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 ?
Treasury Department in July 2014 for use as a distribution option in employer-sponsored individual account plans, QLACs can be purchased with the lesser of 25% of a participant's account balance, or $125,000.
Rather, the DOL has stated that employer fiduciaries wishing to avoid fiduciary liability should offer an investment menu in order to enable participants to "construct a portfolio with risk and return characteristics appropriate to their circumstances" [Final Regulation Regarding Participant Directed Individual Account Plans, 57 Fed.
Next January, the DOL expects to issue notices of proposed rulemaking about the safe harbor for the selection of annuity providers for individual account plans, as well as the inclusion of lifetime income estimates on participants' defined contribution (DC) account statements.
However, exchange-traded funds (ETFs) are beginning to attract greater attention for participant-directed individual account plans, especially since the introduction of a new fee disclosure mandate and greater interest in ETF-based 401(k)s from big-name brokerage firms.
The DOL has issued three proposed rules to assist in the orderly and proper termination of individual account plans, and the distribution of benefits where the plans have been abandoned by their sponsoring employers.
404a-5 which addresses fiduciary requirements for disclosure in participant-directed individual account plans.
Instead, the regulations should be designed to encourage the provision of disability protection in individual account plans through all of the methods in use today.
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.
32) This requirement does not apply to Employee Stock Ownership Plans; individual account plans, such as 401(k), profit-sharing, stock bonus, thrift, or savings plans; and certain grandfathered plans.

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