In a Money Purchase Plan, do contributions must be made every year?

In a Money Purchase Plan, do contributions must be made every year?

• A. True
• B. False
• C. Only if profits exceed threshold
• D. Only for first year

Answer: (A)

Money Purchase Plan funding is an annual obligation. It’s a defined contribution plan in which the employer makes a fixed percentage of each participant’s compensation contributed to their account every year, regardless of company profits or losses. Because the employer’s obligation is to fund the plan annually, contributions are required each year. The eventual retirement benefit depends on the accumulated account value, not on a guaranteed benefit amount. This isn’t tied to profits thresholds and isn’t limited to the first year; the funding is annual by design.

Money Purchase Plan funding is an annual obligation. It’s a defined contribution plan in which the employer makes a fixed percentage of each participant’s compensation contributed to their account every year, regardless of company profits or losses. Because the employer’s obligation is to fund the plan annually, contributions are required each year. The eventual retirement benefit depends on the accumulated account value, not on a guaranteed benefit amount. This isn’t tied to profits thresholds and isn’t limited to the first year; the funding is annual by design.