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Money Purchase Plans
A money purchase plan is very similar to a profit sharing plan, although a money purchase plan has a fixed contribution requirement that the business determines when the plan begins. The business must then make that same contribution percentage each year for all employees, regardless of profitability. Businesses of any size can establish a money purchase plan.
Money purchase plan rules permit an employer to make deductible
contributions each year up to 25% of employee compensation,
or $46,000 per employee (as adjusted for inflation for 2008),
whichever is less.
Which businesses should consider a money purchase plan?
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Businesses that want to reward long-term employees
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Businesses that require a more flexible document (employer eligibility, loans. vesting, etc.)
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Businesses that are seeking a deduction for the amount they contribute to the plan, but are not looking for a plan that allows employee contributions
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Businesses that will commit to a fixed annual contribution
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