Welcome to the MDTAXES Message Board

The MDTAXES Network is an affiliation of CPAs that specialize in the tax planning and preparation for young health care professionals.  Please leave your questions or comments for our CPAs, who visit the message board regularly, or review the answers, suggestions and ideas posted in response to your colleagues' questions.

Please check out our other Message Boards available at www.FindAGoodCPA.com.

Please note: We are NOT affiliated with the Maryland Tax Department. If you're looking for information about Maryland income taxes, go to www.marylandtaxes.com.

Retirement Planning
Start a New Topic 
Author
Comment
Retirement plan options

I am a partner in a three doctor practice with about 20 staff employees. We currently only offer a simple IRA plan to all employees including the partners. We (the partners) would like to add either a defined contribution plan or some other type of plan that maximizes retirement savings and tax advantages without including the staff in the plan. What options might we have? We are currently a C-corp.

Zip Code: 02492

Re: Retirement plan options

For starters, you might consider switching to a Safe Harbor 401k Plan. With a SIMPLE, you can put away $11.5k in salary deferrals ($14k if 50 or older). With a 401k, the maximum salary deferral is $16.5k, increased to $22k for a person 50 or older.

The match for a Safe Harbor 401k is also larger. Instead of a 3% match offered by a SIMPLE, you can elect a match of 4% for a Safe Harbor 401k.

So on $245k of salary, you could put away an additional $7,450 into your retirement accounts, without incurring much of a cost for your staff. Anyone 50 or older can put away an additional $10,450 with a safe harbor 401k.

To take it to the next level, you probably want to speak with a retirement planning firm that deals with more sophisticated plans. Based on the age of the doctors as compared with the staff, you might be able to implement a plan that allows for a larger percent of the retirement plan contributions to go to the owners, and less to the staff.

Please note that profit sharing plan contributions also come with vesting schedules, which means that if a staff person leaves after participating in the plan for just a few years, a chunk of the profit sharing money reverts to the plan and gets re-allocated to the remaining participants. Most vesting schedules allow for 20% vesting per year of plan participation. So your staff would need to be with you for 6 years (the first year doesn't count as a year of participation) before they would be 100% vested. (For a safe harbor 401k, the employee immediately vests in their salary deferrals and the safe harbor match.)

For a twenty person medical office, there are most likely a variety of retirement plan options available to you that will allow you to increase the money you and your partners are saving for retirement without requiring you to be too generous to your staff.

Zip Code: 01801