Money Purchase Pension Plan

In a money purchase pension plan, an annual contribution is made on behalf of each plan participant. This contribution is determined by a formula stated in the plan. Most frequently, this formula is expressed as a percentage of compensation, although it may reflect other factors such as service or the employer's contributions to Federal Social Security.

An account is maintained on behalf of each participant in the money purchase plan. This account most often represents the employee's share of general trust fund assets. In some plans, individual accounts are actually segregated and invested in funds chosen by each participant.