13-3. Retirement benefits are important to employees today. Social Security is a federal program that provides retirement income at the age of 62 and thereafter, as well as other benefits.

Many employers make available pension plans;

these provide an income when employees reach retirement age or when they can no longer work due to disability. Defined benefit plans contain a formula for determining retirement benefits, while defined contribution plans are plans in which the contribution to employees’
retirement savings plans is specified. The most well-known of the latter are 401(k) plans. The Employee Retirement Income Security Act of 1975 requires that employers have written pension plan documents, and established the Pension Benefits Guarantee Corporation to oversee employers’ pension plans. Key pension policy issues include membership requirements and testing.