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  • Avatar cocovaii 
    Participant
    Status: Physician
    Posts: 20
    Joined: 05/23/2019

    Reading WCI, physician on fire and other physician finance blogs, I see multiple references to tax deferred retirement plans adding up to ~56k per year. I know the 401k limit is 19k and I’m guessing the rest is from 457 plans and such.

    As a TPMG doc who is already a senior, are we allowed to put in more than 19k in tax deferred plans? What plan would I put it into and can I go up to the full 56k annually?

    Thanks ahead of time for the help!

    #216352 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 859
    Joined: 03/09/2017

    56k is usually for self-employed docs that can do an employee (19k) and employer (56k-19k) contribution.

    #216362 Reply
    Liked by Roentgen
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
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    Joined: 01/26/2017
    #216372 Reply
    Liked by Peds
    hatton1 hatton1 
    Participant
    Status: Physician
    Posts: 3062
    Joined: 01/11/2016

    If you are over 50 you can put an extra $6k into a 401K to “catch-up” or $25K.

    #216373 Reply
    Liked by Roentgen
    Wally World Wally World 
    Participant
    Status: Physician
    Posts: 37
    Joined: 01/08/2016

    Hi cocovaii! Yes, there is an option to put away more than the 19k in tax deferred plans at TPMG. If you look through the thread referenced by FLP above, the details are spelled out pretty clearly. I’d recommend you take a read through it, it’s long but there are lots of details therein.

    Here’s the thumbnail sketch hopefully addressing your questions:

    1. The total 401k contribution (including employee and employer contributions) maxes out at 56k (in 2019). You can contribute up to 19k as either pretax or Roth. As hatton1 points out (Hi hatton1!) if you are over 50, you can contribute an extra 6k (which is not included in the 56k) pretax or Roth. TMPG will kick in money up to $21,355 (in 2019) depending on your salary (details on how their contribution is calculated is in the aforementioned thread). This will show up on your NetBenefits homepage under “PERMANENTE CONT PLAN.” The difference between the 56k max and the 19k + whatever TPMG puts in can be contributed as an After Tax 401k contribution (obviously not tax deferred since it is after tax, but it can be converted to Roth so it will grow tax free). But that’s how you get to the 56k limit for the 401k. These three amounts (your pretax/Roth $ + the TPMG contribution + your after tax contribution) are all 401k.

    2. Additional tax deferred contributions can be made through the Deferred Contribution Plan (available to all senior physicians). This is a pretty restrictive plan that you can sign up for only once a year and once the enrollment period ends (enrollment start in mid to late November and goes on for a month or so), no changes are allowed with regards to % contributions and only limited changes are allowed with regards to distribution options. It is away to put a lot of money away in a tax deferred fashion. You can put in up to 100% of your salary and all contributions are pretax and grow in tax deferred fashion. It is a non-qualified plan, so I’d make sure you understand what that means before enrolling.

    Hope this helps

    WW

    #216379 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1193
    Joined: 01/26/2017

    Greetings Wally World, just wondering how your thinking has evolved on the deferred comp plan?

    #216393 Reply
    Avatar cocovaii 
    Participant
    Status: Physician
    Posts: 20
    Joined: 05/23/2019

    Really appreciate the rapid responses from all of you!

    My understanding of a non-qualified plan is that if Kaiser goes down as a business, my money that is in that plan is subjective to creditors and I can lose it. I also thought I read somewhere that if I leave Kaiser, I can’t take the money with me. I’m not sure what that means though – do I lose it or can I access it after retirement (after the age of 65)?

    Am I missing any other drawbacks?

    #216520 Reply
    hatton1 hatton1 
    Participant
    Status: Physician
    Posts: 3062
    Joined: 01/11/2016
    (Hi hatton1!)

    Click to expand…

    Hi back Wally World

    #216528 Reply
    Liked by Wally World
    Avatar Morbo 
    Participant
    Status: Physician
    Posts: 15
    Joined: 04/10/2019

    As Wally says, you can get to the $56k by doing $19k in the Roth or Pretax 401k, Employer Contributions of ~$21k.  The final piece is After Tax 401k Contributions (NOT the same as Roth 401k), which you can do an in-plan conversion to the Roth 401k or I think you can also transfer to Roth IRA (this is the so-called “Mega-Backdoor Roth IRA”).

    Note that you are capped at roughly $15k for After Tax contributions, so if you don’t make enough to cap out on the employer contributions, you can’t hit $56k.

    #216550 Reply
    Avatar StarTrekDoc 
    Participant
    Status: Physician
    Posts: 2040
    Joined: 01/15/2017

    The DCP is great, but non-qualified, yes — so at risk as the health of Kaiser —  we never chose to do it, so the exit plans on it I have no idea.

