Question

1. Can a self-employed person adopt a money purchase plan?
2. Can the ER fund the money purchase plan with EE salary reductions?

Answer 1

1) Yes, a self-employed person can adopt a money purchase plan. He can contribute to various plans like SEP or defined contribution plan of retirement from Net earnings from self employment.

2) Yes, ER can fund the money purchase plan with EE salary reduction under Elective-Deferral Contribution. An Elective-deferral conrtibution is made from employee's salary in a retirement plan such as 401(k) or 403(b), but employee must authorize the transaction that his/her salary will be reduced by the amount of contribution to retirement plan.