Professional Documents
Culture Documents
Pension funds (PFs) offer savings plans through which participants accumulate tax
deferred savings during their working years before withdrawing them in their
retirement years
-Pension funds are saving plans kung san yung mga employees/participants is iniipon lahat
ng savings nila throughout their working years until their retirement. Usually, both the
employee and employer is parehas na hinuhulugan yung savings at yung retirement fee na
matatanggap mo is depended sa kung gaano ka katagal na nagtrabaho dun sa company.
PFs were first established in the U.S. in 1759 to benefit the widows and children of
church ministers
-Pension funds were first established sa US noong 1759. Ang purpose is para mabigyan ng
any amount or makatanggap ng benefit ang mga naiwang asawa at anak ng mga namatay
na church ministers.
Merong two sectors and Pension Funds. Ito ay Private and Public PFs.
–Public PFs are funds administered by federal, state, or local governments (e.g., Social
Security
-Public funds on the other hand is for employees working for the state, local governments.
Example is yung mga public teachers and military officers. Kung sa private pension funds,
mutual fungs or insurance company ang nag cacater, sa public merong SSS at GSIS.
Pension funds are broadly classified into two categories, defined benefit plans and defined
contribution plans
A defined benefit PF if a fund in which the employer agrees to provide the employee
with a specific cash benefit upon retirement
-Sa defined benefit plan, yung employer is mag poprovide ng specific amount or cash benefit
upon retirement. Yung amount nayun is specific and it should be accepted by the employee.
Under defined benefit pension funds, the employer should set aside sufficient funds to
ensure that it can meet the promised payments.
-Moreover, dito, yung employer lang yung mag poprovide or mag seset aside ng funds for
them to meet the promised amount upon retirement. Hence, yung employee is walang
icocontribute.
o a fully funded PF has sufficient funds available to meet all future payment
obligations
-fully funded PF meaning merong sufficient funds para ma-meet nung employer yung
pinangakong amount upon retirement.
o an underfunded PF does not have sufficient funds available to meet all future
promised payments
-dito naman, there is no sufficient funds para mameet yung future payments
o an overfunded PF has more than enough funds available to meet the required
future payouts
-kung sa defined benefit plan, may certain ‘amount’ na ibibigay upon retirement, meaning
nakafocus na sa benefit mismo pag nag retire ka. Sa defined contribution naman is mas
nakafocus sa contribution than the actual benefit. In short, yung employer, is magbibigay ng
specified amount of contribution for the pension fund during the working years of the
employee. Pwedeng monthly, or semi-anually or yearly contribution. And lahat ng yon, yung
accumulated amount ang ibibigay or matatanggap ng employee
.
o fixed-income funds offer a guaranteed rate of return
o with variable-income funds, all profits and losses on the underlying securities
are passed through to the fund participants
-sa variable income funds naman is the opposite of the fixed income funds kasi dito,
yung pension funds na matatanggap mo depends upon the profit or losses ng
insurance company or mutual funds. Paanong losses and profit? Yung funds kasi na
cinocontribute ng company na pinagtatarabuhan mo ay ilalagay yun sa mga
insurance companies or mutual funds in which gagamitin naman nila to invest.
Ngayon, kung magkaroon man ng gain or losses, sa variable income funds,
maapektuhan yung amount na matatanggap mo. Which is unlike sa fixed income
funds na kahit may losses or gain, fixed amount pa rin makukuha.
-dito administered ng life insurance company, which is good kasi mas safe yung funds mo
since it is insured
Private Pension Funds- created by private entities and administered by private corporations
-these are created by private financial institutions and is administered or private companies
yung gumagamit
-it is employer sponsored meaning it is the employer who supplements for the
plan and it is usually a basic retirement plan meaning
-dito, imbis na employer ang nag seset up, it is the employee itself. However,
it is still covered by employer-sponsored pension plans. Kumbaga, employer
pa rin magbabayad pero employee yung nag set up
Public Pension Funds - sponsored by the federal or state and local governments
-sponsored by federal state, meaning is is the government who pays for the funds
o -pwedeng employee or the state mismo ang mag set up ng accounts for
the local government employees
Employee Retirement Income Security Act (ERISA) of 1974 (also called the Pension
Reform Act) focus on five areas of reform
-this act is a protection para sa mga employees for their rights sa kanilang pension funds
o Funding – ERISA established guidelines for funding and set penalties for fund
deficiencies
-these are established guidelines na kailangan ifollow for funding at mga penalties rin for
fund deficiencies
o Vesting of Benefits – ERISA requires that a plan must have a minimum vesting
requirement.
-vesting requirements is parang ownership sa funds. Dito, it requires na each employee must
have a minimum vesting requirement. Kung fixed ang makukuha mong amount upon
retirement for 50 years, each year may makukuha kang percentage or owbership from the
whole amount.
-this applies to private corporations. Its use is to protect pension benefits in private sectors
and help to set amount of payment until retirement