Chartered Retirement Planning Counselor (CRPC) Practice Exam 2026 - Free CRPC Practice Questions and Study Guide

When considering the 25% maximum employer contribution limit, it's important to understand how different retirement plans are regulated under IRS rules. A LESOP, or Leveraged Employee Stock Ownership Plan, is structured differently from typical defined contribution plans.

In a LESOP, contributions made by the employer are primarily for the purpose of purchasing stock to allocate to employees as part of their retirement benefits. This type of plan does not fit within the traditional confines of standard defined contribution plans, where a 25% limit typically applies. Instead, LESOP contributions could be significantly more and are limited primarily by the annual contribution limits pertaining to employee stock ownership, rather than the 25% cap found in other plans.

In contrast, plans such as target benefit plans, money purchase plans, and cross-tested plans are subject to this 25% limit, which governs the extent of employer contributions relative to the employees' compensation. Understanding these distinctions is crucial in comprehending how various retirement strategies work under IRS guidelines.