Business and Personal Finance Dictionary

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• MONEY PURCHASE PLAN
  
  A money purchase plan is a defined contribution retirement plan that requires the employer to contribute a fixed percentage of each employee's salary every year the plan is in effect, regardless of how well the company does in a given year. In that sense, money purchase plans are the opposite of profit-sharing plans, where the employer's contribution is more flexible because it is based on annual profits. However, some small-company employers or self-employed people create a paired plan-as part of a Keogh, for example-that combines money purchase with profit sharing, requiring them to add at least a minimum percentage of each employee's salary to the plan each year.
  
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