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  • basics of establishing 401K plan

    Wanted to inquired about establishing 401K plan: not solo K but employer-sponsored 401K

    I am in a private practice with 7 physicians, 4 NP, couple of RNs and MAs.  My group used to have retirement plan (presumed 401K0 offered to all of its employees but did away with it several years ago apparently due to cost.

    All 7 of us are partners in the group. We all take W2 income.

    I wanted to get some basic information about start up and maintenance costs of establishing a 401K plan.

    Does it HAVE to be offered to all of the employees or can it be restricted to just a subsection of the practice? like physicians and NPs or RNs with so much longevity, etc.

    I know that exact details about setting this up requires more information; I read Kon Litovsky's post in the past but I left with more questions than answers. So would appreciate some general information regarding feasibility and pricing.

     

    Thanks as always.

  • #2




    Wanted to inquired about establishing 401K plan: not solo K but employer-sponsored 401K

    I am in a private practice with 7 physicians, 4 NP, couple of RNs and MAs.  My group used to have retirement plan (presumed 401K0 offered to all of its employees but did away with it several years ago apparently due to cost.

    All 7 of us are partners in the group. We all take W2 income.

    I wanted to get some basic information about start up and maintenance costs of establishing a 401K plan.

    Does it HAVE to be offered to all of the employees or can it be restricted to just a subsection of the practice? like physicians and NPs or RNs with so much longevity, etc.

    I know that exact details about setting this up requires more information; I read Kon Litovsky’s post in the past but I left with more questions than answers. So would appreciate some general information regarding feasibility and pricing.

     

    Thanks as always.
    Click to expand...


    You've asked a number of great questions.  Have you read all of these yet:

    https://www.whitecoatinvestor.com/the-ideal-retirement-plan-for-your-practice

    http://whitecoatinvestor.com/how-to-reduce-your-practice-retirement-plan-cost

    http://whitecoatinvestor.com/how-to-run-a-successful-retirement-plan-for-a-medical-or-dental-practice

    I would start with getting yourself an ERISA 3(38), a TPA and a record-keeper, and also begin by getting a comprehensive illustration from the TPA.  Because everyone's practice demographics is really different, the answers will highly depend on your specific practice.

    In some cases HCES ($120k and above) can be excluded from profit sharing for example, but in other cases they can't be if the plan is top heavy.  We always get a comprehensive design study done BEFORE having the plan sponsor commit to a retirement plan just to make sure that you understand the details of your plan design and what drives the employer contribution cost.

    As far as maintenance costs, a custom-designed plan can be set up very cost effectively for a fixed fee.  While there are many different providers out there, all of them pretty much sell their own platform, so once you get a group of doctors together, getting the lowest AUM fee is the best approach, and also getting the best advice is more important than selecting the absolute lowest cost provider that doesn't provide the right types of services.

    I prefer to use the best, lowest cost record-keepers and high quality independent TPAs because group practice plans can be notoriously complex and require a lot more supervision, especially if some of the partners decide to start opening individual brokerage accounts.  Also, if down the line you'll require a Cash Balance plan, you will want to have an infrastructure in place to allow for that, and because our plans quite often start as a 401k and add a Cash Balance plan later, we've developed the infrastructure to accommodate that seamlessly without having to run around looking for advice/providers/services.

    Getting low cost investments in your plan is not the hard part.  The most complex part is getting all of the pieces together and also getting the right plan design and architecture, as well as the best ongoing advice.  A retirement plan is not a DIY, and there will be plenty of things happening with multiple partners that require constant availability of fiduciary level advice.

     

     

     
    Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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