work sheets for note taking. Banks, colleges, etc., may have pamphlets available. The AARP (http://www.aarp.org) is often a valuable resource, as are local senior citizens' centers. A multitude of retirement income calculators are now available on the Internet.
Development and instruction. In some companies, the programs are developed and operated totally by persons outside the organization. In other companies internal personnel or a combination of internal and external instructors and resources are used.
Internet resources. The Internet offers an avalanche of information and tools to aid retirement planning. For example, the AARP provides retirement planning, investment, and other related information, and the American Savings Education Council (http://www.choosetosave.org/asec) has an interactive worksheet for estimating retirement income requirements called Ballpark E$timate. This tool is quick and easy to use and provides guidelines that will help employees begin planning without becoming frustrated with complex calculations.
Other options. As an alternative to a formal preretirement planning program, some firms offer a retirement interview with a company official, while others provide printed materials on retirement and information on the Internet.
Some companies use early retirement incentive programs to open up promotional opportunities for older employees, to enable older and less productive employees to retire voluntarily and with dignity, and to trim employment costs. Incentives may include continued part or full salary, bonuses or severance pay, vested benefits, continued insurance, and lifetime discounts on products and services.
A problem arises, however, if employees who were “encouraged” to take an early retirement later file age discrimination claims, alleging that they were forced out. Such unpleasant encounters can be avoided, to some degree, by offering potential retirees a reasonably attractive retirement plan, affording them ample time to consider the option, and ensuring that they are not threatened or otherwise coerced into accepting early retirement.
The Older Workers Benefit Protection Act (OWBPA) provides that an employee may not waive or release his or her rights under ADEA by taking part in an early retirement incentive program unless the waiver or release satisfies OWBPA's specific requirements for a “knowing and voluntary” waiver. The Equal Employment Opportunity Commission has set out specific requirements for a valid waiver or release. Please see the national Age Discrimination section.
Warning. Some employment law experts think that early retirement plans are often a guise for age discrimination. The OWBPA clarifies how to use such waivers. Employers should, however, obtain competent legal guidance regarding waivers and early retirement incentives, how best to present the plan and/or release to employees, and how to prepare the documents employees will be asked to sign when accepting or rejecting the offer.
Phased retirement is a concept that may help employers meet the challenges of changing workforce demographics. Because of the economy, many employees of retirement age may not be financially ready for traditional retirement. Phased retirement is a process for bridging the gap between full-time employment and full-time retirement. There are many potential forms of phased retirement, including:
• Rehiring retirees as consultants for discreet projects or on a part-time, seasonal, or temporary basis;
• Gradually reducing an employee's working hours;
• Taking a leave of absence to try out retirement;
• Job-sharing arrangement between older workers; and
• Older workers moving to less stressful or less demanding jobs.
Last reviewed on October 13, 2017.
Related Topics:
National
What do employers need to consider regarding retirement? The federal Employee Retirement Income Security Act (ERISA) and the requirements of the Social Security and Medicare systems are the major laws that affect the retirement process. In addition, the federal Age Discrimination in Employment Act (ADEA) necessitates that the entire retirement process be monitored to avoid age discrimination.
With individuals over age 65 becoming a larger segment of the population, their financial needs in retirement are a major national issue. Preretirement planning is crucial assistance that can help retirees achieve financial security. The aging of the workforce, along with financial issues from the economic downturn, are resulting in employees delaying retirement, returning to work after retirement, or using phased retirement.
Employers must pay close attention to the following issues:
Age discrimination. Federal law prohibits discrimination against persons aged 40 and over. Almost all mandatory retirement requirements are illegal. Please see the national Age Discrimination section.
Please see the state Age Discrimination section.
Benefits. No employee benefit plan may cease pension accrual or suspend plan contributions for an employee because of age. Please see the national Age Discrimination section.
Please see the state Age Discrimination section.
Healthcare insurance. Employers must allow employees who lose their group health insurance because of termination to continue their healthcare coverage at their own expense. Please see the national Healthcare Insurance section.
Please see the state Healthcare Insurance section.
Hiring. Job applicants seeking to return to work cannot be discriminated against because they are retired. Please see the national Age Discrimination section.
Please see the state Age Discrimination section.
Medicare. Employees should apply for Medicare coverage three months before the month in which they reach the age of 65 to ensure that coverage begins promptly. Please see the national Social Security/Medicare section.
Employer-sponsored health plans must disclose to all individuals eligible for the Medicare Part D drug benefit who are covered under, or who apply for, the plan's prescription drug coverage whether the coverage is “creditable prescription drug coverage” or not. This requirement applies whether the employer-sponsored coverage is primary or secondary to Part D coverage. Thus, the notice must be provided to Medicare-eligible retirees and their Medicare-eligible dependents who are covered under an employer-sponsored plan and Medicare-eligible active employees and Medicare-eligible dependents of active employees who are covered under the plan. A plan must also provide a disclosure of creditable coverage status to the Centers for Medicare & Medicaid Services (CMS) on an annual basis. CMS regulations require that plans make the disclosure using the disclosure form on the CMS Creditable Coverage Disclosure website at https://www.cms.gov. Please see the national Benefits Recordkeeping and Disclosures section.
Pension plans. ERISA has established participation, vesting, and survivors' benefit requirements for profit-sharing, pension, and 401(k) plans. Please see the national ERISA, national Retirement Savings/401(k) sections.
