Corporate Pension Plan

AAA

DEFINITION of 'Corporate Pension Plan'

A formal arrangement between a company and its employees - or the employees' union - that provides funding for the employees' retirement. This pool of funds can be financed in several ways and will eventually be used to make periodic payments to retired employees. In most cases, both employer and employees make regular contributions to the plan. In the past, employers were wholly responsible for contributing to the plan based on an employee's work, length of employment and position held.

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.

RELATED TERMS
  1. Statement Of Changes In Net Assets ...

    An income statement that identifies any transactions that alter ...
  2. Benefit Allocation Method

    The benefit allocation method is a means of funding a pension ...
  3. Central Provident Fund - CPF

    A mandatory benefit account set up to provide Singaporeans with ...
  4. Leveraged Employee Stock Ownership ...

    An equity compensation system in which the sponsoring company ...
  5. Funded Status

    The status of pension plan that has accumulated assets that have ...
  6. Employee Benefits Security Administration ...

    A division of the Department of Labor (DOL) charged with enforcing ...
Related Articles
  1. 3 Reasons To Use An Employer-Sponsored ...
    Retirement

    3 Reasons To Use An Employer-Sponsored ...

  2. 3 Common Excuses For Not Contributing ...
    Savings

    3 Common Excuses For Not Contributing ...

  3. Pension Plans: Pain Or Pleasure?
    Retirement

    Pension Plans: Pain Or Pleasure?

  4. Retire In Style
    Savings

    Retire In Style

Hot Definitions
  1. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  2. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  3. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  4. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  5. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  6. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
Trading Center