A pension plan is a form of retirement plan where the employer contributes and invests money on the employees’ behalf. Whatever income that the investment generates goes into the employee’s retirement benefit.
Upon retirement, the pension is paid to the employee either regularly or in a lump sum. The amount usually depends on the terms set by the employer and the employees’ length of service. Also, the pension benefits may be inherited by the beneficiary’s surviving spouse or children.
What are the benefits of a pension plan?
Pension plans benefit both parties – the employer and the employed.
Qualified plans pose significant tax advantages to businesses, both large and small. One of their biggest benefits is the tax break it offers employers. Companies with employee pension plans are also likely to receive tax credits – among other incentives – for providing such benefits.
Beyond and perhaps even more important than the tax and financial advantages of qualified retirement plans, is the role that they play in boosting an organization’s image. These benefits have a significant influence when it comes to recruiting and retaining valuable talents.
If you were to choose between a job that offers retirement benefits and a job that doesn’t, of course, you would pick the former.
On the employee’s end, a pension plan means an immediate tax break. The investments earn compounding interest over time and are not taxed until they are distributed. Furthermore, it offers employees convenience and makes them look forward to a potentially worry-free retirement.
Choosing the Right Investment Company
The decision on how to manage and invest pension plan funds is entirely up to the employer. Thus, they need to find the right investments if they wish to safeguard their employees’ future.
Bennett and Porter is a reputable wealth and investment management company with years of experience in qualified retirement plans.
If you think you need expert advice and assistance with the matter, contact us right away!