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Expect to include employees in your retirement plan

Practice Pointers. By Rita M. Schwager, amednews contributor. April 16, 2001.

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PRACTICE POINTERS

Answers to questions about the business side of your practice

SEE ARCHIVES

Question Several years ago I established a Keogh plan for myself. My accountant told me that I did not have to file a tax return. This year I have a new accountant who is telling me that I must file a tax return for the retirement plan, and that I must put money into the plan for one of my employees. I wanted this plan only for myself. Do I really have to include my employees? How can I get out of this situation?

Answer It sounds as if your accountant or plan administrator did not fully explain the provisions of your retirement plan.

What you are required to do is dictated by your plan document, your adoption agreement and the Employee Retirement Income Security Act.

The plan document is usually provided by the investment company that you have chosen to invest your money. A pension lawyer can also write a custom plan. The adoption agreement is a series of choices available to you to customize the plan to your situation.

For example, the requirements for eligibility, how quickly the employee is vested, and the calculation of the amount to contribute are all chosen by you through selections in the adoption agreement, within the parameters of the plan document. ERISA is the arm of the government that oversees the rules and regulations related to these plans.

In all cases, if you establish a retirement plan for yourself in a business, you will have to include your employees in the plan.

How soon the employees are eligible to participate can be manipulated somewhat in the adoption agreement and in your choice of plan type. But eventually, if the employee remains with your practice and works enough hours, he or she will qualify. [...]