A money purchase plan is a type of:

A money purchase plan is classified as a defined contribution plan because it involves employer contributions based on a specified formula, commonly a fixed percentage of the employee's compensation. In defined contribution plans, both employers and employees can make contributions, but the retirement benefits depend on the amount contributed and the performance of the investments made with those funds.

In a money purchase plan, the contributions are mandatory and must occur annually, as defined in the plan's rules. The account balance at retirement is determined by the total contributions made to the account over the employee's career, along with any investment gains or losses incurred during that time. This structure contrasts with defined benefit plans, where retirement benefits are predetermined based on factors like salary and years of service, and profit-sharing plans, which typically allow for discretionary contributions based on company profits.

In summary, characterizing a money purchase plan as a defined contribution plan reflects the nature of the contributions and the basis for the retirement benefit, focusing on individual account balances rather than a set benefit amount.