Social Security. Full retirement age (also called “normal retirement age”) has been 65 for many years. However, beginning with people born in 1938 or later, that age will gradually increase until it reaches 67 for people born after 1959. Employees may begin receiving reduced benefits at the age of 62, full benefits at their normal retirement age, or increased benefits by delaying retirement. Employees should contact the Social Security Administration well in advance of actually retiring to ensure that benefits begin promptly. Please see the national Social Security/Medicare section.
Taxation. The Internal Revenue Code sets minimum distribution and withholding requirements for pension, profit-sharing, and 401(k) plans, as well as individual retirement accounts. Please see the national Withholding section.
Please see the state Withholding section.
Welfare and pension reports. Employer reporting requirements on pension and welfare plans under ERISA are extensive. Please see the national Benefits Recordkeeping and Disclosures section.
Many (if not most) full-time employees in private industry have access to some type of retirement benefits. Part-time workers' access is usually more limited. However, the decline in defined benefit pension plans and the replacement by defined contribution plans makes preretirement planning more important than ever. While all financial planners advise individuals to invest more and more conservatively as they near retirement, this message often does not get through. Many workers have had to put off retirement as they saw their investments tumble with the stock market, even as they were one or two years away from their planned retirement.
As would be expected, surveys indicate that larger firms (500 or more employees) are more likely than smaller ones to have preretirement planning programs, and, of those, more healthcare/educational organizations have formal programs compared to other industries. Preretirement planning programs can be simple or extensive and inexpensive or costly. In some companies, the programs are developed and operated totally by persons outside the organization, and in others, by internal personnel or a combination of both.
Participation. Most organizations with formal preretirement planning programs invite employees to participate at age 55; however, some start at the age of 50 and others at 60. Some programs let employees of any age attend the program.
Subjects covered. The most frequently covered topics in preretirement planning sessions are financial matters (e.g., pensions, Social Security, investments), health care, insurance, real estate (relocation, living options, etc.), personal relationships (spouse and family), volunteerism, second careers, and education. Some organizations also cover legal matters, estate planning, psychological and physiological effects of aging, and nutrition.
Course materials. Most preretirement planning programs provide their participants with a course guide and work sheets for note taking. Banks, colleges, etc., may have pamphlets available. The AARP (http://www.aarp.org) is often a valuable resource, as are local senior citizens' centers. A multitude of retirement income calculators are now available on the Internet.
Development and instruction. In some companies, the programs are developed and operated totally by persons outside the organization. In other companies internal personnel or a combination of internal and external instructors and resources are used.
Internet resources. The Internet offers an avalanche of information and tools to aid retirement planning. For example, the AARP provides retirement planning, investment, and other related information, and the American Savings Education Council (http://www.choosetosave.org/asec) has an interactive worksheet for estimating retirement income requirements called Ballpark E$timate. This tool is quick and easy to use and provides guidelines that will help employees begin planning without becoming frustrated with complex calculations.
Other options. As an alternative to a formal preretirement planning program, some firms offer a retirement interview with a company official, while others provide printed materials on retirement and information on the Internet.
Some companies use early retirement incentive programs to open up promotional opportunities for older employees, to enable older and less productive employees to retire voluntarily and with dignity, and to trim employment costs. Incentives may include continued part or full salary, bonuses or severance pay, vested benefits, continued insurance, and lifetime discounts on products and services.
A problem arises, however, if employees who were “encouraged” to take an early retirement later file age discrimination claims, alleging that they were forced out. Such unpleasant encounters can be avoided, to some degree, by offering potential retirees a reasonably attractive retirement plan, affording them ample time to consider the option, and ensuring that they are not threatened or otherwise coerced into accepting early retirement.
The Older Workers Benefit Protection Act (OWBPA) provides that an employee may not waive or release his or her rights under ADEA by taking part in an early retirement incentive program unless the waiver or release satisfies OWBPA's specific requirements for a “knowing and voluntary” waiver. The Equal Employment Opportunity Commission has set out specific requirements for a valid waiver or release. Please see the national Age Discrimination section.
Warning. Some employment law experts think that early retirement plans are often a guise for age discrimination. The OWBPA clarifies how to use such waivers. Employers should, however, obtain competent legal guidance regarding waivers and early retirement incentives, how best to present the plan and/or release to employees, and how to prepare the documents employees will be asked to sign when accepting or rejecting the offer.
Phased retirement is a concept that may help employers meet the challenges of changing workforce demographics. Because of the economy, many employees of retirement age may not be financially ready for traditional retirement. Phased retirement is a process for bridging the gap between full-time employment and full-time retirement. There are many potential forms of phased retirement, including:
• Rehiring retirees as consultants for discreet projects or on a part-time, seasonal, or temporary basis;
• Gradually reducing an employee's working hours;
• Taking a leave of absence to try out retirement;
• Job-sharing arrangement between older workers; and
• Older workers moving to less stressful or less demanding jobs.
Last reviewed on October 13, 2017.
CT-WEB01
Copyright © 2017 Business & Legal Resources. All rights reserved. 800-727-5257
This document was published on https://Compensation.BLR.com
Document URL: https://compensation.blr.com/analysis/Retirement-Planning/Employee-Retirement/