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To be clear folks, up until this week, the bank had two retirement benefits: a 401-k and a Pension plan.
Similar to other companies, they contributed a matching amount to the 401k and then contributed an amount equal to 4% of your income to your pension fund. Employees had no control over how the pension contribution was managed, and it didn't grow at a very hi rate of return.
Wait.. If it is a true defined pension plan, you don't have to worry about growth rates or what the employer contributes to the plan. Instead, it pays out a defined amount based on some combination of age, length of service and income. You are paid this income for life. It is the employer's job to run a pension plan fund to make this possible.
A pension has some additional advantages. There are no tax penalties for early retirement and many states, including NC, simply exclude part or all of a pension payment from income tax. They don't do this for a 401K.
Most companies will match up to 6% 50 cents on the dollar (or there about..)
Just curious, how much is BofA contributing totally now?
It's in the news article: "Instead, the Charlotte bank will begin contributing 2 to 3 percent of an employee's salary to his or her 401(k) in addition to the standard match of 5 percent of an employee's contributions."
So looks like the max is 8%, assuming the employee is contributing 5%.
Do employees have choice to participate in pension and how much of pay is typically taken out and how much is matched? I don't know too much about pension plans, can someone explain versus 401 ?
Do employees have choice to participate in pension and how much of pay is typically taken out and how much is matched? I don't know too much about pension plans, can someone explain versus 401 ?
It's a defined benefit, meaning employees get a certain percentage of their salary each month after retirement based on how many years they worked for the company. Usually you have to work 5 years to become vested in the plan. If you leave before then, I think you get the cash you put in back.
In NC state and local government, employees are required to contribute 6% of their salary to the plan. If you have 35 years, you get half the salary of the average of your last four years. You get a lower percentage for fewer years on the job.
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