Pensions

Pension benefits are a critical component of income security for retired workers. In the broadest terms, a pension program is any program that has been established in which a worker earns a benefit that will provide income during retirement. Favorable tax treatment dating back to 1921 encouraged the development of the U.S. pension system. An employer, trade union, or the government may establish pension plans, which are generally one of two main types: defined benefit (DB) and defined contribution (DC). This entry defines DB plans and DC plans, compares their strengths and weaknesses, and further explores the social and ethical reasons for establishing such plans.