Why do private companies need a retirement program?
Simply stated, because of R.A. 7641, otherwise known as the New Retirement Law.
How does this law affect the company?
R.A. 7641 mandates that all private companies provide retirement benefits to its employees who have reached the age of 60 and has rendered at least 5 years of service. The total amount shall be computed as 22.5 days (75%) of an employee’s basic salary multiplied by the number of years rendered to the company.
What if the company already has an existing retirement program?
If the retirement program was already in place before January 1993, it would have been rendered obsolete because it could not have met the requirements of R.A. 7641.
How can the AMA Retirement Program help the company?
The PLAN can be used by the company to build funds to fulfill its future financial obligations. The program provides guaranteed returns sufficient to meet future money needs for retiring employees based on R.A. 7641, since all provisions of the Retirement Law have been taken into consideration.
The company is assured of meeting projected retirement benefits in that the PLAN expresses its maturity in terms of fixed cash benefits. From the start, the company is aware of how much it is going to get, as against other retirement programs which do not specify the amount since it is dependent on the employee’s salary, percent contribution and the year of hiring.
With limited payment period, the company is relieved of the financial burden of the retirement premium of the employee as early as possible. Other programs require payments until the employee’s retirement age.
The PLAN is very flexible in that periodic upgrading is possible to ensure attainment of fund requirements in case of wage hikes or any changes in the economic environment.