[pic]provides replacement for salary when a person is no longer working. In the case of a defined put on reward plan, the employer or union contributes to the plan, which pays a predetermined gather for the rest of the employees life based on space of service and salary. Payments whitethorn be made either at once or through an annuity. premium payments are taxable income to recipients in the year received. The employer or union has fiduciary responsibility to seat the pension funds in stocks, bonds, real estate, and other assets; net a satisfactory rate of return; and make payments to retired workers. Pension funds holding trillions of dollars are one of the largest investment forces in the stock, bond, and real estate markets. If the employer defaults, pension plan payments are unremarkably guaranteed by the pension benefit guaranty corporation (PBGC).
In the case of a defined contribution pension plan, such(prenominal) as a 401(k) or 403(b) plan, employees choose whether or not to contribute to the plan offered by the employer, who may or may not match employee contributions. Pension benefits are determined by the amount of assets built up by the employee during his or her days of contributions. Self-employed individuals can also set up pension plans such as keogh plans. An individual retirement account (IRA) is a form of pension plan. See also vesting.
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