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    Weighing the best retirement plan for practice, employees

    Understanding various programs can help physicians make appropriate choice



    Defined benefit pension plan

    This plan helps build savings quickly. It produces a much larger tax-deductible contribution for the practice than a defined contribution plan. However, annual employer contributions are mandatory since each participant is promised a monthly benefit at retirement age.

    Since this plan is more complex to administer, the services of an enrolled actuary are required. All plan assets must be held in a pooled account, and the employees cannot direct their investments.

    Certain factors affect a physician’s contribution for a plan, such as current value of the plan assets, the ages of employees, date of hire, and compensation. A participating employee–with a large projected benefit and a few years until retirement age–generates a large contribution because there is little time to accumulate the necessary value to produce the stated benefit at retirement.

    The maximum annual benefit at retirement is the lesser of 100% of the employee’s compensation or $210,000 per year in 2016 (indexed for inflation).

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