Assignment:
Legal Environment
Role played by Social Security in employee retirement
Social security is mostly known to provide financial support to the retired workers. Social security does not only provide monetary support for the retired workers, but also for the survivors of employees that pass on before retirement. The program also provides disability compensation for employees that becomes unable to earn a living. If the employee has any dependents are eligible for this financial support. The main role of social security is to make sure that the future of an active member is secured from financial constraints that may come on his way after retirement (Young, 2010).
The program is based on contributions that active members make into the program during the working life. For someone to qualify for social security program you require a maximum of 40 credits although the extra credits that may be earned does not in any way increase the amount of benefits. The financial benefits that an individual receives are based on their average indexed monthly earnings which depends on a number of factors such as the number of years an individual have worked under the social security cover, wages index and the salary for the job (Ruschmann&Nasiatka, 2011).
Relationship between FICA, ERISA, and Social Security
Federal Insurance Contributions Act (FICA) is federal law that requires employees and employers to withhold two separate taxes from the wages earned. The two different axes are added together at flat rate percentage and treated as a single amount known as payroll taxes or FICA. The two taxes pay for both social security benefits and Medicare health insurance. It is evident that social security is funded mainly through federal insurance contributions act tax. Social security is therefore a component of federal insurance contributions act tax(Gonzalez, 2010).
Employee retirement income security act gives divorced spouses and spouses the rights to an employee's pension plan. The relationship between this act and the social security is that they both offer some benefit to the survivor (divorced spouse). Nonetheless, the divorced spouse must have been married for atleast 10 years, entitled to higher retirement benefits on their own records and presently unmarried for them to receive the social security benefits.
Real world examples of retirement planning programs
University of California retirement plan is an optional retirement program that offers two choices- pension choice and savings choice. The retirement benefit for an individual on this plan is based on the number of years of service in the University of California, age and the highest average 36 consecutive months of pay(Gonzalez, 2010).
California public employees' retirement system is another form of retirement program that covers the majority of the public employees of California State. It provides benefits to all state government workers and to school employees. It acts to supplement the social security.
Example of fiduciary responsibility under ERISA
A fiduciary has a duty to act prudently in accordance with the retirement plan documents. It is one of a fiduciary's major responsibilities under ERISA. It needs experience in different areas, including investments. The lack of relevant experience will require a fiduciary to hire an individual with professional knowledge to oversee the investments and other functions of the retirement plan(Gonzalez, 2010).
References
Gonzalez, L. C. M. (2010). Is Our Healthcare System Good Enough to Take Care of Our Elderly-An Epidemiological and Legal Approach to Aging and the Benefits of Social Security, Medicare, Medicaid, and ERISA in Puerto Rico. Rev. Jur. UPR, 79, 125.
Ruschmann, P., &Nasiatka, M. (2011).Social security. New York: Chelsea House.
Young, M. (2010).Social security. Detroit: Greenhaven Press.