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What Are Pension Funds

Pension Funds

Many corporations, as well as state and federal government agencies, promise their employees a pension plan upon retiring. The financial strain that this places on both the government and companies is substantial. An employer may be required to provide tens of thousands of dollars every year to retired employees that were promised retirement pension funds.

It is the employer's responsibility to adhere to the promises that were made to employers. It order to do this, it is essential for a company to establish a pension fund. Every corporation or government entity that provides its employees with pensions upon retirement has developed a pension fund. It is from this fund that retirees receive their monthly pension payments. If these pension funds are not adequate, an employer will experience difficulties paying his/her employees the agreed-upon finances, and as a result, may face adverse legal consequences.

A pension fund is a collection of financial assets which becomes its own legal entity. Again, an employer is responsible for establishing a pension fund to address the financial needs of his/her employees upon retirement. The monetary assets that are available in pension funds rely upon contributions that are made by both employees and employers, so that depending upon the type of pension plan with which an individual is provided, he/she may be required to contribute money to a pension fund.

In some instances, a portion of an employee's paycheck is reserved to be put towards his/her retirement fund. In other cases, an employee may have the option to contribute money to pension funds, but not the obligation. Likewise, an employer may be required to contribute a defined quantity of finances to pension funds, or he/she may be obligated to match the contributions of employees. The amounts an employer and an employee will be obligated to contribute to these funds varies a great deal depending upon the type of pension plan an employer issues. In most cases, pension funds are handled for employers by a y

NEXT: What Are The Public Employees Retirement Systems

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