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Investopedia explains 'Corporate Pension Plan'
Two of the most common corporate pension plans are the defined-benefit and defined-contribution plans. With defined-benefit plans, employee retirement benefits are calculated according to a formula, usually based on duration of employment and salary history, and it is the employer's responsibility to come up with the necessary cash to fund the plan. Defined-contribution plans, on the other hand, offer no guarantee on the amount of benefit that an employee will receive at retirement; the payout from this plan rests solely on the success of the investment plan.
Many corporate pension plans promise to fund the living requirements of retired employees until they die. Not surprisingly, financing them can put a strain on corporations. As a result, many companies are changing their pension plans from defined benefit to defined contribution.
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