Key Feature
A money purchase pension plan
is a type of pension plan that
is designed to favor the younger
employees. In general,
contributions are allocated to a
participant's account based upon
his compensation (such as a
contribution equal to 10% of
compensation). Although a
younger and an older employee
with the same level of
compensation will receive the
same allocation, the long-term
accumulation of tax-sheltered
funds will benefit younger
employees more than older
employees.
Contributions are fixed by
formula and may be set at any
amount from a minimal level
(such as 3% of compensation) to
a maximum level of 25% of
compensation (or $40,000 if
less). At retirement a
participant's benefit is equal
to the then value of the
investments held on his or her
behalf. |
