Pay-As-You-Go Pension is a pay-as-you-go pension plan sponsor simply 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 is difficult for private companies to pay for pensions on this basis, however, since their long-term revenue streams are not as reliable as governments’. For this
reason, many private employers use (or are required to use) pre-funded pensions.
Definition