What is the maximum percentage of plan assets that can be invested in employer securities in a money purchase pension plan?

What is the maximum percentage of plan assets that can be invested in employer securities in a money purchase pension plan?

• A. No more than 5%
• B. No more than 10%
• C. No more than 15%
• D. No more than 20%

Answer: (B)

In a money purchase pension plan, regulations set forth in the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC) typically restrict the percentage of plan assets that can be invested in employer securities. The correct limit in this case is 10%. This is intended to ensure diversification within the retirement plan’s investments, protecting participants from undue risk associated with having a high concentration of their retirement savings in a single employer's stock. By having this restriction, the plan encourages a more balanced investment approach and helps mitigate risks associated with employer-specific financial downturns. The investment in employer securities serves to align the interests of the employee with those of the employer, but limits are necessary to safeguard the retirement savings of participants by not allowing excessive concentration in any one company's stock.

In a money purchase pension plan, regulations set forth in the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC) typically restrict the percentage of plan assets that can be invested in employer securities. The correct limit in this case is 10%. This is intended to ensure diversification within the retirement plan’s investments, protecting participants from undue risk associated with having a high concentration of their retirement savings in a single employer's stock.

By having this restriction, the plan encourages a more balanced investment approach and helps mitigate risks associated with employer-specific financial downturns. The investment in employer securities serves to align the interests of the employee with those of the employer, but limits are necessary to safeguard the retirement savings of participants by not allowing excessive concentration in any one company's stock.