Corporate Pension Plan
A formal arrangement between a company and its employees - or the union that represents them - that provides funding for the employees' retirements. 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.
A corporate pension plan could, technically, refer to any arrangement that an employer makes with its employees to pay for their retirement. However, the term is most often used to describe defined-benefit plans, which are a type of corporate pension plan.
Investopedia Commentary
Corporate pension plans are hotly debated because many of them are thought to be drastically underfunded. Many of the assumptions upon which the allocation of pension funds was originally based have proven to be incorrect the expected rates of return on invested plan assets have not been realized and employees are living much longer than plan assumptions had anticipated. Many corporate pension plans promise to fund the living requirements of retired employees until they die and, as a result, financing them can put a strain on corporations.
Related Links
Analyzing Pension Risk
How To Evaluate Pension Risk By Analyzing Annual Costs
Making Salary Deferral Contributions - Part 1
Making Salary Deferral Contributions - Part 2
See also: Defined-Benefit Plan, Defined-Contribution Plan, Employee Benefits Security Administration - EBSA, Pension Benefit Guaranty Corporation - PBGC, Pension Fund, Pension Shortfall