Q. Describe pay-as-you-go pension plan?
Pay-As-You-Go Pension: A pay-as-you-go pension plan sponsor basically just pays for pension benefits to retired plan members out of its current incoming revenues. Many government pension plans are funded on a pay-as-you-go (or "paygo") basis, with pension benefits financed directly from current taxes. It's difficult for private companies to pay for pensions on this basis, though, as their long-term revenue streams aren't as reliable as governments'. For this reason, many private employers use (or are required to use) pre-funded pensions.