Personal Defined Benefit Plan

[sealsmith217]

I'm looking into starting my own personal DBP and wanted to get input on how to do this.

I am 37 years old in a small democratic EM group and we have a 401k/profit sharing plan. I currently contribute the max of $53,000/year and looking into other ways to put away retirement money. I talked to my group and the group is not looking into starting its own DBP. I already do a backdoor Roth IRA, HSA, and also have a taxable account for retirement.

After joining this forum it made me realize that other younger docs like WCI are contributing to a DBP.

Need to know how I can further explore this option on my own and anyone's thought if it will be worth it for me considering the costs on running one, etc.

[jfoxcpacfp]

Unless you have a side business, this option will not be available to you. The whole group must set up a DBP for you to participate as an employee or owner-employee. Since you participate in the group's 401k, my presumption is that you fall into one of those categories.

[litovskyassetmanagement]

sealsmith217 wrote:

I’m looking into starting my own personal DBP and wanted to get input on how to do this.

I am 37 years old in a small democratic EM group and we have a 401k/profit sharing plan. I currently contribute the max of $53,000/year and looking into other ways to put away retirement money. I talked to my group and the group is not looking into starting its own DBP. I already do a backdoor Roth IRA, HSA, and also have a taxable account for retirement.

After joining this forum it made me realize that other younger docs like WCI are contributing to a DBP.

Need to know how I can further explore this option on my own and anyone’s thought if it will be worth it for me considering the costs on running one, etc.

Click to expand...

Unless your group wants to adopt a DB plan, you can not open your own. It is also true that at age 37 your contribution might be only about $37k or so on top of the $53k 401k contribution, so not that big. However, getting your group to adopt a DB plan might be a worthwhile effort, since your contribution does increase with age. Most doctors don't realize that they do not HAVE to participate in a DB plan if the group adopts one, but an appropriately designed DB plan can allow some of the partners who are interested to contribute more than $53k.  Another issue is whether your group practice has any non-partner employees.  This can complicate matters quite a lot.  One way a DB plan can be designed is for the partners to specify their own contribution, which can range from nothing, to a maximum allowed for their age.  The administrative cost is actually rather small vs. the benefit, and can be paid only by those partners who participate.  So all in all, this type of plan is a win-win for a group practice without non-partner employees, even if the age range goes from 30s to 60s, and it is just a matter of educating the group about the pros and cons of adopting such a plan.  If most of the group is not even maxing out the 401k plan though, I would think this would be a very tough sell - you need a critical mass of partners to start this type of plan.  Also, those who don't want to participate would still be able to max out their 401k at $53k (I believe that's only possible if the group does not have non-partner employees - this is because profit sharing is 6% for those who participate in a CB plan, but that is more than made up by the CB contribution which for someone that's 37 is around $90k in total).