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The mid-career physicians were dissatisfied with the quality of a 200-physician medical group's pension plan. The pension committee undertook an external plan-redesign bid process to overhaul the existing plan and see if they could increase the pre-tax contributions the physicians could make. Many physicians worried that the current plan did not meet their retirement security needs. So the pension committee invited several pension-design firms to make a proposal to the pension committee.
When the pension committee learned about the Cash Balance option, they knew they had found the answer. They added a Cash Balance pension plan to the existing plans and more than doubled contribution amounts for the physicians. The average total tax-deductible contribution to the pension plans increased from $37,500 to $72,600 with a Cash Balance plan. Because these plans permit age-graduated contribution rates, contributions for doctors over 50 were increased by over 200%. Several doctors in their 50s are receiving over $125,000 each.
Non-shareholder doctors, nurse practitioners and other mid-level providers were all included in the plan at varying percentages of pay. Staff contributions went from 4% of pay to 6% of pay in order to pass IRS discrimination testing.
The pension committee is extremely happy with the results now after having the plan for several years. Many of the doctors have seen dramatic improvement in their retirement accounts as a result of the Cash Balance plan. In fact, it is much more than they thought would happen when they started the review process. The outstanding pension plan aids in physician retention and physician satisfaction within the medical group.
Retirement Plan Illustration
Year Ending December 21, 2009
|
|
401(k) |
Profit Sharing |
Cash Balance |
Total |
| 1 |
$20,500 |
$29,500 |
$125,000 |
$175,000 |
| 2 |
$20,500 |
$29,500 |
$75,000 |
$125,000 |
| : |
: |
: |
: |
: |
| 63 |
$20,500 |
$29,500 |
$0 |
$50,000 |
| Subtotal |
$1,271,500 |
$1,829,500 |
$1,240,000 |
$4,341,000 |
|
|
|
|
401(k) |
Profit Sharing |
Cash Balance |
Total |
| 1 |
$15,500 |
$29,500 |
$98,000 |
$143,000 |
| 2 |
$15,500 |
$29,500 |
$85,000 |
$130,000 |
| : |
: |
: |
: |
: |
| 53 |
$15,500 |
$29,500 |
$0 |
$45,000 |
| Subtotal |
$821,500 |
$821,500 |
$636,000 |
$2,279,000 |
|
|
|
|
$2,093,000 |
$2,651,000 |
$1,876,000 |
$6,620,000 |
| 18 Associate Physicians |
n/a* |
$0 |
$0 |
$0 |
| 35 Midlevel Providers & RNs |
n/a* |
$126,000 |
$0 |
$126,000 |
| 387 Other Employees |
n/a* |
$928,000 |
$0 |
$928,000 |
| Total |
$2,093,000 |
$3,705,000 |
$1,876,000 |
$7,674,000 |
|
|
*This illustration shows only the cost to the group.
Staff employees and others pay for their own 401(k) contributions. |
