Defined Benefit Plan For Physicians

A Tax Strategy for Individuals with Self-Employment Income and

Small Practice Owners

Defined Benefit Plansfor Medical Professionals

Copyright 2012 Dedicated Defined Benefit Services LLC

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Defined Benefit Plans ─ in the News

“Retro-Pension: Defined-benefit plans for small businesses can help owners catch up on savings”

Financial Planning Magazine, February 2011

“Creating a pension plan helps business owners and the self-employed sock away more tax-deferred cash for retirement”

Smart Money, October 2008

A Pension Plan for the Self-Employed“Solo pension plans are a great option for entrepreneurs, doctors, and real estate agents who want to slash their taxes and turbo charge retirement savings.”

Kiplinger’s Retirement Report, August 2011

High-Income Clients Save More With These Underutilized Retirement Plans “From a short-term standpoint, there’s absolutely nothing that can equal this for me or anyone older with excess income and big taxes...”

Financial Advisor Magazine, December 2011


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Today’s Presenter

Dempster R. Cherry Financial Advisor SagePoint Financial. 619.465.5442

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Agenda

The Personal Pension Plan– Defined Benefit Plans At a Glance– Compared to Other Retirement Plans– The OnePersonPlus® Program from Dedicated DB

Ideal Financial Situations

Meeting Your Needs– Eligible Compensation– Key Dates– Fees– Opening a DB Plan– Follow through


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Defined Benefit Plans at a Glance

Qualified retirement plan approved by the IRS

Contributions are tax deductible

Highest available contributions and tax deductions of any qualified retirement plan

Contributions are based on:– your age– income– years to retirement


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Comparison of Retirement Plans

SIMPLE

SEP

Single 401(k)

DB

DB + 401(k)

Hypothetical Example:Maximum annual contribution limits in 2012 for a Medical Professional age 52, earning $250,000 annually, retiring in 10 years

$50,000

$199,200

Assumes 5-7% funding rate for Defined Benefit Plans

$55,500

$21,500

$161,700


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Defined Benefit Plans are Goal-oriented

Goal or “benefit” represents the amount of retirement wealth the plan will provide annually at retirement age

Benefit is established when plans are opened– Based on age, income and years until retirement– Capped at $200,000 per year (for 2012)

Employer commits to achieving the goal through regular, annual contributions large enough to meet the goal

Retirement age is typically set at age 62 or older

Plan can be amended to change the goal


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OnePersonPlus from Dedicated DBA Great Tax Strategy for Baby Boomers!

Typical Plan Sponsors• Medical professionals, age 40+• Owner + up to 4 employees • Expect to Contribute 5 successive years

New Plans• Avg. annual contributions: $120,000*• Avg. term: 8+ years• Integrates with a solo 401(k)

Dedicated DB’s Service• Prototype plan documents eliminates cost of actuary, tax attorney• Easy to open, efficient to administer – 2-page adoption agreement, simplified forms,

pre-filled annual census• Set up fee and annual administration fee• No administration fees based on size of your account

You and Your Financial Advisor Select the Investments* Based on 2011 first year contributions to Dedicated Defined Benefit Services DB plans.


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Dr. Charles, Owner-only, Age 52

Annual earnings: $450,000 Maximum DB+ 401(k) contribution for 2012: $199,200

– Contribution to DB Plan: $161,700– Contribution to 401(k): $37,500

Annual tax savings: $75,600 – Combined marginal tax rate of 38%

DB Accumulation at age 62: $2.42 Million– 10 years, 5 - 7% rate of return

Annual DB Benefit: $200,000

Sole proprietor, Wants Maximum Tax Deduction


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The Impact of Age on Contribution: The Older, The Better

Doctor Charles Age 52 10 Years to Retirement Compensation: $450,000 DB Contribution: $161,700 Annual Benefit at

Retirement: $200,000

Doctor Tim Age 35 27 Years to Retirement Compensation: $450,000 DB Contribution: $25,800 Annual Benefit at

Retirement: $200,000


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Anesthesiologists, C-CorpMarried Couple in Business Together

5 years from retirement W-2 Income: $500,000 ($250,000 each) Total annual DB contribution: $399,800

$195,700 towards Paul’s retirement $204,100 towards Mary’s retirement

Annual combined income tax savings: $151,900 Accumulation at retirement:

Paul: $1.13 MillionMary: $1.18 Million

Paul, Age 60, Mary, Age 58


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Mollie, Dentist, Age 55 +2 Employees

Owner’s W-2 income: $400,000Employee 1 age 28 earning $35,000Employee 2 age 35 earning $45,000

2012 DB contribution for owner: $188,200DB Contribution for Employee 1: $4,900DB Contribution for Employee 2: $9,50093% of contribution for Mollie

Annual income tax savings for Mollie: $71,500* Retirement accumulation for Mollie at 62: $1.69 Million

*Assumes 38% combined state/federal marginal rate

Dentist, C-Corp


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Walter, Age 60, Professor at Med School

In addition to university salary, Walter has self-employment income from consulting & serving on 2 biotech boards

Annual self-employment earnings: $100,000* DB contribution for 2012: $80,000 Annual tax savings: $30,400

combined marginal tax rate of 38% DB Accumulation at age 65: $464,400

5 years, 5 - 7% rate of return

* High 3-year average, after payment of self-employment taxes

Wants to Secure Retirement with Side Income, Sole Proprietor


Kumar, Age 48, Radiologist, C-Corp

2012 W-2 earnings: $135,000 Maximum DB contribution for 2012: $63,900 + 401(k) contribution for 2012: $25,100 Total deduction in 2012: $89,000 2012 tax savings: $33,800

– combined marginal tax rate of 38%

DB Accumulation at age 62: $1.63 Million– 14 years, 5 - 7% rate of return

Annual DB Benefit: $135,000

Wants high contributions in 2012 but needs flexibility as his income fluctuates


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Eligible Compensation for a DB Plan


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Key Dates

DB Plans must be opened by the end of your fiscal year, for most businesses that will be December 31st.

The Investment Account will be opened once the Adoption Agreement is signed. If you open the plan before year end, we recommend investing no more than 50% of the assets before you have your final year-end income statement.

The investment account must be funded when taxes are filed but no later than eight and a half months after the end of your fiscal year.


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Fees

Defined Benefit Plan DB Plan Set up: $1200 plus $50 per participant DB Annual Administration: $1600 plus $100 per

participant

OR

Defined Benefit & 401(k) Plans Set up: $1400 plus $50 per participant (owner

and spouse only) Annual Administration: $2050 plus $200 per participant

(owner and spouse only)


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Establishing a Plan

1. We can run a feasibility proposal for you

2. Bring your accountant into the discussion early

3. Once the plan meets your objectives, we’ll complete a Set-up Questionnaire

• Send signed Questionnaire to Dedicated DB• With Set-up Fee

4. We’ll send you an Adoption Agreement to sign

5. You can begin to fund the investment account

Defined Benefit Plan For Physicians

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