Written by Mario Ritter

I’m Steve Ember with the VOA Special English Economics Report.

Many workers depend on plans offered by their employers to help pay for their retirement.  There are two major kinds of retirement plans.  One is defined by what is paid out, the other by what is paid in.

The first is called a defined benefit plan, or pension.  It provides set payments based on the number of years an employee has worked.  These plans often pay for health care and other costs.  They might also provide money to family members when the pensioner dies. 

Pensions, however, can be a big cost to employers.  In the United States, the change from a manufacturing economy to a service economy has resulted in fewer and fewer traditional plans.

In nineteen seventy-four, the Employment Retirement Income Act set rules to protect pensions.  That law also created a federal agency called the Pension Benefit Guaranty Corporation. 

On Thursday its executive director announced that he will leave at the end of May.  Bradley Belt has led the Pension Benefit Guaranty Corporation for two years.  During that period the agency had to deal with a record level of pension plan failures. 

As a result, it is now responsible for the current and future pensions of more than one million workers.  At the end of last September, it reported a deficit of almost twenty-three thousand million dollars in its single-employer insurance program.

The agency takes control of pensions that do not have enough money to pay claims.  It currently guarantees thirty thousand plans.  Forty-four million Americans are in these plans.  But there are limits to how much they can receive if their pension fails. 

The other major kind of retirement plan is called a defined contribution plan.  Two things define how much a worker will get at retirement.  The first is how much both the worker and the employer paid into the plan.  The other is the performance of its investments. 

One popular version is a four-oh-one-k plan, named after a part of the tax law.  It offers investments for workers to put money into.  Their employer usually adds to the savings. 

Defined contribution plans can reduce the taxes of workers and employers.

But some plans are very complex.  An easier way for small employers to offer retirement savings is through a Savings Incentive Match Plan.  It permits contributions of up to ten thousand dollars a year toward retirement.

This VOA Special English Economics Report was written by Mario Ritter.  Read and listen to our reports at voaspecialenglish.com.  I'm Steve Ember.