Got Trouble? We can help.

Retirement benefits

Retirement benefits can include a pension plan or a "401(k)" plan. Although you usually don't have to offer any retirement benefits, if you do choose to give retirement benefits, those benefits are protected by very strict federal laws.

• How do I offer retirement benefits?
• What is a "401(k)" plan?
• Can I retain my employees' pension after they retire?
• What if my employee quits or changes jobs?
• Unpaid benefits
• Do I need a lawyer?

How do I offer retirement benefits?

Retirement plans can be very complicated. Therefore, you should contact a lawyer to make sure that your retirement plan is set up correctly. It is possible that your lawyer will arrange to set up the plan through a retirement benefits administrator that will handle all the retirement paperwork and make pension payments directly to the employees after they retire.

What is a "401(k)" plan?

A "401(k)" plan (named after section 401(k) of the Internal Revenue Code) is a retirement account that an employer may set up for his employees. While employed, employees may contribute a portion of their pre-tax earnings to the 401(k) account, and those earnings are not subject to income tax until the employee withdraws the money in installments at retirement. Interest or dividends earned by the account are also not taxed until withdrawn at retirement.

In many 401(k) plans, the employer agrees to "match" the employees' contributions to the account.

A 401(k) account is "owned" by the employee, and may not be taken away by the employer.

Can I retain my employees' pension after they retire?

No. That's one area where the federal government has made sure there are protections for the employees.

What if my employee quits or changes jobs?

The employee still doesn't lose his/her 401(k) account - it's the employee's money, not yours.

But you may be able to set reasonable rules about how you will pay the money to your employee. For example, the employee might have to wait until a certain date after changing jobs to get the 401(k) money or to transfer the money to another retirement plan. If you have questions about retirement benefits, consult with a business lawyer near you.