Pension Trust

What Does Pension Trust Mean?

A pension trust is an employee retirement fund funded by both the employer and the employee. The monetary contributions from both parties are entrusted to a legal trustee, who follows the accounting standards of the United States.

Before the funds are converted into retirement income, they may also be invested to maximize future withdrawals.

Insuranceopedia Explains Pension Trust

A pension trust involves three parties: the trustee, the employer, and the employee-beneficiary. The trustee is often a third-party entity, independent of the workplace, and is appointed solely to manage the trust. This arrangement relieves the employer of administrative responsibilities. The trustee is responsible for keeping both the employer and the employee informed of any developments related to the trust.

The trustee has legal and ethical obligations, including acting in the best interest of the beneficiary. Consequently, the trustee’s decisions are aimed at growing the trust’s funds while minimizing unnecessary risk. The trustee may invest the contributions prudently to ensure that the beneficiary’s pension exceeds the total amount contributed by both the employee and the employer.