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Money Purchase Plan – 401a Overview

401a’s are similar to 401k’s. Your employer contributes to these Money Purchase Plans on your behalf. Usually a fixed percentage amount of your salary is used to calculate the amount of contribution. The money comes out of your employer’s pockets and not your gross income.

Here is a good link explaining it IRS-style.


The Money Purchase Plan 401a

A Money Purchase Plan is also called a 401a and is a type of retirement plan. Comparing it to a 401k, there, you deduct a certain amount from your gross salary and contribute that towards your retirement. In the 401a plan a specific percentage amount (let’s say 10%) is sent to a retirement account by your employer based on whatever your gross salary is. It’s like the 401k matching which some physicians are familiar with.

Kaiser Permanente’s Northwest Permanente Group offers this 401k to their physicians and it’s important to understand it. Fortunately, it’s incredibly easy to grasp. The money is sent to your Fidelity brokerage account and you can invest it in the same investment options as your 401k.


Kaiser Permanente 401a Example

I make around $200k a year as an urgent care doctor. I deduct $18k from my gross annual income to put towards my 401k. On top of this my employer matches my 401k contribution at 2%. So, I set aside $18k and they set aside another $4,000 for a total of $22,000.

Now, let’s look at the 401a. It is calculated at 10% based off of my gross salary. 10% of $200k is $20k which is how much they set aside for me in another account which I then invest in various investments.

When I log into my Fidelity brokerage account I see a screenshot of a 401k and a 401a.

In my example I get bi-weekly paychecks so of course it’s calculated per paycheck. You can see each paycheck’s contribution amount in the image below. I keep a running log of these on my own spreadsheet.

The key with your retirement accounts (the 401a and 401k) is that it cannot exceed the max annual contribution limit set by the IRS. For 2015 this amount is $53,000. My total from the example above is $42,000 ($22k+20k).


Investment Options

The same investment options are available to me as my 401k. These are usually money market accounts, index funds, or other similar mutual funds.

In order to decide what specifically you should invest in, it would be good to know what your risk profile is and what asset allocation you desire.




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