A couple firsts for 2012 this week; Major League Baseball held its opening day in Japan and GBQ hosted our first quarterly Japanese Business Services seminar!
On March 28, 2012, as part of the Japanese Business Services seminar, GBQ’s Mike Kozlowski, Director, Assurance & Business Advisory Services, and Akio Seino, Director, Japanese Business Services presented the basics for 401(k) plans.
In the past, Defined Benefit Plans were the norm for employee retirement plans with their guaranteed retirement benefits. However, as contributions generally come from the employer and are impacted by investment returns, these options have become very expensive for employers. Plans are being frozen, with no newly hired employees being able to participate, or terminated altogether.
But the fall of the Defined Benefit Plan has seen the rise of the Defined Contribution Plan, or the 401(k) plan. The costs of retirement are now being shared between employer and employee. Instead of being guaranteed amounts, 401(k) retirement benefits are dependent upon individual employee and employer contributions, and investment returns. Employees can opt to contribute a percentage of pay, set a dollar amount per pay, and are allowed flexibility in changing amounts. Employers can offer matching contributions based upon a predetermined or discretionary formula and can add a discretionary profit sharing contribution.
Key advantages and disadvantages were discussed.
Advantages of the 401(k) Plan:
Disadvantages of the 401(k) Plan:
The Japanese retirement plan is also called 401K. However, there are a few important differences from the U.S. plan. No withdrawals are allowed until the individual is at least 60 years old. There are no individual contributions. And there is a lower maximum contribution amount at 23,000 Yen/month with other corporate plan or 46,000 Yen/month without other corporate plan.
* Thank you to Kyle Culver, Assurance Staff for his contributions to this post.