Final answer:
Form 5500, which reports on retirement pension/profit sharing plans, is filed with the Department of Labor. It regulates and ensures proper management of pension plans, while penalizing firms for underfunding and informing employees about their retirement accounts. Defined contribution plans like 401(k)s are replacing traditional pension plans, offering tax deferral, investment opportunities, and portability.
Step-by-step explanation:
Annual reports on retirement pension/profit sharing plans, known as Form 5500, are filed with the Department of Labor.
The reporting requirement is an important aspect of ensuring that pension plans are managed properly and in the best interest of the employees.
It helps in regulating the pension plans, penalizing firms for underfunding their pension plans, and providing employees with more information about their pension accounts.
Defined contribution plans such as 401(k)s and 403(b)s have become more prevalent as they allow both employers and employees to contribute a fixed amount to the worker's retirement account, which is invested and is tax deferred.
The portability of these plans is beneficial as it follows the employee when they change employers, leading to potentially better outcomes with real rates of return, protecting retirees from the inflation costs suffered by those with traditional pension plans.