What is Pension?

Legal Definition
A pension is a fund into which a sum of money is added during an employee's employment years, and from which payments are drawn to support the person's retirement from work in the form of periodic payments. A pension may be a "defined benefit plan" where a fixed sum is paid regularly to a person, or a "defined contribution plan" under which a fixed sum is invested and then becomes available at retirement age. Pensions should not be confused with severance pay; the former is usually paid in regular installments for life after retirement, while the latter is typically paid as a fixed amount after involuntary termination of employment prior to retirement.

The terms "retirement plan" and "superannuation" tend to refer to a pension granted upon retirement of the individual. Retirement plans may be set up by employers, insurance companies, the government or other institutions such as employer associations or trade unions. Called retirement plans in the United States, they are commonly known as pension schemes in the United Kingdom and Ireland and superannuation plans (or super) in Australia and New Zealand. Retirement pensions are typically in the form of a guaranteed life annuity, thus insuring against the risk of longevity.

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. Occupational pensions are a form of deferred compensation, usually advantageous to employee and employer for tax reasons. Many pensions also contain an additional insurance aspect, since they often will pay benefits to survivors or disabled beneficiaries. Other vehicles (certain lottery payouts, for example, or an annuity) may provide a similar stream of payments.

The common use of the term pension is to describe the payments a person receives upon retirement, usually under pre-determined legal or contractual terms. A recipient of a retirement pension is known as a pensioner or retiree.
-- Wikipedia
Legal Definition
Upon retirement many workers continue to receive monetary compensation from their employer in the form of a pension. There are two main types of pensions. Under a defined benefit plan, the benefit that an employee receives is normally based on the length of a workers employment and the wages that were received. Each employee does not have a separate account in these programs, as the money to support the pensions is generally administered through a trust established by the employer. In a defined contribution plan, the employer makes regular deposits into an account established for each employee. The employee is not guaranteed to receive a given amount during retirement but only the amount in the account.

Pensions are governed primarily by federal statutory law. Congress passed the Employee Retirement Income Security Act (ERISA) under its Constitutional mandate to regulate interstate commerce. See U.S. Constitution, Art. I, § 8. The act was passed in response to the mismanagement of funds in direct benefit plans. All employers who engage in interstate commerce and provide defined benefit plans to their employees must abide by ERISA guidelines. The provisions of ERISA do not apply to defined compensation plans.

ERISA is highly complicated and provides detailed regulations for many aspects of defined contribution plans. ERISA requires that employers provide both the Labor Department and its employees with detailed descriptions of the benefits they are to receive. It also outlines which employees must receive a pension if they are offered and requires that a percentage of the retirement benefits become vested in the employees after they have worked for a given number of years and/or have reached a given age. ERISA also requires that pension plans provide benefits to an employers survivors upon his death. The legislation also requires employers to adequately fund the program and establishes fiduciary responsibilities that must be adhered to. ERISA also establishes the Pension Benefit Guaranty Corporation to insure defined benefits plans. (PBGC). Employers must pay premiums so that their plans are covered by the PBGC. The termination of plans is also extensively regulated.

To encourage employers to provide pension plans that follow Congressionally-established guidelines such as ERISA Congress has authorized tax breaks to employers who follow the guidelines. Title 26 (the Internal Revenue Code) establishes numerous qualifications and requirements in order for an employer to receive special tax treatment. For example, pension plans must be vested and must meet minimum coverage requirements.
Legal Definition
A stated and certain allowance granted by the government to an individual, or those who represent him, for valuable services performed by him for the country. The government of the United States has, by general laws, granted pensions to revolutionary soldiers; vide 1 Story's Laws U. S. 68; 101, 224, 304, 363, 371, 451; 2 Id. 903, 915, 983, 1008, 1240; 3 Id. 1662, 1747, 1778, 1794, 1825, 1927; 4 Id. 2112, 2270, 2329, 2336, 2366; to naval officers and sailors; 1 Stor. L. U. S. 474, 677, 769; 2 Id. 1284 3 Id. 1565; to the army generally; 1 Id. 360, 412, 448; 2 Id. 833; 3 Id 1573 to the militia generally; 1 Id. 255, 360, 412, 488 2 Id. 1382; 3 Id. 1873; in the Seminole war, 3 Id. 1706.
-- Bouviers Law Dictionary
Legal Definition
A stated allowance out of the public treasury granted by government to an individual or to his representatives, for his valuable services to the country or in compensation for loss or damage sustained by him in the public service. Price v. Society for Savings, 64 Conn. 362, 30 Atl. 139, 42 Am. St. Rep. 198; Manning v. Spry, 121 Iowa, 191, 96 N. W. 873; Frisbie v. U. S„ 157 U. S. 160, 15 Sup. Ct. 586, 39 L. Ed. 657. In English practice. An annual payment made by each member of the inns of court. Cowell; Holthouse. Also an assembly of the members of the society of Gray's Inn, to consult of their affairs. In the civil, Scotch, and Spanish law. A rent; an .annual rent.
See also
-- Black's Law Dictionary
Legal Definition
The bounty of the government, which Congress has the right to give, withhold, distribute or recall, at its discretion. See 107 U. S. 64, 27 L. Ed. 352, 2 Sup. Ct. Rep. 39.
-- Ballentine's Law Dictionary