Section 3. Supplementary reading. Exercise 1. Read and translate the text.

Exercise 1. Read and translate the text.

The Retirement Equity Act.

In an effort to ensure the fair treatment of employees under pension plans. Congress in 1974 passed theEmployee Retirement Income Security Act(ERISA). This law was designed to ensure the solvency of pension plans by restricting the types of investments that could be made with the plan's funds and providing general guidelines for fund management. Table 1 summarizes the major provisions of ERISA.

Table 1. Major provisions of ERISA

Subject Provisions

Eligibility Prohibited plans from establishing eligibility requirements of more than one year of service, or an age greater than 25, whichever is later.

Vesting Established new minimum standards; employer has three choices:

a. 100 percent vesting after 10 years of service.

b. 25 percent vesting after 5 years of service, grading up to 100 percent after 15 years.

c. 50 percent vesting when age and service (if the employee has at least 5

years of service) equal 45, grading up to 100 percent vesting 5 years later.

Funding Required the employer to fund annually the full cost for current benefit accruals

and amortize past-service benefit liabilities over 30 years for new plans and 40

years for existing plans.

Plan termination insurance Established a government Insurance fund to insure vested pension benefits up

to the lesser of $750 a month or 100 percent of the employee's average wages

during highest paid five years of employment; the employer pays an annual

premium of $1 per participant and is liable for any insurance benefits paid up to 30 percent of the company’s net worth.

Fiduciary responsibility Established the «prudent man» rule as the basic standard of fiduciary

responsibility; prohibits various transactions between fiduciaries and parties-in

-interest; prohibits investment of more than 10 percent of pension plan assets

in the employer's securities.

Portability Permitted an employee leaving a company to make a tax-free transfer of the

assets behind his vested pension benefits (if the employer agrees) or of his

vested profit-sharing or savings plan funds to an individual retirement account.

Individual retirement accounts (IRAs) Provided a vehicle for transfers as noted above and permits employees

of private or public employers that do not have qualified retirement plans to

deduct 15 percent of compensation, up to $1,500, each year for contributions

to a personal retirement fund. Earnings on the fund are not taxable until

distributed.

Reporting and disclosure Required the employer to provide employees with a comprehensive booklet

describing plan provisions and to report annually to the Secretary of Labor on

various operating and financial details of the plan.

Lump-sum distributions Changed the tax rules to provide capital gains treatment on pre-1974 amounts

and to tax post-1973 amounts as ordinary Income, but as the employee's

only income and spread over 10 years.

Limits on contributions and benefits Limited benefits payable from defined-benefit pension plans to the lesser

of

$75.000 a year or 100 percent of average annual cash compensation during

the employee's three highest paid years of service. Limited annual additions

to employee profit-sharing accounts to the lesser of $25,000

or 25 percent of the employee's compensation that year.

The act has been criticized as being too costly. In fact, it has been reported that several companies dropped their pension plans rather than complies with ERISA. Another major complaint has been that it causes an unwieldy amount of paperwork. In 1984, Congress passed theRetirement Equity Act. The overall impact of this act was to liberalize the eligibility requirements, vesting provisions

maternity/paternity leaves, and spouse survivor benefits of retirement plans. Table 2 summarizes the majority provisions of the Retirement Equity Act.

Table 2.Major provisions of the Retirement Equity Act.

• Employees must be allowed to participate in a qualified plan no later than age 21 with one year at service (previously, it was age 25 with one year of service).

• Vesting credit must be awarded for years of service beginning at age 18 (previously, service before age 22 could be ignored in most plans).

• For both vesting and participation purposes, as many as 501 hours of service must be awarded to any employee on maternity or paternity leave.

• An election to war/e spouse survivor benefits must be made in writing by both the participant and spouse and witnessed by a plan representative or notary public.

Mandatory Retirement.The 1978 amendment to the Age Discrimination in Employment Act (ADEA) forbade mandatory retirement before age 70 for companies employing 20 or more people in the private sector and at any age for federal employees. Prior to the effective date of this amendment, January 1, 1979, employers could choose any age for mandatory retirement. An amendment to ADEA that took effect in January 1987 eliminated mandatory retirement at any age for employees of companies with 20 or more employees.

