Defined Benefit Plans for Physicians, Dentists and Small Medical Practices

Special Considerations for Physicians and Small Medical Practices

• The older the physician, generally, the higher the contribution.  Most physicians begin their practices with school debt and incur high expenses to set up a practice.  As practices mature and they are older – 45+ — they have the excess cash flow to support high contributions and need the tax deductions.
• Doctors who are employed by hospitals or research centers generally will participate in a retirement plan through the institution.  However, many of them have side income from independent research studies, serving as expert witnesses, sitting on board of directors, etc. This secondary income source may not be needed to maintain life style and can be used to fund a defined benefit plan and reduce the tax liability.
• Doctors who work as locum tenens – serving temporarily in hospitals or other locations — often receive high self-employment income for these engagements and have few work-related expenses.  Some doctors choose to do this as a way of semi-retiring.  Generally, the net profit from this income can be used to fund a defined benefit plan if it is not needed for current cash flow.  
• If the physician owner of a medical practice adds a spouse who works in the business to payroll, this could increase the total contribution for their family in a situation where otherwise, the doctor would have maxed out with only his or her own contribution.