Congress passed the Employment Retirement Income Security Act to protect employe

Question

Congress passed the Employment Retirement Income Security Act to protect employee benefits including pension or retirement benefits. However, ERISA does not specifically address one of the current "hot topics" in employer retirement plans. That "hot topic" is the use of defined benefit or defined contribution retirement plans. Employers that have defined benefit retirement plans are increasingly converting those plans to defined contribution plans while almost all new employee pension plans are defined contribution plans.

1.What protections does ERISA provide to employees in general?

2.How might these protections be inadequate from an employee standpoint as our country faces challenging economic times?

3.Can employees truly "rely" on benefits such as health insurance and retirement?

Explanation / Answer

One of the biggest challenges of retirement planning is to ensure that you have gathered enough money during your working years that will take care of your expenses once you retire. Given the rising cost of living, increased life expectancy and inflation, investments towards your retirement fund is a must to have in your financial calculations. What is equally important is to ensure that there is adequate investment made towards retirement kitty. But how can one ensure that the contribution made towards post retirement fund is “adequate”?

What protections does ERISA provide to employees in general?

Guaranteed Minimum Sum Assured-

Need a minimum sum assurance that have to know to every beneficiary. So this will give the clear idea to everyone for securing their future. According to that some X amount will be as pension. Benefit of this one can plan according to the pension their life in future. This will also ensure the inflation rate & requirement of the individual. All this planning can happen only on the by knowing minimum sum assurance.

Death Cover-

In case of your unfortunate demise before the end of policy term, need to know what amount your nominee will receive??? This will secure your family after death. This is very important protection for you & your family member. Also ERISA should clear amount that will give the beneficiary. Give idea year & year ratio what will amount by paying term.

Accident Cover

In case of your major accident happen So what will be the protection will give by ERISA or Retirement plan. Also suppose major physical disability this will cover this retirement plan.

Health Benefit-

Member & its family need secure their health by the retirement plan. Any major illness needs cover under this policy.

Benefits under discontinues or Surrender-

However, one can understand due to some reasons beyond your control you might not be able to continue paying your premiums. In such cases you need to know minimum benefits you will gated form it

Utilization of Policy Proceeds-

As per current regulations, you have the option to take the Maturity (Vesting) Benefit and the in need to what manner you will get that.

1) will take up to 1/3 of the benefit as tax-free cash lump sum as per the current tax regulations.

2) You can utilize the entire proceeds to purchase annuity at the then prevailing annuity rates. You

3) Alternatively, you can utilize the entire proceeds to purchase a single premium deferred pension plan from us.

4) To extend the accumulation period/deferment period within the same policy with the same terms and conditions as the original policy provided the policyholder is below an age of 55 years at the time of vesting

How might these protections be inadequate from an employee standpoint as our country faces challenging economic times?

It is very clear that if economy growth then & then benefits will pass on to the people.

There are no of reasons as

Inflation-

Base on inflation rate planning of expenses will do by every employee. So in crises of economy challenges it’s very difficult sustain the things.

Low Consumer confidence.

In a recession there will be rising unemployment and therefore a fall in consumer confidence. This will cause a rise in the savings ratio. IN other words people will spend less of their disposable income and save more leading to a bigger fall in AD. IF confidence remains very low for a long time then it will be difficult for the government to increase AD. For example if the government cut income taxes this would increase disposable income but if confidence was low people would not be willing to spend any extra and the economy would remain in a recession.

Ineffectiveness of Monetary Policy

Lower interest rates reduce the cost of borrowing and therefore people should be more willing to spend and invest. However Monetary policy could be ineffective. Firstly firms may be reluctant to invest, even though it is cheap to borrow, because they cannot see any increase in demand

Effectiveness of Fiscal Policy

·         Firstly there will be time lags. It takes time for the government to change its spending plans and once implemented it will take time for this spending plan to actually increase..

Deflation

If there is deflation this makes it difficult to increase demand. This is because people will not spend if they feel that prices will be cheaper in the future

Hysteresis

This states that what has happened in the past will affect the future. For example if unemployment is high then it is likely to continue being high.

Supply side shocks.

If there was a fall in AS well as AD this would make the recession more severe.

This are the reason based on it is inadequate looking for perspective of economy de grading.

Can employees truly "rely" on benefits such as health insurance and retirement?

Despite concerns about the future of Social Security, American workers are increasingly expecting to rely on Social Security retirement benefits from this government program. According to Gallup‘s annual Economy and Personal Finance survey, 36 percent of non-retirees — about 10 percentage points higher than a decade ago — say they‘re counting on Social Security to be a major source of their retirement income.

From related government program one can go or rely on health insurance & retirement as having some assurance from the government side.

But you shouldn‘t rely solely on Social Security benefits in retirement, but the reason is not because these benefits are going to run dry. Despite popular belief, Social Security will not run out completely.

Social Security is funded through a 6.2 percent payroll tax that workers pay and another 6.2 percent employers kick in — self-employed people have to pay the full 12.4 percent. It‘s also financed through a trust fund, which built up reserves when more money was coming into the system through taxes than was being paid out.

Social Security benefits are a guaranteed source of retirement income if you‘ve worked for at least 10 years and paid into the system. And your benefit — the amount you get each month — is based on your income in your 35 highest-earning years.

There are other things, though, that can affect how much you get. Unfortunately, people don‘t always get all the money they‘re entitled to because of mistakes they make when collecting Social Security benefits. Here are three things you should do when you apply for Social Security and to make sure your benefits last:

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