A money purchase plan allows a company to base its annual contribution to the plan on:

A money purchase plan is a type of defined contribution retirement plan where contributions made by the employer are typically set at a fixed percentage of an employee's salary. This percentage is predetermined and specified in the plan document, ensuring that contributions are made consistently each year based on the employee's compensation.

This structure not only provides clarity for both employers and employees regarding how contributions are calculated but also helps in predictable financial planning for the employer and employees alike. The use of a fixed percentage tied to the employee's pay promotes equitable and systematic contributions over time.

While other factors, such as company profitability or investment earnings, may influence overall financial decisions or returns, they do not affect the calculation of contributions in a money purchase plan. Annual resolutions passed by the board may pertain to various business decisions but are not the mechanism for determining contributions in this context. Hence, basing contributions on the specified percentage of pay is the defining characteristic of a money purchase plan.