An early retirement incentive program or ERIP is an employer sponsored plan which provides special benefits or incentives to an employee who makes the decision to retire sooner than they had otherwise planned.
However, more often than not such a program is offered to those employees who are close to retirement age, but in fact there is no actual minimum age requirement. Many companies will often adopt an early retirement incentive program in order to get those employees at the top of the pay scale to retire sooner. However, another company may adopt this program in order to avoid or reduce the number of involuntary redundancies that may have to take place because of financial constraints on the business. Sometimes an early retirement incentive program may be offered to the whole company, who it may be limited to particular employees within the company say in a particular department or those who work in a certain position within the company.
In the US there is a law governing early retirement incentives which have the following guidelines which companies need to follow:-
1. The program needs to be in effect for at least one year.
2. The employees that take part must be at least 50 years of age in order to participate.
3. Any employee that is eligible must be given the opportunity to participate in the program.
4. The amount of service credit that is purchased must be uniformly determined and it can not exceed five years or one fifth of the member's total service credit or whichever is the lesser.
5. No one can purchase a partial years credit.
6. Employees of a company must already qualify to retire or they will qualify with the purchase of credit.
7. It is important to note that the total cost for the service credit is to be paid by the employer.
In some cases may provide an early retirement incentive program as an optional extra and in these cases then it is important that you consider carefully whether you wish to take this option up or not. However, if it is not optional then there will be no decision to be made by you.
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