Ideally, the social insurance in form of social security benefits plays a major role of income support for the elderly in the United States. The social security is important because it enables its beneficiaries to expect higher incomes and enjoy lowered poverty rates. The social security makes it possible for workers to have a retirement plan that is affordable. In one of the alternatives of this plan the amount is paid half by the employer and half by the employees. This makes it affordable for the employees (Butrica, Iams, & Smith, 2006). In 2013 the required rate for this security was at 6.2 of the employee’s wages and 6.2 percent for the employer.
FICA is the abbreviation for federal insurance contribution act tax; it is composed of a combination of social security Act and Medicare tax or hospital insurance tax. ERISA strands for employee retirement security income act. It is based on a law that was enacted in 1974. This law set standards for already established pension and health plans to provide protection for those who have these plans. The plans should provide information related to plan features, provides fiduciary responsibilities. In summary FICA, ERISA and Social security are programs put in place to help and protect individuals who are going on retirement (Butrica, Iams, & Smith, 2006).
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Some real world examples of retirement planning programs include the 401 (k) plan, simplified employee pension plan (SEP); profit sharing plan and the employee stock ownership plan. 401 is a retirement savings plan sponsored by an employer. It lets the worker save and invest a piece of their paycheck before taxes are taken out. The simplified employee pension plan provides for the business owners to have a simplified method to contribute toward their employee’s retirement as well as their own retirement savings (LaCombe, 2017). Profit sharing plan allows employees to have a share in the profits of a company. Then they will receive a percentage of a company’s profits based its earnings. The employee stock ownership plan allows for the employees to have an ownership interest in the company.
A person may be regarded as fiduciary under the employee retirement income security act (ERISA) if such a person exercises discretionary control or authority over a plan management or plan assets. The persons might also be considered a fiduciary if he or she has a discretionary responsibility for the administration of a plan. The last consideration is when the person or entity provides investment advice to a plan for a fee or other compensation (LaCombe, 2017).
References
Butrica, B. A., Iams, H. M., & Smith, K. E. (2006). The changing impact of social security on retirement income in the United States. In The Distributional Effects of Government Spending and Taxation (pp. 112-132). Palgrave Macmillan, London.
LaCombe E. A. (2017). The basics of fiduciary responsibility under ERISA. 401K coach program.
