Money Purchase Plans: A Layaway Plan for Your Future Sometimes referred to as Pension Plans, money purchase plans (MPPs) are a type of defined contribution (DC) offering in which an employer contributes a fixed percentage (usually 10% to 15%) of each eligible employee's salary into their specific plan account. Offered mostly by small businesses, MPPs provide two main benefits: participants receive a stated mandatory contribution, and earnings on the plan assets are tax-deferred until a participant withdraws them. Money purchase plans aren't as common as they once were, though. Traditionally, small businesses paired them with profit-sharing plans to boost contribution limits. When the government, however, increased the maximum profit-sharing contribution from 15% to 25%, many employers phased out their MPPs.								> Home > Glossary > Support Questions & Answers   Money purchase plans and traditional pension plans are alike in that both:   Require fixed, regular contributions from the employer.   Let employees who leave before retirement roll over their accounts.   Allow you to invest your money in vintage baseball cards.

		Money Purchase Plan Highlights
		Employee contributions: Allowed by some plans, but only with after-tax dollars.
		Employer contributions: Fixed at a certain percentage of employee compensation.
		Contribution limits: Yearly total of employee and employer contributions cannot exceed 100% of the employee's compensation or $, whichever is less.
		Loans: Allowed.
		Early withdrawals: Allowed. Taxes apply on earnings and employer contributions. 10% penalty applies to whole amount, except in IRS-approved situations.
		Worth knowing: MPPs are usually combined with another DC plan. This allows total retirement funding to reach 25% of payroll, while limiting the employer's contribution obligation to a lower percentage say 10% or 15%.

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> DC Plan Types: Rounding Up Retirement Plans > Profit-Sharing Plans: Spreading the Wealth > 401(k) Plans: Match, Point, and Set > 403(b) Plans: A Profitable Savings Plan for Nonprofit Employees > 457(b) Plans: Governing Retirement

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