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February 16, 2009

Money purchase pension plan

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Definition

An employer-sponsored  qualified-retirement-plan, established by an employer for the benefit of it’s employees and their beneficiaries.

Money purchase pension plans are defined contribution plans , and are  funded with employer contributions

Contributions to money purchase pension plans are mandatory

Earnings in a money purchase pension plan accrue on a tax-deferred basis . Contributions and earnings are taxable to the participant when withdrawn from the participant’s money purchase pension account

Referring Cite

IRC § 401(a)

Additional Helpful Information

  • Employer contributions to money purchase pension plans are subject to the deductibility limit of IRC § 404, i.e. 25% of eligible compensation
  • Employer contributions to money purchase pension plans can be subject to a vesting schedule
  • Participants must experience a triggering event in order to be eligible to make withdrawals from their money purchase
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