A pension plan is a type of retirement plan that provides a steady source of income to employees after they retire from their job. It is a form of savings for the future and acts as a supplement to government-provided retirement benefits. Employers typically contribute to the pension plan on behalf of their employees, with some plans also allowing employees to make contributions. The funds in a pension plan are invested in various assets, such as stocks and bonds, with the goal of generating a return on investment that will provide stable income for retirees.

One of the main benefits of a pension plan is the potential for a guaranteed income during retirement. Unlike other retirement savings options, such as 401(k)s, the income from a pension plan is not dependent on market fluctuations. This makes it a reliable source of income for retirees who may not have other significant savings or investments.

It is important for employees to understand the basic structure and benefits of their pension plan. This can include knowing how much their employer contributes, when they are eligible to receive benefits, and the various payout options available. By having a clear understanding of their pension plan, employees can better plan for their retirement and make informed decisions about their financial future.