Early Retirement.As an alternative to mandatory retirement, some organizations offer incentives to encourage early retirement. This method of reducing the work force is often viewed as a humanitarian way of reducing the payroll and rewarding long-tenured em­ployees. The types of incentives offered vary, but usually include a lump-sum payment plus the extension of other benefits, such as medical insurance. A 1986 survey by Hewitt Associates found that among their sample of 529 corporations, one-third had used early retirement incentive within the previous five years.

Most pension plans have special allowances for voluntary early retirement. Usually an employee's pension is reduced by a stated amount for every month that he or she retires before age 65. Popular early retirement ages are 55, 60, and 62. Most plans require that an individual must have worked a minimum number of years with the organization to be eligible for early retirement. Early retirement has grown in popularity, partially because of the pension benefits available. Presently, the earliest that an employee can receive social security retirement benefits (reduced) is at age 62.

Employees Not Covered by Pension Plans.

In 1981, legislation was enacted to allow employees to set up individual plans oiled individual retirement accounts (IRAs). Although the basic purpose of IRAs was to provide an option for employees not covered by private pension plans, anyone who has an earned income can invest in an IRA. With an IRA, an individual could originally make tax-exempt contributions to a maximum of S2,000 per year. In conjunction with a spouse-homemaker, a married person could contribute up to $2,250 per year. The 1986 Tax Reform Act drastically decreased the tax advantages of an IRA. Currently, IRA contributions are totally deductible only if he individual's income is less than $25,000 (singles) or $40,000 (married filing jointly) or if the employee is not covered by a company pension plan. Interest earned on IRA accounts is still deferrable. A similar plan, called a Keogh plan, has been effected for self-employed persons. Under a Keogh plan, self-employed persons can currently make tax-exempt annual contributions of up to $30,000 or 25 percent of net self-employment income, whichever was less.

Exercise 2. Translate into English.

С 1 января 2002 года в нашей стране начата пенсионная реформа. Размер и порядок начисления трудовых пенсий регулируются Федеральным законом от 17.12.2001 г. «О трудовых пенсиях в РФ».

Пенсия состоит из трех частей – базовой, страховой и накопительной. Размер базовой пенсии устанавливает государство в зависимости от вида пенсии. Страховая часть пенсии формируется в рамках системы государственного пенсионного страхования, ядром которой является Пенсионный фонд РФ. Источником финансирования страховой части является платеж, собираемый налоговыми органами и перечисляемый в бюджет пенсионного фонда. Накопительная часть формируется за счет страховых взносов, уплачиваемых работодателем в ПФР в составе единого социального налога в пользу своих работников.

Законом предусмотрена индексация пенсий. При этом базовая и страховая части индексируются разными темпами: базовая часть с учетом темпов роста инфляции, а страховая часть в зависимости от темпов роста заработной платы.

Начиная с 2005 года, по решению Правительства РФ, накопительная часть трудовой пенсии формируется только у граждан 1967 года и моложе. Таким образом, для старшей возрастной категории (старше 1967 года рождения) единственный способ повышения размеров будущей пенсии – это самостоятельно или с помощью работодателя начать формировать дополнительную пенсию в негосударственном пенсионном фонде.

Главной особенностью накопительной части трудовой пенсии является возможность работника самостоятельно распорядиться ее формированием. Свои пенсионные накопления можно либо оставить в государственном пенсионном фонде, куда они перечисляются по умолчанию, либо перевести их негосударственный пенсионный фонд. Сделать это можно раз в году.

6,2 миллиона человек заключили договоры с различными негосударственными пенсионными фондами, то есть 15% трудоспособного населения страны. Из них 4 миллиона – по инициативе работодателя, то есть юридических лиц. 760 тысяч россиян уже получают негосударственную пенсию.

Госдума приняла в окончательном чтении законы о добровольных пенсионных накоплениях граждан. Речь идет о пополнении их из трех источников – государственной казны, средств работодателя и самого гражданина. Новый закон не сулит золотые горы, но обещает прибавку гражданам, вступившим в программу софинансирования пенсий.

Основа законопроекта проста. Вкладываешь в накопительную часть своей пенсии тысячу рублей – государство добавляет столько же, но не больше 12 тысяч рублей в год. Что касается людей, которые уже достигли пенсионного возраста, но работать продолжают, то на каждую их тысячу из бюджета выделяют 4 тысячи. Но за год не больше 48 тысяч рублей.

Дата добавления: 2015-10-02