Make sure you have right retirement plan

Practice Pointers. By Cathy B. Goldsticker, AMNews contributor. Sept. 15, 2003.

PRACTICE POINTERS

Answers to questions about the business side of your practice

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Question Our practice is an S corporation; I am the only physician. We established a Keogh plan three years ago; I am the only employee in the plan. Our practice also has three part-time receptionists who work less than 20 hours per week, and earn $10,000 to $13,000 per year. Our Keogh plan includes qualified employees after one year of employment. Is a Keogh the correct plan for us? Are our part-time employees qualified for the plan? If the plan has defects, how are they corrected?

Answer A Keogh plan is a retirement plan vehicle for self-employed individuals. A self-employed individual is defined as one who earns income from a business or profession that is owned or operated by this individual. The term includes sole proprietorships, partnerships and limited liability companies being taxed as a partnership. It does not include incorporated ventures, such as yours.

A Keogh plan is not the correct retirement plan for an S corporation. It would be best if you transfer plan assets into a SIMPLE plan, 401(k) plan, or money purchase pension plan.

A SIMPLE plan is for companies with 100 or fewer employees and must cover all employees who earned at least $5,000 in the proceeding year. Your employees may elect to contribute up to $8,000 per year; those who are 50 or older may contribute an extra $1,000 per year.