401K and Stock Bonus Plan for Mt. Dale Corporation

401Kand Stock Bonus Plan for Mt. Dale Corporation

401Kand Stock Bonus Plan for Mt. Dale Corporation

Question1

Lookingat the Mt. Dale Corporation there is need to do something to make401k plan fairer owing to the rather different proportions of thecomposition of the company.The target group for this analysis ishighly compensated executives. Usually, the highly compensatedexecutives are known to contribute too much and it is fair to makethem have their contribution in line with the law. As an employer,first, will be setting a certain percent-of-pay limit in the plandocument and ensure that the contributions do not exceed (Huberman &ampSengmueller, 2004). Through this, there is certainty that the planindeed will pass its test. However, this must be taken sostrategically because the HCEs could easily miss the savingopportunities. The second important thing to do to ensure fairness isrun discrimination test projects mid-year to limit the variouscontributions of HCE. Through this strategy, the highly compensatedexecutives are able to contribute the most allowed using theconstraints that affect their plan (Huberman &amp Sengmueller,2004). Through the above plans or strategies, the unbalances that areoften witnessed in the HCEs part will be addressed.

Question2

Forthe stock bonus plan, there is little that can be done or nothing tomake it fairer for a given group of employees. Usually, for thestocks that are given to the employees are not part of their wagesrather they are benefits that make the jobs more appealing. Usually,the level of appealing of these benefits is commensurate with the paypackage. The pay packages of individuals are designed in accordanceto the responsibilities and the job designation. The various jobresponsibilities are reviewed from time to time to match the skills,education, and job description. Hence to make the plan fairer dependson a number of issues including the performance of the company. Onewould argue that unless, one group is found to contributesubstantially to the growth of the company then making suchadjustments would be a tall order.

References

Huberman,G., &amp Sengmueller, P. (2004). Performance and employer stock in401 (k) plans.&nbspReviewof Finance,&nbsp8(3),403-443.