A money purchase plan is a pension plan that has a mandatory annual contribution. The contribution formula is established in the plan document however company contributions can be as high as 25% of pay. Employers also have the option of making all contributions subject to a vesting schedule.
For businesses with a number of part-time employees or high employee turnover, or those needing the freedom of variable contributions, a Profit-sharing plan may be the perfect answer.
A 401(k) plan allows participants to contribute a portion of their pre-tax salary to a tax-deferred retirement plan. Some companies may provide a matching option to their employees as an extra incentive for the participants to contribute. All plans are subject to discrimination testing to ensure all plan participants are receiving equal benefit.
Similar to a basic Roth-IRA, Roth 401(k) contributions are made with after-tax dollars and are eligible to grow tax free. Unlike a Roth-IRA, participants may contribute regardless of how much they earn. A Roth 401(k) must be combined with a Individual (k) or a 401(k) plan and cannot be established on its own.
A 403(b) plan is a tax-favored retirement plan for employees of school systems, nonprofit organizations, or other tax-exempt employers (know as 501(c)(3) organizations). Participants can make pre-tax contributions and some organization even provide a matching incentive to their employees.