Money Purchase Pension Plan
In general, an employer has more flexibility in contributing to a profit-sharing plan than to a money-purchase pension plan. Contributions to a money-purchase pension plan are fixed and are not based on business profits. For example, if according to the plan each participant will receive 10% of eligible compensation, each eligible employee must receive the contribution without regard to the employer’s profits for the year.
A money-purchase pension plan is suited for employers who are able to determine profit trends and do not mind being mandated to make contributions to the plan each year.