If you have a fully-funded pension plan, you are in relatively safe hands. That means your pension plan has a sufficient amount of assets required to provide all benefits accrued in the plan. A fully-funded pension plan must be able to make all expected payments to you. This type of plan is most common among private-sector employers.
How it Works
A fully-funded pension plan is supported by your employer. The company will provide all funds throughout your working years. Nothing is deducted out of your salary to fund the pension plan. The plan is dependent on its return on investment in order to be stable. Your company should provide statements which will assist you in determining the overall financial health of your plan.
While there are advantages to a fully-funded pension plan, the top pro is the fact that you as the employee do not have to pay into your pension plan -- it is all funded by your employer. You don't need to manage the fund either. A fund manager will look after it, making investments as he sees fit. The manager will usually look after the funds of everyone in the company. Another advantage here is the fact that you will know how much money you will get in retirement since payouts are determined by length of service to the company.
In contrast to the fully-funded plan, there is the pay-as-you-go plan. In the latter, you have far more control. You decide how much will be contributed to the plan (however, the money is contributed by you), how it will be invested (meaning you are responsible for its gains and losses), and you can choose how to receive payouts upon retirement (as a lump sum or monthly installments, for example).
Private Sector Initiative
It is uncommon to find fully-funded pension plans in the public sector, making this type of plan usually only available to private-sector employees. In "Should Public Retirement Plans be Fully Funded?" -- a paper written by Henning Bohn from the University of California Santa Barbra -- the author believes that this venture is not responsible to taxpayers, since they would be paying taxes on an investment with a relatively small return, while they face high-interest fees in other areas. So those who work in the public sector should consider the fact they won't have access to this type of fund.
How Much Money Can You Put Into a 529 Plan?
A 529 college savings plan is an investment account that allows you to save for your or your child's college education. Maximum...
Is an Annuity the Same As a Pension?
Annuities are insurance policies that function as long-term retirement savings vehicles and may also guarantee you an income at retirement, depending on...
Accrued Pension Benefits
Pension plans are retirement plans funded entirely by your employer for your benefit. Accrued pension benefits represent the total amount of money...