What is an Unfunded Pension Plan?
A pension plan is a retirement plan set up by a company, which guarantees a dollar amount paid per month based on the number of years an employee worked with the company. Usually employees must work 20-30 years before being able to collect a pension. Employees make contributions to their pension, or take a slightly lower wage in order to be able to collect a pension at a later date. When you have an unfunded pension plan, this means that the company didn’t make any savings over the year to cover employees now receiving a pension. It also means that contributions made by current employees are being used to pay the pension of current retirees. This can be a dangerous situation for the person collecting a pension from the unfunded pension plan. If anything happens to the company, or current contributions to the plan drop, or if the workforce is diminished, the company has no way to continue to make pension payments. Another issue at hand is that current employee contributions to an unfund
A pension plan is a retirement plan set up by a company, which guarantees a dollar amount paid per month based on the number of years an employee worked with the company. Usually employees must work 20-30 years before being able to collect a pension. Employees make contributions to their pension, or take a slightly lower wage in order to be able to collect a pension at a later date. When you have an unfunded pension plan, this means that the company didnt make any savings over the year to cover employees now receiving a pension. It also means that contributions made by current employees are being used to pay the pension of current retirees. This can be a dangerous situation for the person collecting a pension from the unfunded pension plan. If anything happens to the company, or current contributions to the plan drop, or if the workforce is diminished, the company has no way to continue to make pension payments. Another issue at hand is that current employee contributions to an unfunde
