Money purchase plan

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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
The RCH program portability services mentioned in the request involve automatic rollovers of mandatory distributions and account balances from terminated workers’ defined contribution (DC) plans into default individual retirement accounts (IRAs), and the subsequent automatic roll-in of funds in the default IRA to an individual account plan maintained by a new employer when the IRA owner changes jobs.
(A profit sharing plan may not invest more than 10 percent of its holdings in employer stock unless it meets the requirements for an "individual account plan.") Separate accounts are established for each participant and allocation of contributions and distributions of benefits are generally subject to the same requirements as a profit sharing plan.
A QTA may find that an individual account plan has been abandoned if there have been no contributions for more than 12 continuous months or where the facts and circumstances known to the QTA indicate that the plan is, or may become, abandoned.
An eligible individual account plan (i.e., a profit-sharing, stock-bonus, or employee stockownership plan that specifically permits the holding of "employer real property" or "qualifying employer securities") may hold such property in any amount--and may even hold such property as the exclusive assets of the plan.
While any individual account plan can offer a variety of choices regarding contributions, investments, and withdrawals, the choice of whether or not to participate is fundamental to a voluntary approach.
District Court for the Southern District of Texas in 2001 is a 401(k) plan, an individual account plan, called the "savings plan." The savings plan permitted the employees to contribute between 1 and 15% of their base pay, and Enron matched their contributions at certain percentage levels with Enron stock.
The share of lost benefits recoverable by workers under the individual account plan depends on several factors, the most important of which is the rate of return.
This applies to any defined benefit plan or individual account plan subject to minimum funding standards.
Here there is no question of forfeiture, but if the account is part of an individual account plan and not used up by the end of the year, it must be allocated to participants' accounts in accordance with Internal Revenue Service (IRS) rules that prohibit unallocated funds.
To be qualified as "an ERISA section 404(c) plan" under the regulations, the plan must be an individual account plan in which the participant both (1) has an opportunity to exercise control of the assets in his individual account and (2) chooses from a broad range of investments.(13)
Bradford Campbell, counsel at Drinker Biddle & Reath LLP's Employee Benefits & Executive Compensation Practice Group and former assistant secretary of labor for the Employee Benefits Security Administration (EBSA), says he is still concerned about one sentence in the revised FAB, which reads: "Nonetheless, in the case of a 401(k) or other individual account plan covered under the regulation, a plan fiduciary's failure to designate investment alternatives, for example, to avoid investment disclosures under the regulation, raises questions under ERISA Section 404(a)'s general statutory fiduciary duties of prudence and loyalty."

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