    We just got the TPMG update on funding :  they are at 105% of funding levels 🙂

    #216556 Reply
    Wally World Wally World 
    Participant
    Status: Physician
    Posts: 37
    Joined: 01/08/2016

    Greetings Wally World, just wondering how your thinking has evolved on the deferred comp plan?

    Click to expand…

    Hi FLP! (glad to see that your hiatus from the forum was short lived!) I’ve been putting a small % of salary into the DCP for the past few years. Given the tax situation living in California (and the limited options as a W2 employee in getting $ into tax deferred accounts), it’s just too tempting to pass up completely. Since the additional risk of the plan (outside of investment risk) is related to TPMG bankruptcy, I’ve moved to selecting the shortest distribution option (ie a lump sum paid 5 years from the year of contribution). Since you can delay the payment at any time (but no less than 12 months before the scheduled payment), I’ll just push it back another 5 years if that seems to make the most sense a year before scheduled distribution (which would be at the time of plan enrollment, so isn’t hard to keep track of). I think the biggest threat to our organization would be the move to single payer in CA (and the associated elimination of health care intermediaries, ie Kaiser Health Plan), so I plan to make the decision annually depending on how the political winds are blowing at the time. Of course, the longer the $ stays in the plan the better so unless disaster seems to be looming, I plan on just shuffling the distribution dates forward.

    I remember you mentioned that you were utilizing the DCP as well… I’d be interesting in learning about your approach to the distribution options.

     

    My understanding of a non-qualified plan is that if Kaiser goes down as a business, my money that is in that plan is subjective to creditors and I can lose it. I also thought I read somewhere that if I leave Kaiser, I can’t take the money with me. I’m not sure what that means though – do I lose it or can I access it after retirement (after the age of 65)?

    Click to expand…

    Correct, in case of TPMG’s insolvency or bankruptcy, the plan assets are subject to claims by creditors. I believe that if you leave TPMG with money still in the plan, the planned distribution will still occur as selected (though I don’t know if you can make changes to distribution the same way you can while employed). The money can’t be rolled over into a different account and will not be paid out as a lump sum on separation. At one of our Benefit Planning Seminars, the presenter said that the only triggers for lump sum payment of the account balances are death of the account holder, change in TPMG ownership, or termination of employment due to disability.

    #216706 Reply
    Liked by Peds
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1193
    Joined: 01/26/2017

    Greetings Wally World, just wondering how your thinking has evolved on the deferred comp plan?

    Click to expand…

    Hi FLP! (glad to see that your hiatus from the forum was short lived!) I’ve been putting a small % of salary into the DCP for the past few years. Given the tax situation living in California (and the limited options as a W2 employee in getting $ into tax deferred accounts), it’s just too tempting to pass up completely. Since the additional risk of the plan (outside of investment risk) is related to TPMG bankruptcy, I’ve moved to selecting the shortest distribution option (ie a lump sum paid 5 years from the year of contribution). Since you can delay the payment at any time (but no less than 12 months before the scheduled payment), I’ll just push it back another 5 years if that seems to make the most sense a year before scheduled distribution (which would be at the time of plan enrollment, so isn’t hard to keep track of). I think the biggest threat to our organization would be the move to single payer in CA (and the associated elimination of health care intermediaries, ie Kaiser Health Plan), so I plan to make the decision annually depending on how the political winds are blowing at the time. Of course, the longer the $ stays in the plan the better so unless disaster seems to be looming, I plan on just shuffling the distribution dates forward.

    I remember you mentioned that you were utilizing the DCP as well… I’d be interesting in learning about your approach to the distribution options.

     

    My understanding of a non-qualified plan is that if Kaiser goes down as a business, my money that is in that plan is subjective to creditors and I can lose it. I also thought I read somewhere that if I leave Kaiser, I can’t take the money with me. I’m not sure what that means though – do I lose it or can I access it after retirement (after the age of 65)? 

    Click to expand…

    Correct, in case of TPMG’s insolvency or bankruptcy, the plan assets are subject to claims by creditors. I believe that if you leave TPMG with money still in the plan, the planned distribution will still occur as selected (though I don’t know if you can make changes to distribution the same way you can while employed). The money can’t be rolled over into a different account and will not be paid out as a lump sum on separation. At one of our Benefit Planning Seminars, the presenter said that the only triggers for lump sum payment of the account balances are death of the account holder, change in TPMG ownership, or termination of employment due to disability.

    Click to expand…

    Hey Wally World, since you are the forum’s premier authority on TPMG/Kaiser benefits what did you think about my analysis on Deferred comp: https://www.whitecoatinvestor.com/forums/topic/flps-analysis-of-457-non-qualified-deferred-comp-plans/

    For each year’s contribution, I have been selecting initiation of payout in 5 years which as you know is the minimum allowed. As far as I can tell there is no advantage to selecting anything longer, since it can be rolled back in 5 year increments.

    I am selecting for the payout to be disbursed quarterly over a 5 year period. I think getting paid out over a 5 year period is better than lump sum as presumably the investment will continue to appreciate over the disbursement period, and you are avoiding a lump sum tax hit.

