The reason most of us work is to make money, the second reason we work is to gain retirement. Martocchio (2013) says companies make retirement plans in one of three ways. They are a defined benefit plan, a defined contribution plan, or a hybrid plan.
A defined benefit plan is when a company guarantees a certain amount of money to an employee at retirement. This amount is based on a percentage of an employee's pre retirement pay times how many years of service they have with the organization. The employer must make contributions to the pension if it is underfunded (Chen, 2015).
Defined contribution plans are when an employee and the employer contribute a certain amount towards an employee's retirement. There is no guaranteed amount of money at the time of retirement. It could either gain money or lose money because it is invested in company stock, diversified stock market funds, or federal government bond funds. This means the employee takes the risk of gaining or losing money. …show more content…
The other reason companies do not like defined benefits plans is because they must pay the Pension Benefit Guaranty Corporation in order insure their pension in the case they go through financial hardship. Corporations are moving more towards defined contribution plans than defined benefit plans (Sialm, Starks & Zhang,
A defined benefit plan is when a company guarantees a certain amount of money to an employee at retirement. This amount is based on a percentage of an employee's pre retirement pay times how many years of service they have with the organization. The employer must make contributions to the pension if it is underfunded (Chen, 2015).
Defined contribution plans are when an employee and the employer contribute a certain amount towards an employee's retirement. There is no guaranteed amount of money at the time of retirement. It could either gain money or lose money because it is invested in company stock, diversified stock market funds, or federal government bond funds. This means the employee takes the risk of gaining or losing money. …show more content…
The other reason companies do not like defined benefits plans is because they must pay the Pension Benefit Guaranty Corporation in order insure their pension in the case they go through financial hardship. Corporations are moving more towards defined contribution plans than defined benefit plans (Sialm, Starks & Zhang,