Pension+Plans

Pension Plan Fact Sheet DEFINITION: A pension is a steady income given to a person (usually after retirement). Pensions are typically payments made in the form of a guaranteed __annuity__ to a retired or disabled employee. Some __retirement plan__ (or //superannuation)// designs accumulate a cash balance (through a variety of mechanisms) that a retiree can draw upon at retirement, rather than promising annuity payments. These are often also //called pensions. In// either case, a pension created by an employer for the benefit of an employee is commonly referred to as an occupational or employer pension. Labor unions, the government, or other organizations may also fund pensions. __ 401 (k) __ More and more employees are investing in their futures through 401(k) plans. Employees who participate in 401(k) plans assume responsibility for their retirement income by contributing part of their salary and, in many instances, by directing their own investments. Apart from fees charged for administration of the plan itself, there are three basic types of fees that may be charged in connection with investment alternatives in a 401(k) plan. **Sales charges (also known as loads or commissions).** These are basically transaction costs for the buying and selling of shares. **Management fees (also known as** ** investment advisory fees or account maintenance fees). ** These are ongoing charges for managing the assets of the investment fund. They are generally stated as a percentage of the amount of assets invested in the fund. **Other fees.** This category covers services, such as record keeping, furnishing statements, toll-free telephone numbers and investment advice, involved in the day-to-day management of investment products. **Mutual Funds** - Mutual funds pool and invest the money of many people. Each investor owns shares in the mutual fund that represent a part of the mutual fund's holdings. The portfolio of securities held by a mutual fund is managed by a professional investment adviser following a specific investment policy. In 2001, of those who had 401(k) coverage available, 30 percent didn't participate. **The Employee Benefits Security Administration (EBSA)** makes available through its Public Disclosure Room certain employee benefit plan documents and other materials required by the Employee Retirement Income Security Act of 1974 (ERISA). ERISA is a Federal law that is designed to protect the rights of millions of American workers and beneficiaries in private-sector pension plans, group health plans, and certain other employee benefit plans.
 * Collective Investment Funds ** - A collective investment fund is a trust fund managed by a bank or trust company that pools investments of 401 (k) plans and other similar investors. Each investor has a proportionate interest in the trust fund assets. ** Variable Annuities ** - Insurance companies frequently offer a range of investment alternatives for 401(k) plans through a group variable annuity contract between an insurance company and an employer on behalf of a plan. The variable annuity contract "wraps" around investment alternatives, often a number of mutual funds. ** Public form of pension plans: ** Social Security pays the average retiree about 40 percent of pre-retirement earnings.