pension plan

Related Terms
Scheme under which retirement benefits accrue and are distributed to the beneficiary employees. Its two basic types are (1) Deferred compensation plan in which an employer pays a fixed monthly pension depending on the employee's retirement age, length of service, and last salary received. It may also be paid to a deceased employee's surviving spouse. (2) Defined contribution plan in which the employee contributes a percentage of salary every month and the employer matches it. Upon retirement the employee receives the combined sum. Also called pension scheme.

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