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    Looking for clarity regarding profit sharing plans in context of a 401K

    Just joined a practice for which I'm eligible for an employee offered 401K. Once I'm partnered, does that qualify me as "employer" such that I can max the contribution to 53K, optimizing my tax shelter? I see 401K commonly discussed in terms of a profit sharing plan- is this something that has to be set up by the employer or can any partner (hence employer) in a practice with 401K fill the account to 53K annually?

  • #2
    Congratulations on the new job! Once you are partner/employer- the max contribution that you can make will depend on how the group plan is set up and you are right, it needs a "profit sharing" component to max it all the way to 53K. There are some excellent blog posts on here about it which really distills the information in an understandable manner. Look for "401k/profit sharing plans" and "Small business retirement plans" among others. All the best!

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    • #3




      Looking for clarity regarding profit sharing plans in context of a 401K

      Just joint a practice for which I’m eligible for an employee offered 401K. Once I’m partnered, does that qualify me as “employer” such that I can max the contribution to 53K, optimizing my tax shelter? I see 401K commonly discussed in terms of a profit sharing plan- is this something that has to be set up by the employer or can any partner (hence employer) in a practice with 401K fill the account to 53K annually?
      Click to expand...


      Ask to see a copy of the SPD, Summary Plan Description, which should explain all. Plans differ and yours may or may not have a profit sharing component. You can always lobby to have it changed, of course, as you may be more "clued in" than the partners.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4




        Looking for clarity regarding profit sharing plans in context of a 401K

        Just joined a practice for which I’m eligible for an employee offered 401K. Once I’m partnered, does that qualify me as “employer” such that I can max the contribution to 53K, optimizing my tax shelter? I see 401K commonly discussed in terms of a profit sharing plan- is this something that has to be set up by the employer or can any partner (hence employer) in a practice with 401K fill the account to 53K annually?
        Click to expand...


        Typically, group practice plans allow partners to contribute $53k via enhanced profit sharing.  However, that's not a given (and such profit sharing id always discretionary and can change year to year).  If you have a copy of the SPD or a plan document, it might say that profit sharing is allowed, but it won't tell you exactly who is going to get what. You will need to find this out from the other partners. They should know, because presumably they work with the TPA to make this happen.  Often, different partners want different profit sharing contributions (not everyone wants to max out), so that's something the TPA should be able to do for them.  If you have a practice manager, chances are that they might also know the details.

        If nobody knows anything about it (or if your practice allows profit sharing, but none is provided), this is something that you might first discuss with the other partners, and after that you might want to get the TPA involved to have them do an illustration for you.  If you have non-partner employees for the practice (other than partner-track doctors), this absolutely has to be done because the cost of doing profit sharing with too many non-partner employees might be high.
        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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