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In: Accounting

Which of the following statements best describes the advantages of a qualified money-purchase pension plan? (A)...

Which of the following statements best describes the advantages of a qualified money-purchase pension plan?

(A) It is designed to adequately protect against inflation.

(B) Older employees can be more readily provided with adequate retirement benefits.

(C) Tax sheltering is enhanced because an annuity can be purchased for each employee.

(D) Costs are predictable, and the design is simple and understandable.

Solutions

Expert Solution

Option C should be the right answer because in the money purchase pension plan the employee's account balance of emmployee is tax deferred until the money is withdrawn, while the contribution of employer is tax-deductible. It is just like the profit sharing plan, but the rules for a money purchase plan are more rigid because the company cannot adjust its contribution level as profits go up or down.

ekkarill92 answered 2 years ago
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