How does a medium size company start a pension plan?
In: Economics
These days pension funds are usually managed by 3rd parties.
This way the pension fund is kept separate from the finances of the company paying into it.
The last thing you want is the company to be in financial trouble and borrow from the pension fund like what Sears did surreptitiously (by convincing the pension fund to buy Sears stock despite knowing the company was on the way down) thereby screwing over the workers and retirees in the process.
Many insurance companies have diversified into running retirement savings programs and pension funds because it can be pretty lucrative. You are potentially managing a stock portfolio worth billions.
If a company wants to provide a pension plan for employees they can sign up for such a program with a provider. For small and medium businesses this is attractive because the pension fund is pooled with the money from a lot of other companies.
They don’t, and often can’t.
They engage existing, licenced, regulated, professional pension companies and offer whatever that company offers on to its employees.
Pensions are a highly-regulated industry and starting a new pension company requires huge investments, insurances, many staff, and a ton of experience, expertise and regulatory checks (i.e. what they are and are not allowed to do with the money they are given for pensions, and what they can and can’t promise in return when people retire).
No company I know of is setting up their own pensions.
They just ring up a few pension providers and they are literally “sold” a pension plan through those companies, which they offer to staff.
Well, you got to have a lot of old folks retire, then give them money to stay away from work. It’s kind a like getting fired but they pay you to stay away now.
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