pension plan

A plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees, or their beneficiaries, over a period of years (usually for life) after retirement. Retirement benefits are measured by, and based on, such factors as years of service and compensation received by the employees. The Employee Retirement Income Security Act (ERISA) governs plan qualification, operation, and administration, and specifically such matters as participation requirements, funding, vesting and filing and reporting with the Internal Revenue Service and Labor Department.

Pension benefits under qualified plans are guaranteed by the Pension Benefit Guaranty Corporation. A stated allowance out of the public treasury granted by government to an individual, or to his representatives, for his valuable services to the country, or in compensation for loss or damage sustained by him in the public service. Frisbie v. U. S., 157 U.S. 160, 15 S.Ct. 586, 39 L.Ed. 657.

See also individual retirement account

- Keogh Plan

- money-purchase plan

- pension trust.

@ contributory pension plan

A plan funded with both employer and employee contributions.

@ defined-contribution plan

Pension plan that provides benefits as determined by the accumulated contributions and the return on the fund's investment performance; the contributions are specified, but the benefits are not.

@ defined pension plan

A pension plan where the employer promises specific benefits to each employee. The employer's cash contributions and pension expense are adjusted in relation to investment performance of the pension fund. Sometimes called a "fixed-benefit" pension plan.

@

- funded pension plan (funded)

@ noncontributory plan

A pension plan where only the employer makes payments to fund the plan

Compare contributory pension plan.

@ qualified pension plan

An employer-sponsored plan that meets the requirements of I.R.C. No. 401. If these requirements are met, none of the employer's contributions to the plan are taxed to the employee until distributed to him or her [No. 402]. The employer will be allowed a deduction in the year the contributions are made [No. 404]

@ pension trust

Type of funded pension plan in which the employer transfers to trustees an amount sufficient to cover cost of pensions to employees who are the beneficiaries of the trust

@