What Are Some Examples of Retirement Pension Programs in the United States?


Quick Answer

There are two main types of retirement pension plans: defined benefit plans and defined contribution plans, as stated by the United States Department of Labor. A benefit plan ensures specific benefits upon retiring and a contribution plan requires the employer to contribute in part to the retirement plan. Each is covered by the Employee Retirement Income Security Act.

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Full Answer

Not all employers offer a retirement plan, but many do, especially for full-time employees. There are many different types of pension plans that employers can offer to their employees.

  • Simplified Employee Pension Plan: Employees set up a tax-favored IRA to make contributions towards and the employer may also make contributions.
  • Profit Sharing Plan: Employers contribute a portion of their business profits to each employee participating in the plan on an annual basis.
  • Employee Stock Ownership: Employers provide employees with a certain amount of stock annually.
  • Money Purchase Pension Plan: An employer makes fixed annual contributions to an employee's individual account.
  • Cash Balance Plan: The employer places a 'pay credit' and an 'interest credit' in the employee's retirement account each year. The interest credit can vary from year to year and is tied to an investment of some type.
  • 401K Plan: A retirement account that the employee and employer can contribute to a 401K and it isn't taxed until employers start taking out distributions at retirement, according to the IRS.
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