Tuesday, January 3, 2012

Dentist has Questions about Qualified Retirement Plans


I’d like recommendations for the best retirement plan for my office with my specific needs...

I currently have a 401k plan in place with Safe Harbor election. I feel like I pay too much to administer it.  I would like to find a retirement plan that is lower cost to me/the office.
Basically I am looking for a low cost (possibly free) qualified plan that my staff can defer money to, without me having to pay administrative costs and me having to match any percent of income.  I am not interested in being able to defer anything myself.
What about a SEP plan?

Here was your criteria from above:

1. I am not concerned about how much I can defer personally, assume I don't have to defer anything myself.

2. I want the lowest cost (possibly free?) plan that can be run.

3. My staff does want to defer more than 5k (Simple IRA limit) per year

If I understand it correctly… if I contribute 1,2,3% (or whatever %) of my salary, then I have to contribute to everyone the same %?  What are your thoughts and pros and cons of that?

Well, you asked us to assume that you didn't want to contribute. Otherwise, you are correct, that's how a SEP works. SEPs work well when the owner is the only participant or when the owner has been "employed" longer than the other employees (read a lot of turnover) and as a last minute thought.

Who will administer the simple IRA? Can I do it through Fidelity who would house the investments?

Sort of... you'll still be responsible to make sure everything’s being handled correctly.

The 3% contribution would apply to who?

Depends on the plan.

Would they have to qualify?

Generally yes.

Would it be every staff member?

It depends on the plan and the eligibility requirements.

Is that $ fixed or subject to change?

It depends on the plan, many allow for a change from time to time if not annually

I think you need to sit down with your CPA to narrow in on what you need based upon your criteria and specific circumstances...

This first appeared on Dentaltown.


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