Money Purchase Pension Plans

A Money Purchase Pension Plan allows the employer to make annual contributions that are not tied to profits. In many ways it operates like a profit sharing plan except the employer is required to contribute the same percentage of employees' salaries each year. For added flexibility, offering both a profit sharing and money purchase pension plan allows the employer the ability to boost contributions at their discretion.

Benefits of a Money Purchase Pension Plan

  • Tax-Deductible Contributions
  • All contributions to a Money Purchase Pension Plan (up to the allowable limit) are deductible for federal and, in most cases, state income tax purposes. This favorable tax treatment may provide a reduction in your company’s current taxes. If you are self-employed, contributions are deductible on your personal tax return.

  • Tax-Deferred Growth
  • All contributions to your Money Purchase Pension Plan account compound tax-deferred until withdrawn at retirement. Your investment can accumulate more quickly than in a non tax-deferred investment vehicle.

  • Generous Contribution Limits
  • You may be able to contribute as much as 25% of compensation or up to $52,000 in 2014, whichever is less, to a Money Purchase Pension Plan account.

  • An Attractive Employee Benefit
  • Small business owners may set up a Money Purchase Pension Plan as a way to compete with larger businesses for quality employees. This popular and highly visible employee benefit can help you attract and retain the employees you need to succeed in today's competitive business environment. Unlike large company plans, a Money Purchase Pension Plan is easy to establish and maintain.

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