The employer contributes a specified fixed percentage of each participant's annual salary to the plan each year, to a maximum of 25% of compensation. Contributions to a Money Purchase Pension Plan are not based on employer profits, therefore contributions must be made regardless of whether the company is profitable. With the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), money purchase plans have become obsolete and many are being converted to profit sharing plans.
