contractual arrangement in which the employer provides benefits to employees upon retirement. Many plans include disability and death benefits. A pension plan involves recognizing the employer's cost and the funding of pension benefits. Pension expense is tax-deductible to the employer. The employee is taxed when the pension annuity is received from employer contributions or originally not-taxed employee contributions. The two most common types of plans are DEFINED CONTRIBUTION PENSION PLAN and DEFINED BENEFIT PENSION PLAN. Pension plan provisions vary from company to company. For example, the pension plan may be contributory or noncontributory, meaning the employee may or may not also make payments to the pension plan.