of $75,000 to $100,000 for doctors under age 50 and can be over $400,000 for 60-year-old physicians who qualify. At these very high contribution limits, you can catch up pretty quickly.

Nonqualified (NQ) Plans

Many doctors want to save for their retirement, but don’t want to pay too much for the employees who have to be covered in a “qualified” plan. Because these plans are not subject to the various qualified plan rules, NQ plans take many shapes and forms. Some are explicitly compensation plans that provide some long term retirement benefits and present tax reduction benefits to the key employee(s). Other plans are aimed primarily at a goal other than compensation.

Why NQ Plans Are So Attractive

The outstanding benefit of NQ plans over qualified plans is that NQ plans need not be offered to employees. This means only the doctors who want to participate can, making the costs of these plans relatively inexpensive for the physician-owners. Other benefits include the absence of penalties for withdrawals prior to 59 ? and the lack of burdensome compliance requirements. For these reasons, NQ plans can be extremely attractive.

Types of NQ Plans

While we will limit our discussion here to a number of popular types of NQ plans, we hope that this discussion furthers your interest in NQ plans and how they may play a role in your overall financial plan.

1. Compliant Split Dollar Plans

Split dollar plans have been the primary type of NQ plans in the corporate work place for the last 40 years. In fact, nearly all Fortune 1000 companies compensated their key executives with some type of split dollar plan. In the last two years, however, the IRS has changed the rules significantly regarding split dollar plans. Unfortunately, many advisors who do not practice in this area on a daily basis operate under the misconception that split dollar plans are now “dead”. Nothing could be further from the truth.

Under the new tax scheme, it is certainly more difficult to implement a split dollar plan for public companies. However, for private businesses, including all medical practices, split dollar plans can still be a viable option. In fact, given the low interest rate environment that we currently enjoy, now is a perfect time to implement a split dollar plan for a medical practice. Physicians can take advantage of this low interest rate (which affects the tax treatment of the structure) and enjoy significant retirement wealth accumulation without offering it to any employees. Thus, we highly recommend that you look into the option of compliant split dollar plan before the interest rate environment changes.

2. Asset Protection NQ Plans

In many circumstances, the central goal of a NQ plan may be asset protection for the practice assets. Nonetheless, the retirement tax benefits accrued for the key physicians are substantial. Most popular in this arena are the plans that asset-protect a practice’s accounts receivable (AR).

In these plans, the AR is typically leveraged (in some cases sold). If leveraged, tax benefits include potential tax deduction of the interest on the loan, plus the creation of an NQ investment fund with loan proceeds for the benefit of each participating physician. This way, the AR can be “leveraged” to provide a further retirement benefit for each participating physician, and perhaps to fund a buy-out for physicians when they retire. However, in this type of NQ plan it is crucial that both asset protection and tax issues be properly negotiated. In 90% of the plans that we have reviewed, there are significant pitfalls lurking in such plans. If this type of plan is of interest to you, we encourage you to contact us



3. NQ Plans Involving Outside Vendors

While certainly the rarest type of NQ plan, those involving outside vendors do exist. One that we are familiar with involves a vendor that may purchase AR (as above), provide medical consulting services to medical practices, or may even provide business lending. These transactions are independently evaluated by the physicians and are often extremely beneficial to the medical practice regardless of any NQ plan that may attach to it. In other words, a practice engages an outside firm to provide one of the above services, and as an incentive to do so, these firms will institute a NQ plan for the physician client. While the details of such NQ plans are beyond the scope of this article, suffice it to say that, in the right circumstances, these plans can be a double win for the physicians in the practice – getting the service that they need to run their practice, and enjoy a significant NQ retirement benefit.



Conclusion

Nearly every successful physician should consider a NQ plan. Qualified Plans give a maximum benefit of $40,000 per year, and they must include virtually all employees. This often makes qualified plans extremely expensive for the physicians and does not allow for significant retirement wealth accumulation. NQ plans do not require any employee participation and, therefore, are relatively inexpensive to implement. If building your retirement wealth is an important goal for your financial plan, we highly recommend you investigate options for NQ plans.

For a 40% discount on Jarvis & Mandell’s new book, Wealth Protection M.D., or for an audio CD on Asset Protection please call (800) 554-7233 or email info@wealthprotectionalliance.com.

Article Source: http://articlecrazy.com

David B. Mandell, JD, MBA is an attorney, lecturer, and author of Wealth Protection, MD. He is also a co-founder of The Wealth Protection Alliance (WPA) – a nationwide network of elite independent financial advisory firms whose goal is to help clients build and preserve their wealth. Keith L. Mohn, CLU, CHFC is a financial consultant and lecturer, and President of Benefits Solutions Group, LLC, in Keego Harbor, Michigan, a full service financial consulting and planning firm specializing in working with high net worth individuals, business owners and medical professionals. Mr. Mohn has been servicing the financial needs of medical professionals since 1983, is a member of The Wealth Protection Alliance and can be reached at 248-681-9320.

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