Money purchase plan

(redirected from Individual Account Plans)

Money purchase plan

A defined benefit contribution plan in which the participant contributes some part and the firm contributes at the same or a different rate. Also called an individual account plan.

Money Purchase Plan

An employer-contribution retirement plan in which the employer is required to place a certain amount in the retirement account each year. Usually this is a certain percentage of the employee's wages or salary. The employer is required to contribute the agreed-upon amount regardless of how the company performs in a given year. This reduces the risk for the account holder, but increases the risk for the employer. It is also called an individual account plan.

money purchase plan

A defined-contribution pension plan in which the employer contributes a specified amount of cash rather than shares of stock or a percentage of profits.

Money purchase plan.

A money purchase plan is a defined contribution retirement plan that requires the employer to contribute a fixed percentage of each employee's salary every year the plan is in effect.

The contributions must be made regardless of how well the company does in a given year. In contrast, in profit-sharing plans, the employer's contribution is more flexible because it is based on annual profits.

However, some small-company employers or self-employed people create a paired plan that combines money purchase with profit sharing. Paired plans require them to add at least a minimum percentage of each employee's salary to the plan each year.

References in periodicals archive ?
The study also notes that while the fraction of total assets is smaller in the individual account plans of those with lower net worth, lower income, and who are younger, these assets do comprise a significant portion of their total financial assets--more than one-third, in many cases.
404a-5 which addresses fiduciary requirements for disclosure in participant-directed individual account plans.
Effective in 2007, the PPA provides for a prohibited transaction exemption for certain investment advice to participants in individual account plans.
Effective 2007, the PPA provides for a prohibited transaction exemption for certain investment advice to participants in individual account plans.
The design features of voluntary individual account plans can affect whether individuals participate in the accounts and what retirement incomes they will receive.
The carve-out with transfers has the same effect on saving as the other individual account plans under conventional scoring rules, but a larger effect under the special scoring rule because the transfers crowd out additional on-budget spending.
That exception also imposed certain requirements for the purchase of "qualifying employer securities" (generally, the employer's common stock having the greatest voting power and dividend rights or, in certain cases, noncallable preferred stock convertible into common stock) by ESOPs, as well as by other individual account plans not designated as ESOPs, and on the "exempt loans" an ESOP might enter into to purchase qualifying employer securities.
403(b) plans are almost always run as participant directed individual account plans, and many of them choose to comply with ERISA section 404(c).
This exception also applies to other eligible individual account plans, as defined in ERISA, such as 401(k) plans.
Compliance with 404(c) is voluntary; to qualify for protection, individual account plans must give participants a broad range of investment alternatives and an opportunity to exercise control over some or all of the assets in their accounts.
411(d)-6T(19) addresses the participant notice requirement under ERISA Section 204(h), under which plan administrators must provide written notice to plan participants when future benefit accruals are reduced in defined benefit plans or individual account plans subject to the ERISA Section 302 funding requirements.

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