A Money Purchase Pension Plan is a type employer sponsored retirement account in which tax deductible contributions are made solely by the business owner. Unlike a profit sharing plan where the contribution level may vary from year to year, a money purchase pension plan represents a fixed commitment on the part of the business owner. The business owner establishes the annual contribution requirement (up to 25% of total compensation paid to all eligible employees) in the plan adoption agreement. For example, if the business owner elects a contribution percentage of 10 percent, he/she must make a 10 percent contribution to all eligible plan participants on an annual basis. In the event the business owner decides to change the contribution percentage, the plan agreement must be amended.

For plan years beginning after December 31, 2001, a Money Purchase Pension plan will be less advantageous than a Profit Sharing Plans; therefore, business owners should work closely with their financial and/or tax advisor to determine which plan best meets their needs. Understanding the distinction between discretionary and mandatory contributions is an important factor to consider when determining the type of plan most appropriate for your situation.

Several allocation methods are available:

· Same percentage of compensation for each participant;

· Permitted disparity (Social Security integration);

· Age-weighted.

A Money Purchase Pension Plan can generally be implemented and administered without substantial setup charges and expensive annual administrative fees. The business owner is considered the "plan sponsor" and will typically be named as the "trustee" of the plan. In either case the employer is responsible for keeping records to reflect each employee's date of eligibility, applicable vesting schedule, outstanding loan balances, and ownership share in the assets of the plan. Each year the business owner is responsible for ensuring that the plan remains compliant with current laws and for filing an annual return/report regarding the plan's financial condition, investments, and operations. The annual reporting requirement is generally satisfied by filing Form 5500 Annual Return/Report of Employee Benefit Plan, along with any required attachments. Note: Annual reporting requirements are waived for plans with no common-law employees, other than a spouse, where total plan assets are less than $100,000.

Future earnings are tax-deferred. A participant's benefit is based on the amount of contributions to their account and the gains and losses associated with the account. For self-employed individuals, contributions can be made from net earnings in the trade or business for which the plan was established, not from income derived from personal investments.

Other types of Qualified Business Retirement Plans include Profit-Sharing Plans, 401(k)s and Defined Benefit Plans. Contact our Customer Service Department to discuss eligibility requirements as well as other information about qualified retirement plans.

Future earnings are tax-deferred. A participant’s benefit is based on the amount of contributions to their account and the gains and losses associated with the account. If you are self-employed, contributions can be made from net earnings in the trade or business for which the plan was setup, not your investments.

Other types of Qualified Business Retirement Plans include Profit-Sharing Plans, 401(k)s and Defined Benefit Plans. Contact our Customer Service Department to discuss eligibility requirements as well as other information about qualified retirement plans.

Eligibility
Contribution
Distribution