Money purchase plan

(redirected from Money Purchase 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 ?
They had suffered from the move away from final salary pension schemes to less generous money purchase plans and when they come to claim the state pension it will make up a smaller proportion of their previous earnings.
The National Association of Pension Funds said default funds - also known as money purchase plans - should shift members' money away from shares to safer investments as they approach retirement.
Munnell critically evaluates the implications of shifting from DB to 401(k) plans, as well the shift to money purchase plans in the United Kingdom.
Of the companies surveyed, 87% of respondents reported the use of 401(k) plans, pension plans, stock purchase plans, stock option plans, and money purchase plans in addition to the ESOP.
As a result, 401(k) plans have become more attractive options than SEP-IRAs, Simple IRAs or profit-sharing or money purchase plans.
People with private pensions or company money purchase plans must use their pension pot to buy an annuity, which guarantees them an income for life, before they are 75.
They are being replaced by money purchase plans which rely on stocks and shares rising in price.
Such exclusions may significantly reduce the cost of employer contributions, particularly in money purchase plans, defined benefit plans and top-heavy plans.
These seemingly divergent business imperatives have led to a dramatic increase in the incidence of 401(a) money purchase plans, such as profit sharing plans funded primarily with employer contributions, according to Diversified Investment Advisors' recently released Report on Retirement Plans--2006.
The closure of most defined benefit schemes means that more and more of us now rely on money purchase plans to fund our retirement.
The new share class generally supports Delaware's 401(k), ERISA 403(b), Governmental 457, Profit Sharing and Money Purchase plans, as well as other non-qualified deferred compensation arrangements.
Examples include 401 (k) plans, profit-sharing plans and money purchase plans.