Growing Medical Practice


Four partners, in a Cardiology Practice, were maximizing contributions to a profit sharing / 401(k) plan totaling about $200,000 for the partners in retirement savings. Each partner earned between $500,000 and $1 million annually. The partners were interested in increasing the amount they are able to put away for retirement while minimizing their risk of tax exposure.

With $1 million in Associate / Staff payroll, the firm was spending 6% on their employees in the profit sharing plan, equaling $60,000. [1,000,000 x .06 = $60,000]


The Partners had become frustrated with their inability to make large tax deductible contributions to their current retirement plan. Additionally, they are looking for a strategy to attract new partners to the medical practice.


A custom designed,Split Funded Defined Benefit Plan, was created for and presented to the partners as follows:

The partners increased their income tax deductible contribution from about $200,000 to $700,000 with a combination of their current 401(k) / profit sharing plan plus the addition of a Split Funded Defined Benefit Plan.

Total 401(k) for Partners: $79,000
Total Profit Sharing for Partners: $34,000
Total Split Funded Defined Benefit Plan: $587,000
Total Partners Tax Deductible Contribution: $700,000
Employee Contribution only increased from 6% to 8.5%, an increase of about $25,000.
  • In the 40% tax bracket, the $500,000 [700,000-200,000 = $500,000] of additional tax deductible contributions provided in this plan resulted in an additional $200,000 of tax savings [.40 x $500,000 = $200,000] for the owners. In other words, instead of writing a check to the IRS for $200,000 the owners will now pocket the $200,000 tax savings for themselves. Thus minimizing their tax exposure.
  • The plan provided each partner with $2.6 million of life insurance to be used for estate tax purposes.
  • The partners were delighted to learn how they could use this plan as an effective recruiting and retention tool to attract new partners to the practice. This was accomplished by allowing forsignificantincome tax deduction to any partner joining the practice.
  • Each partner’s particular plan and contributions are fully portable upon leaving the practice or upon retirement. Allowing partners maximum flexibility / mobility throughout their career.

Disclosure: PensionQuote and its representatives do not provide tax, accounting or legal advice, and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise). Any tax statements contained herein were not intended or written to be used for the purpose of avoiding U.S. federal, state or local tax penalties that may be imposed on the taxpayer. Individuals are urged to consult their own independent tax and legal advisors as to any accounting or legal statements herein before establishing a retirement plan and to understand the tax, ERISA and related consequences of any investments made under such plan.

Would you like more information? Please fill out the form below:

PensionQuote, Inc.

Telephone: 800.717.4723
Facsimile: 305.539.9732
E-mail: [email protected]

About Us

We are pioneers in retirement planning, featuring tax-advantaged defined benefit pension plans as exit strategies for high net worth clients. We partner with top industry Advisers to bring their clients preferred solutions to achieve large income tax deductions.


Coral Gables, FL

Call Us

Phone: 1-800-717-4723

Working Hours

Monday-Friday: 9:00am – 5:00pm

Pin It on Pinterest

Share This