Discuss the origins of employer-sponsored retirement plans.
Discuss the 2-3 most prominent trends in retirement plans including its impact for both the employee and the organization.© BrainMass Inc. brainmass.com October 10, 2019, 3:27 am ad1c9bdddf
Employer -sponsored retirement plans were established in the late 19th century without any tax advantages, although the government reduced taxes to them in the 1920's. After the Social Security system was established in 1935 these retirement plans became more widespread.
Employer-sponsored retirement plans in the United States developed in conjunction with shifts in family ties and in the nature of the business world. Urbanization weakened the extended family. Also the number of elderly people grew quickly as earlier immigrants aged and life spans increased. Large corporations needed systematic publicly accountable ways of moving elderly workers from their jobs. One solution that was considered was pensions. Pensions provided an incentive to younger employees to stay with an employer throughout their working life. By 1929 about 15% of private-sector employees were covered by employment-based plans, which were concentrated in large corporations and in certain government sectors
The Revenues Acts of 1921, 1926 and 1928 initiated tax advantages for employment-based retirement plans. The 1921 law allowed employees to deduct contributions to profit sharing and stock bonus plans from their income to be taxed. As a result employees were allowed to delay recognizing contributions to those plans as taxable income until the contributions were withdrawn. The legislation also exempted the investment earnings of such plans until withdrawal. In 1926, the law was extended to pensions while the 1928 law allowed sponsoring employers to deduct contributions for past and current service.
It appeared as Congress's exemption of the earnings of ...
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