An employment-based Pension plan is retirement insurance plans or annuity plans where the employee allocates a portion of the current income to retirement income, usually tax exempt. These plans are of two types. Defined benefit pension and defined contribution pension. Defined benefit pension plans are fixed plans paid to employees as retirement benefit plan based on their retirement age, service term and last salary received. Under defined contribution pension the employee contributes a percentage of salary to a retirement benefit plan. On retirement, the employee receives the combined sum as a pension.