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200% 401(k) match?

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  • 200% 401(k) match?

    Are any of you in a private practice where your group will max out your "employer contribution" to your 401(k)? For example, you contribute $18k and the group contributes $36k on your behalf? I've seen this mentioned elsewhere and I'm just curious if that is an opportunity that is not to uncommon in private practice setting?

  • #2
    my first practice did that.  however we were unable to sustain it due to relatively poor contribution from the lower paid employees.  they didn't care that the benefit was enormous.  we had to raise rates to keep better employees rather than focus on retirement, which is why the safe harbor thing exists, i guess.




    • #3
      Yes I have a 200% match. I use that and adjust my salary to max out to $53k. It's 200% match of up to 6% of salary. Rest is s-corp distribution which avoids Medicare tax. The super match and a couple other features make it "safe harbor" which avoids fancy actuarial testing.

      I'm happy to encourage my staff to save, but even with the match they are reluctant to commit a lot to the 401k. It is a cost to the practice which rewards those who save more.

      Other 401k experts on this board can help you customize a plan. Some cookie cutter 401ks may not allow much customization including match %.


      • #4
        Yes.  My group does it.  However, the only employees our group has is us doctors.


        • #5
          A man chooses his job based on this, or makes other arrangements.  Wasn't aware it is not common, but a man only considers certain positions.  Currently we use the "safe harbor" combo also.

          The new-grad attendings graduate with huge debts, and expensive tastes.  They buy 800K houses right out of residency, because renting is "throwing money away".  They don't contribute and complain about loans.  Lately, productivity based monthly compensation is going up to feed them with sacrifices elsewhere.

          If this benifit ever goes away, so will a man.


          • #6
            I just started a new job (my first one). It sounds like I need to wait until the calendar year that I am eligible to buy into the practice (2018) to take advantage of it, so that would be Jan 2018. Until then all I can do is max out my own $18k in the next four months. One of the partners was saying I could essentially adjust my income so that the practice contributes $36k to my 401(k) on my behalf in addition to the $18k that I contribute. But then someone else mentioned a profit-sharing program. Can these two things co-exist or is it just one or the other? I didn't chose my job based on this obviously or I would have known the answer before signing.


            • #7
              Sure they can co-exist.   However you/they have it set up.  It is decided by The Many Faced God of employment and partnership contracts.

              You should get acquainted intimately with the details of yours.  Ask politely, and feign innocence.

              This man, maxes his 401k contribution, then the partnership maxes the rest of the 401k portion.  There are still profits to be divided after that.

              If I had to choose, I'd defer portions of other compensation (hourly or productivity based) to max out the employer portion, if possible.  But this depends on your specific situation.  Huge loans or other obligations may take precedence in some circumstances.

              It seems you have some things to clarify with your group.  The first few months are not crucial, and you are on the right track exploring these things. Have a better idea what you will be doing for January.


              • #8
                WCICON24 EarlyBird
                I see higher matching designs in cases when profit sharing is not done.  However, in many cases nobody really tried optimizing the profit sharing designs, maybe because it is time consuming work for the TPA.  In a large practice there are many ways to try to design a plan so that the owners can still max out at $54k while minimizing employer contribution to NHCEs.  It does not always work out, and depends on demographics, but at least this can be attempted.

                A match might or might not work.  If you have lots of NHCEs who don't participate, this might work out, but if all NHCEs participate, then the profit sharing design might end up being better - one has to do a design study based on current participation rates to determine which one would be lower cost to the practice.
                Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees