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Module III - Retirement Planning and Employee Benefits
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COURSE DESCRIPTION: This module would cover the knowledge requirements relating to retirement planning and employee benefits for a CFPCM professional. The emphasis is on the process of wealth creation and the retirement planning and strategies for clients.
Introduction to Retirement Planning
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Issues in retirement planning |
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a. Importance of retirement planning |
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b. Life expectancy and career stability |
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c. Pre-retirement counseling |
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2
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Wealth creation |
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a. Wealth accumulation and erosion |
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b. Early retirement, living longer than expected, delaying retirement |
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c. Effect of inflation |
Retirement Benefits
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3
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Types of plans |
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a. Defined benefit plans |
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b. Defined contribution plans |
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c. Defined benefits v/s defined contribution plans, employer’s and employee’s perspectives |
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d. Trends and reasons for transition |
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e. Portability of plans |
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4
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Defined benefit plans |
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a. Gratuity and the Payment of Gratuity Act, 1972 |
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b. Leave Salary |
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c. Retrenchment compensation and the Industrial Disputes Act, 1947 |
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d. Voluntary Retirement Scheme |
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e. Nature of defined benefit, tax issues in defined benefit plans, age/service requirements, applicability of plans to clients |
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5
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Defined contribution plans |
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a. Statutory provident fund, Provident Fund Act, 1925 |
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b. Recognized provident fund, Employee Provident Fund and Miscellaneous Provisions Act, 1952, Employees’ Provident Fund Organization, features, mode of operation and investment norms |
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c. Unrecognized provident fund |
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d. Employees’ Pension Scheme, 1995, features, funding of scheme |
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e. Employees’ Deposit Linked Insurance Scheme, 1976, features, funding of scheme |
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f. Public Provident Fund, features |
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g. Nature of defined contribution, tax issues in defined contribution plans, withdrawal norms, applicability of plans to clients
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6
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Superannuation and other retirement plans |
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a. Trust funds – fiduciary responsibilities |
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b. Approved superannuation funds |
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c. Employer pension plans and applicability to client |
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d. Private fund managers, investment norms |
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e. Pension plans from mutual funds and insurance companies |
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f. Social security benefits – civil servants, defense personnel and war widows, agricultural workers, destitute, disaster affected people, etc. |
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g. Retirement plans for self-employed |
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h. Profit sharing plans |
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7
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Group Life and Health Insurance |
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a. Group insurance contracts and characteristics
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b. Basic underwriting principles and eligibility requirements of group plans |
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c. Group life insurance plans |
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d. Group medical insurance plans and managed care |
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e. Group disability-income plans |
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f. Workers compensation |
Retirement Planning and Strategies
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8
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Retirement needs analysis |
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a. Determination of financial objectives at retirement |
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b. Estimating retirement expenses |
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c. Calculation of retirement funds available to meet objectives |
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d. Calculation of additional funds needed to meet objectives |
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9
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Retirement income streams |
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a. Employer pension scheme |
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b. Commuted and uncommuted pension, tax treatment, advice on commutation |
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c. Immediate and deferred annuities |
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d. Other income streams and their tax treatment – fixed deposits, rental income, schemes from Indian Savings Organization, monthly income plans |
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10
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Post-retirement counseling |
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a. Investment risk and constraints
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b. Investment portfolio evaluation, restructuring of investments or debt |
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c. Risk tolerance and attitude to equities |
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d. Client’s health, interests and hobbies, home, vacations, gifting |
Pension Sector Reforms
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11
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Need for reforms |
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a. Demographic trends
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b. Coverage of population, organized and unorganized sectors, employment trends |
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c. Un-funded pension liabilities |
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d. Deficiencies in existing schemes |
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12
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Reform proposals |
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a. Project OASIS and its recommendations
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b. World Bank’s recommendations, multi-pillar reforms, Chilean model |
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c. Pensions Authority |
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d. The role of the state – developmental state (East Asia), welfare state (Europe and North America), minimalist state (Europe and North America) |
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