In a brief essay, describe the three classifications that apply to basic pension plans.

The three classifications are contributory versus non-contributory plans, qualified versus nonqualified plans, and defined contribution versus defined benefit plans. In a contributory pension plan, the employee can contribute while in a non-contributory plan, the employer makes all the contributions. Qualified plans offer tax deductions for some contributions while nonqualified plans get less favorable tax treatment for both employees and employers. With defined benefit plans, the employee knows ahead of time the pension benefits he or she will receive. The defined pension benefit is set by a formula that ties the person's retirement pension to an amount equal to a percentage of the person's pre-retirement pay, multiplied by the number of years he or she worked for the company. Defined contribution plans specify what contribution the employee and employer will make to the employee's retirement or savings fund.