Companies wishing to take advantage of the tax privileges that come with a formal retirement plan must first set up the plan and then file it with the BIR for tax exemption.
The following steps describe the process of creating a retirement plan and securing a tax qualification with this plan:
Design the basic provisions of the retirement plan.
In this step, the company must decide the retirement benefits to be paid and the corresponding eligibility requirements in terms of age and service years. If the company is uncertain at this point as to what benefits to provide, it may consider simply providing the minimum benefit under Republic Act (RA) 7641. This way, the company allows itself the future option of increasing the minimum benefit, should it wish to do so, while already availing of the tax benefits of having a formal retirement plan.
Draft the Retirement Plan Rules and Regulations incorporating final provisions.
These Plan Rules will consist of about 9–10 pages because they will also include a number of standard provisions required by the Bureau of Internal Revenue (BIR).
Perform an actuarial valuation.
The actuarial valuation calculates the recommended contributions to support the benefits defined in the above plan rules. The output from this step is therefore the actuarial report, which is one of the documentary requirements filed with the retirement plan.
Prepare all of the documents required for filing and then submit the same to the BIR.
After processing, the BIR issues an approval letter for the retirement plan.