RRHH Digital Also called Retirement Plan and generally tax exempt, refers to a common fund set aside for an employees future benefit which is then invested on the employees behalf. This agreement allows the employee to receive benefits upon retirement by transferring part of his/her current salary toward retirement income.
There are two basic types of pension plans:
Defined-benefit plans: the employer pays the employee a fixed monthly amount depending on the employees length of service and salary history to guarantee a benefit upon retirement.
Defined-contribution plans: predefined contribution where the employee defers a percentage of his/her salary into the plan and the employer matches it.
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