A pension plan is an employee benefit that commits the employer to make regular contributions to a pool of money that is set aside in order to fund payments made to eligible employees after they retire.
- A pension plan is a retirement plan that requires an employer to make contributions to a pool of funds set aside for a worker’s future benefit.
- There are two main types of pension plans: the defined benefit and the defined contribution plan.
- A defined benefit plan guarantees a set monthly payment for life (or a lump sum payment on retiring).
- A defined contribution plan creates an investment account that grows throughout the employee’s working years. The balance is available to the employee upon retiring.