Money purchase plan

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 ?
Gillespie Money Purchase Plan, William and Sarah Humphries, Catherine Jane Howe Trust, James and Jane Flack and William Daniel Thomas Jr,.
An ESOP is a defined contribution plan that can have the features of a stock bonus plan and a money purchase plan, both of which are qualified under 1RC section 401(a).
Money purchase plan: TEI has a defined contribution money-purchase retirement plan, which covers all eligible employees who meet age and length-of-service requirements.
* An individual seeking to draw from a flexible drawdown plan MUST NOT make contributions to a money purchase plan, including employer and third party payments, or be an active member of a defined benefits scheme in the same tax year.
An employee stock ownership plan, or ESOP, is a stock bonus plan, or a stock bonus plan combined with a money purchase plan, that is designed to invest primarily in the common stock of the employer (see pages 475 and 542).
The maximum annual addition that can be contributed to a money purchase plan is the lesser of 100% of the participant's compensation, or $49,000 (in 2010, as indexed).
This limit may be more or less favorable than the defined contribution limit applicable to a comparable money purchase plan.
Before 2000, the hospital group had a Money Purchase Plan that was funded solely by the hospital and did not provide employee investment direction.
Short plan year fliers who must file a Schedule SB, Single-Employer Defined Benefit Plan Actuarial Information, or Schedule MB, Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information, and/or a supplemental attachment to Schedule R for 2008 will receive an automatic extension to file their complete Form 5500 until 90 days after the 2008 forms are available.
A money purchase plan is one in which the employer promises to contribute a certain percentage of each participant's annual compensation to the plan each year (see "MONEY PURCHASE PLANS," below).
Respecting qualified retirement plans, there is the defined benefit or pension plan, the defined contribution plan (e.g., 401(k)), the profit-sharing plan, the money purchase plan and the employee stock ownership plan or ESOP.
Under the law Mary can contribute $25,000 to a SEP-IRA, $8,000 to a Simple IRA, $25,000 to a profit-sharing or money purchase plan and $37,000 to a 401(k)--$25,000 employer contribution plus $12,000 employee deferral.