Pension plans are retirement plans provided by employers to their employees, offering them a steady income in retirement. They come in various forms, but the two main types are defined benefit plans and defined contribution plans.

Defined Benefit Plans: These traditional pension plans promise employees a specific benefit upon retirement, usually based on a formula that considers factors such as salary history and years of service. The employer bears the investment risk and is responsible for ensuring there are enough funds to meet future pension obligations.

Defined Contribution Plans: In these plans, such as 401(k)s or 403(b)s, the employer and/or employee contribute funds to the employee's individual retirement account. The eventual benefit depends on how much money is contributed and how well the investments perform. Unlike defined benefit plans, the investment risk falls largely on the employee.

Pension plans can offer tax advantages to both employers and employees, and they serve as an important tool for retirement savings. However, in recent years, many companies have shifted away from traditional pension plans to defined contribution plans due to factors like cost predictability and regulatory changes. This has placed more responsibility on individuals to manage their retirement savings effectively.