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Identify and describe the similarities and differences of the two types of pension or retirement plans...

Identify and describe the similarities and differences of the two types of pension or retirement plans that the Employee Retirement Income Security Act (ERISA) covers.

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Employee Retirement Income Security Act (ERISA): The Employee Retirement Income Security Act of 1974 is a federal United States tax and labor law that establishes minimum standards for pension plans in private industry. It contains rules on the federal income tax effects of transactions associated with employee benefit plans.

The Employee Retirement Income Security Act; The main purpose of ERISA is to protect the interests of employees (and their beneficiaries) who are enrolled in employee benefit plans, and to ensure that employees receive the pensions and group-sponsored welfare benefits that have been promised by their employers.

similarities and differences between the two types of pension or retirement plan that the Employee Retirement Income Security Act (ERISA):

A Simplified Employee Pension Plan (SEP) is a relatively uncomplicated retirement savings vehicle. A SEP allows employees to make contributions on a tax-favored basis to individual retirement accounts (IRAs) owned by the employees. SEPs are subject to minimal reporting and disclosure requirements. Under a SEP, an employee must set up an IRA to accept the employer's contributions. Employers may no longer set up Salary Reduction SEPs.

However, employers are permitted to establish SIMPLE IRA plans with salary reduction contributions. If an employer had a salary reduction SEP, the employer may continue to allow salary reduction contributions to the plan.

Pension Benefit Guaranty Corporation (PBGC) benefit plan promises a specified monthly benefit at retirement. The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement. Or, more commonly, it may calculate a benefit through a plan formula that considers such factors as salary and service - for example, 1 percent of average salary for the last 5 years of employment for every year of service with an employer. The benefits in most traditional defined benefit plans are protected, within certain limitations, by federal insurance provided through the Pension Benefit Guaranty Corporation (PBGC).

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