When it comes to choosing a retirement plan option for yourself and your practice, plan management, maintenance, and remaining compliant with IRS regulation will undoubtedly be a factor in your decision-making. Why subscribe to an overcomplicated plan if there are no benefits that counterpose the extra time and money investment needed to manage it?
As we discussed in our previous article, "Retirement Plans in the Dental Practice", 401 (k) s are popular qualified workplace retirement plans that allow employees to contribute pre-taxed income to their individual retirement accounts and, in some cases, even receive an employer match up to a certain percentage point. Both employer and employee can contribute to the plans and both receive tax benefits.
However, 401 (k) retirement plans are also known for:
- Being highly regulated by the IRS to avoid discrimination favoring more heavily compensated employees
- Requiring complex plan outlines to set up and maintain
- Multifaceted and ongoing maintenance requirements
In short, if the tax and savings benefits don’t outweigh the time or money needed to manage these plans, it might not be right for your practice. Because, at the end of the day, dentist owners have one of two choices: to handle the administrative work themselves or hire someone else to do it, and the former is wildly unrealistic (not to mention risky due to the number of moving parts and IRS regulations required to keep all the wheels moving compliantly).