Most of the plans available to small businesses--simplified employee pensions (SEPs), salary reduction simplified employee pensions, SIMPLE IRA plans, SIMPLE 401(k) plans, regular 401(k)s, profit-sharing plans, money purchase pension plan
, Keogh plans, defined benefit plans, defined contribution plans, and employee stock ownership plans--are subject to the minimum coverage requirements, minimum vesting standards, the actual deferral percentage test, the non-discrimination requirements, and the top heavy plan requirements.
Where life insurance is purchased on the lives of participants in a money purchase pension plan
, the 25% rule is applied in basically the same way as if the plan were a profit sharing plan.
DB and money purchase pension plan
sponsors should identify participants who could be affected by lower limits and discuss with counsel whether they would need to provide 45 days' advance notice of the reduction, Mercer says.
Cash Balance Pension Plan Chapter 15 Cross Tested /Age-Weighted Plan Chapter 21 Defined Benefit Pension Plan Chapter 14 ESOP/Stock Bonus Plan Chapter 18 HR 10 (Keogh) Plan Chapter 22 Money Purchase Pension Plan
Chapter 16 Profit-Sharing Plan Chapter 17 Savings / Match Plan Chapter 19 Section 401(k) Plan Chapter 20 Installing a plan involves various steps, some of which must comply with a fairly strict legal timetable.
A money purchase pension plan
is a defined contribution plan in which the company's contributions are mandatory and are usually based solely on each participant's compensation.
Corporation 3, for example, maintained an 8-percent-of-compensation money purchase pension plan
. The annual compensation limit for 1999 was $160,000.
Y borrowed $20,000 front the X money purchase pension plan
, which later merged into the X profit sharing plan.
Because the maximum annual addition, and thus deductible employer contribution, is $40,000 in 20002, individuals earning $160,000 or more may receive a $40,000 deductible contribution under either a profit-sharing plan, a money purchase pension plan
, or a profit-sharing/401(k) plan.
This change eliminates the need for an employer to maintain both a profit-sharing plan and a money purchase pension plan
in order to reach the full 25 percent limit.
Adopt changes to money purchase pension plan
and deferred compensation plan.
Also, except as provided in regulations, a money purchase pension plan
is treated like a profit-sharing or stock bonus plan for purposes of these deduction rules.
Personal pension plan: A money purchase pension plan
taken out by individuals to produce an income and, if you choose, a tax-free cash sum at retirement.