Money-Purchase Pension Plan

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Money-Purchase Pension Plan

A defined contribution pension in which an employer must contribute an amount equal to a certain percentage of the employee's compensation, usually 25%. While the amount of employer contribution is fixed, the amount of benefit is not. There are also penalties associated with receiving payments from the pension before retirement. These contributions are tax-deductible for the employer and guarantee the employee a certain amount of principal in the pension plan.
References in periodicals archive ?
e rule changes mean that from April 2015, anyone aged 55 or more can take their entire pension pot as cash - assuming they have a money-purchase pension rather than one based on their salary.
Qualified retirement plans such as defined benefit pension plans, money-purchase pension plans, and 401(k) plans, can be installed in a corporation, a partnership or a sole proprietorship.
Meanwhile, Prudential believes a 25-year-old paying into a money-purchase pension from this year should expect a pension at 65 worth pounds 16,023 a year, but pounds 57,714 if they are on a final-salary scheme.
In a money-purchase pension scheme, the amount of pension you get depends on how much money has been paid into your fund, and how well the scheme's investments have performed by the time you retire.
A-Day introduces the concept of unsecured pension, a way of crystallising benefits from money-purchase pension savings schemes before the age of 75.
Assuming that your employer has a money-purchase pension scheme, the lower interest rate will only be applied from January 1, 2003 and will nor affect your pension in a big way.
The above increases have drawn much attention to the fact that employees can now reach the maximum contribution level through a defined contribution plan, so that any existing money-purchase pension plan (MPPP) could be terminated in 2002 without sacrificing contribution levels.
Under the current law, the maximum an employer can contribute to all qualified profit-sharing and money-purchase pension plans for a single employee is $35,000.
Business owners whose maximum contributions are reduced in this way may wish to adopt a money-purchase pension plan, which allows a higher percentage contribution (up to 25%).
As an example, if a company has two plans--a profitsharing plan and a money-purchase pension plan--and the plans independently qualify, an examination of the moneypurchase plan would not preclude the profit-sharing plan from applying for VCR correction.
The limit for contributions to a money-purchase pension plan is 25 percent, with a maximum of $30,000 total.
Two situations address money-purchase pension plans (MPPPs).