Final answer:
Plan eligibility is the term describing which employees are covered by a pension plan. Traditional defined benefit pensions are now rare, replaced by defined contribution plans like 401(k)s, which offer more portability and protection against inflation for retirees.
Step-by-step explanation:
The term used to describe which employees will be covered by a pension plan is known as plan eligibility. Eligibility criteria determine which employees are entitled to participate in a pension plan. Employers offering pensions must adhere to regulations, such as contributing to the Pension Benefit Guarantee Corporation to protect workers' pensions in cases of bankruptcy. While traditional pensions, known as defined benefit plans, are becoming less common, they're being replaced by defined contribution plans like 401(k)s and 403(b)s, where both employer and employee contribute to the worker's retirement account.
Defined contribution plans are advantageous as they are portable between employers and help retirees avoid the inflation costs that can affect traditional pensions. Additionally, federal regulations penalize firms for underfunding their pension plans and require firms to provide employees with information about their pension accounts. This ensures greater transparency and security for employees' retirement funds.