When some degree of retirement income security in the plan is desired. When an employer seeks to reward long-term employee relationships. As with all qualified plans, a money purchase plan provides a tax-deferred retirement savings medium for employees. The plan is relatively simple and inexpensive to design, administer, and explain to employees. Individual participant accounts allow participants to benefit from good investment results in the plan fund.
Employees bear investment risk under the plan.
The ultimate amount that can be accumulated under a money purchase plan is very sensitive to investment return, even for an employee who entered the plan at an early age. The plan is subject to the Code's minimum funding requirements. Employers are obligated to make the plan contribution each year or be subject to minimum funding penalties.