At the end of the day, the reason most dental practice owners make these discretionary contributions is to increase the amount they can add to their own 401k accounts.
Mission, KS (PRWEB) February 28, 2013
This is the time of year that dental practice owners are reviewing their options for making extra 401(k) contributions, evaluating discretionary matches or profit sharing contributions based on last year’s numbers. They are to be congratulated for having a 401k plan and the extra funds to consider going the “extra mile” with contributions.
Dentists need to provide their 401(k)’s Third Party Administrator (TPA) several pieces of information as quickly as possible after year-end:
- An estimate of the additional contribution the practice has the capacity to make
- An employee “census” form, reporting compensation, hours worked, employees’ years with the company, age, turnover, etc.
- Notes on particular employees the dentist hopes to reward with higher contributions
With that information the TPA will run multiple calculations of the various ways to structure contributions so they are as advantageous as they can be for the dentist and, to the extent possible, particular employees. Cross-testing (also called new comparability) and age-weighted testing may allow a larger contribution on behalf of those employees to whom the dentist wishes to provide more significant benefits (including the owner himself), assuming non-discrimination requirements are met.
Mission Financial Planning works with the dentist and their TPA to calculate the most advantageous way to allocate these additional contributions. To learn more about discretionary contributions in 401(k)s, visit http://missionfinancialplanning.com/evaluate_401k_contributions/
Mission Financial Planning is a fee-only financial advisory firm built around offering financial planning to dentists and dental practices across the U.S. The firm takes a specialized approach, consulting on personal and small business financial planning. For more information call 913-948-9694 or visit http://www.missionfinancialplanning.com.
Fee-only financial advisors are compensated solely by the client with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product.