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Employer-sponsored pension plans

DOI: 10.2298/eka0462149r

Keywords: non-contributory pension plans , 401(k) pension plan , contributions , pensions , discrimination tests

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Abstract:

Apart from pension plans within social insurance, in developed pension systems there are also available to individuals schemes which may to a large extent ensure a significant part of their total pension. Among them are the following: employer-sponsored pension plans or individual pension plans. The most widely used employer-sponsored pension plan in the USA is 401(k), in which both the employer and the employee contribute to the financing of the pension. These contributions as well as the return to their investment have a preferential tax treatment, i.e. do not enter a tax base. The funds are taxed only when drawn from the account in the form of a pension. This paper aims to present the functioning of 401(k) pension plan as the most widely used employer sponsored pension plan in the USA, which is likely, in a modified form, to have an important place within our future reformed pension insurance system.

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