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Money Purchase Plans
A defined contribution pension plan for owners and employees
Money Purchase pension plans allow employees to save money for retirement by investing tax-deductible employer contributions. Any type of business can set up such a plan, including for-profit and non-profit sole proprietorships, partnerships, corporations and not-for-profit organizations.
Also called "defined contribution plans," these pension plans are unique in that all contributions are mandatory and made by the employer, up to 25% of each employee's annual compensation (or $35,000, whichever is less). Contributions are not based on the profitability of the company, but on the amount of each participant's compensation.
Money Purchase pension plans are often paired with a Profit-Sharing Plan to offer employees higher contribution limits and more flexibility.
The amount contributed is limited and can vary each plan year. The benefit depends on plan contributions and the interest earned by the investments in the plan.
Employers have some flexibility in creating vesting schedules. Depending on the schedule selected, employees may or may not have the right to receive the entire plan's balance when he or she begins taking distributions.
For more information, contact an Extraco Relationship Manager by e-mail, or call 866-EXTRACO toll-free.
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Business smarts here
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Reduce fees and use idle funds more efficiently with a Commercial Checking account. |
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