Pension Plan - King Of Pensions

Enticing compensation packages are offered in effort to benefit your pension plan.

The Pension Plan is divided into two major categories: qualified (or tax-qualified) and nonqualified plans.

Qualified plans are also divided into two categories: Defined benefit plans.

In this type of plan, an employer pays a retired employee a fixed amount, based on a formula that includes such factors as: employee's age, earnings, and years of service. Most employers fund their plans by placing money in dedicated investment funds controlled by professional money managers.

Defined contribution plans.

In this plan, employees contribute to their own pension plan accounts and assume a share of the investment risk. In some cases, the employer also contributes to the pension plan, usually by matching the employee's contribution. Some of the most popular retirement plans, including 401(k) plans, fall into this category.

Pension Plan Guarantees

Defined benefit plans provide a safety net: if an employer can no longer fund its pension plan, the federal Pension Benefit Guaranty Corporation (PBGC) can step in and take over the plan. The PBGC collects insurance premiums from employers who offer defined benefit plans; in return, the government guarantees that pension recipients will continue to receive their pension plan benefits.