A Money Purchase Pension Plan allows a company to make annual contributions that are not tied to profits. In many ways it operates like a profit sharing plan except the company is required to contribute the same percentage of employees’ salaries each year. For added flexibility, offering both a profit sharing and money purchase plan gives a company the ability to boost contributions when they want. Employer contributions are mandatory, and are limited to 25% of total compensation, up to $53,000.
Withdrawals taken prior to age 59 ½, may be subject to an additional 10% federal tax penalty and possibly state income taxes. Talk to a Alamo Capital advisor to learn more about the different options, including mandated limits, tax consequences and qualified contributions and distributions.