10.26.07 - Issue # 294 Forward This Newsletter To A Colleague

Bruce Bryen, CPA
Partner, The Snyde
Group, LLC
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An Employer Sponsored Qualified Retirement Plan.
It's the Best Investment Available For You and Your Dental Practice

The implementation of a sophisticated employer- sponsored qualified retirement plan is one of the most sound methods to generate wealth, ensure financial stability and optimize tax benefits that exists. Whether you have no employees or many, this type of plan will accelerate your contributions because of higher deductibility limits than boiler plate type plans such as individual IRAs. The type of legal structure that you have formed for your dental practice has no bearing on the format of the plan that you decide upon or the contribution level that is generated by the type of plan that you use.

What is the best type of plan for you?

There are only two types of plans available.  They are the defined benefit plan and the defined contribution plan. Of course there are many variations of each, but by definition, these are the only two plans in existence. Defined benefit plans are very complex and sophisticated but can be customized to your individual needs. This type of plan offers tremendous tax advantages such as an incredibly quick and large generation of deductible contributions and can be used as an effective tool in a pretax dental practice acquisition. The effective savings in this type of purchase can amount to hundreds of thousands of dollars for the buyer and the seller of the dental practice. Amounts paid into these plans tend to be larger amounts than those paid into defined contribution plans and therefore the balances tend to grow to larger sums on a much faster pace than those in the defined contribution plans.

Defined contribution plans restrict the employer or employee contribution level and these plans are less complex than defined benefit plans. Examples are 401ks, simple IRAs and profit sharing plans. Contributions and accumulations of wealth generally tend to grow less quickly than those available in defined benefit plans because of the restrictions in funding levels. These restrictions are based on percentage of salary levels and fixed levels of contributions based on amounts that cannot exceed certain published IRS guidelines.

In either type of plan, the employer’s contributions are pretax, your money is protected from creditors and you maintain control, if you wish, over all investment decisions concerning the funds generated by the contributions to the plan and the earnings on those funds.

The type of plan that one chooses is based upon a number of factors such as age at implementation, years of service in the practice, annual income and overall debt and asset diversification structure. Sometimes more than one plan is effective for an employer who may be interested in maximizing the contribution and growth level of the plan(s). Many dentists spend a great deal of money on attorney fees in order to create elaborate asset protection devices such as family limited partnerships and irrevocable trusts. Those legal structures do not offer the tax deductibility provision that an employer-sponsored qualified retirement plan affords. The irrevocable trust also does not offer the control of the investment fund available to the trustees (dental practice owner) of the employer-sponsored qualified retirement plan. Especially important to the practicing dentist is the ability to use the retirement plan for the explicit purpose of providing an opportunity for a prospective buyer to pay pretax dollars to acquire the dental practice and allow that buyer the ability to buy at a lower net cost for the acquisition. Of course this method allows the seller of the dental practice to have a much larger group of buyers available for the ultimate sale of the dental practice. It certainly makes it easier for a seller to transition the practice to a buyer. This is an exciting concept that creates hundreds of thousands of dollars in savings to the buyer and the seller.

An experienced professional advisor familiar with your practice and your personal financial position is in an important position to establish your ability to understand the guidelines that must be followed in the creation of this important vehicle for use in creating wealth through pre tax savings and also in affording the opportunity for a larger than normal pool of buyers for your dental practice. An advisor who has knowledge in the world of dentistry will have the ability to engage an actuary on your behalf for the formal approval from the IRS of the right retirement plan for you and your practice. Those with experience can design the plan that fits your needs and complies with all IRS regulations.

Meet with someone with experience in advising those in the dental world. Find out what you are missing and begin implementation of the best investment available for you and your dental practice.    

Bruce Bryen, CPA has successfully assisted dentists with their personal and financial matters for over thirty years. As a partner in The Snyder Group, he delivers creative strategies and prudent financial strategies to help dentists build and protect wealth at every stage of their careers. His extensive expertise includes financing, debt restructuring, retirement planning, and tax advising to help dentists keep more of what they earn.  He can be reached at bbryen@snydergroup.net. 1-800-988-5674.

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