    I think in the case of a single payer system being implemented in California, I am presuming that although Kaiser ?? may cease to exist, the physician medical group (TPMG) will continue to exist. But who knows??

     

    #216718 Reply
    Wally World Wally World 
    Participant
    Status: Physician
    Posts: 37
    Joined: 01/08/2016
    since you are the forum’s premier authority on TPMG/Kaiser benefits

    Click to expand…

    Ha! Don’t know about that. Though I have been to several of the Benefits Planning Seminars put on by the Sage Financial people over the years. I find them reassuring.

    what did you think about my analysis on Deferred comp: https://www.whitecoatinvestor.com/forums/topic/flps-analysis-of-457-non-qualified-deferred-comp-plans/

    Click to expand…

    Thanks for directing me to that thread. I completely missed it (was a labor intensive work week for me with not much forum browsing time). On initial glance, I’d agree with your conclusions that “The more money that is deferred, the larger the benefit. The longer time money is deferred, the larger the benefit.” Issue that keep me from putting a larger amount into the DCP include that I don’t know how to factor in the extra risk associated with the non-qualified nature of the plan or the value of the extra flexibility of an after-tax account. For my own personal retirement planning, I like putting aside pretax dollars (401k, KP Plan 2 contributions, DCP), Roth dollars (backdoor Roth IRAs, mega backdoor 401k), after tax dollars (regular taxable account). Since limits on what I can put into each bucket are determined by law and my income (Captain Obvious here, I guess), more money in to DCP would preclude me from doing other types of investing/savings. It works out for the past few years that I put away around 40% pretax, 20% Roth, 40% after tax for retirement. Its a balance that I feel comfortable with & I like being diversified across each of these areas. This keeps me from putting 50% of my salary (like the example in your thread) into the DCP at this point.

    For each year’s contribution, I have been selecting initiation of payout in 5 years which as you know is the minimum allowed. As far as I can tell there is no advantage to selecting anything longer, since it can be rolled back in 5 year increments.

    Click to expand…

    Completely agree. I do the same.

    I am selecting for the payout to be disbursed quarterly over a 5 year period. I think getting paid out over a 5 year period is better than lump sum as presumably the investment will continue to appreciate over the disbursement period, and you are avoiding a lump sum tax hit.

    Click to expand…

    I look at this a bit differently. Since each years contribution is a separate entity (ie not one pile of money but each year is considered separately), having the payments spread out over a 5 year period will result in getting partial payments from different years in the same year. Hmmm… that was an awkward sentence. Example of what I’m trying to say. Assume several years of consecutive contributions all disbursed quarterly over a 5 year period. In years 1-5, no disbursement. In year 6, you start receiving quarterly payments from year 1. In year 7, quarterly payments from years 1 and 2. Year 8, quarterly payments from years 1-3. etc So starting in year 10 (and every year thereafter) you are getting 5 years worth of partial payments each quarter which doesn’t seem all that different from just getting a lump sum from one year at a time (and it is more complicated to manage, at least to me!). I hope this makes some sense.

    Also, the fact that I’m putting away less $ in DCP than in your example makes this a less important decision for me.
    Best,
    WW
    #216789 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1193
    Joined: 01/26/2017
    since you are the forum’s premier authority on TPMG/Kaiser benefits 

    Click to expand…

    Ha! Don’t know about that. Though I have been to several of the Benefits Planning Seminars put on by the Sage Financial people over the years. I find them reassuring.

    what did you think about my analysis on Deferred comp: https://www.whitecoatinvestor.com/forums/topic/flps-analysis-of-457-non-qualified-deferred-comp-plans/ 

    Click to expand…

    Thanks for directing me to that thread. I completely missed it (was a labor intensive work week for me with not much forum browsing time). On initial glance, I’d agree with your conclusions that “The more money that is deferred, the larger the benefit. The longer time money is deferred, the larger the benefit.” Issue that keep me from putting a larger amount into the DCP include that I don’t know how to factor in the extra risk associated with the non-qualified nature of the plan or the value of the extra flexibility of an after-tax account. For my own personal retirement planning, I like putting aside pretax dollars (401k, KP Plan 2 contributions, DCP), Roth dollars (backdoor Roth IRAs, mega backdoor 401k), after tax dollars (regular taxable account). Since limits on what I can put into each bucket are determined by law and my income (Captain Obvious here, I guess), more money in to DCP would preclude me from doing other types of investing/savings. It works out for the past few years that I put away around 40% pretax, 20% Roth, 40% after tax for retirement. Its a balance that I feel comfortable with & I like being diversified across each of these areas. This keeps me from putting 50% of my salary (like the example in your thread) into the DCP at this point.

    For each year’s contribution, I have been selecting initiation of payout in 5 years which as you know is the minimum allowed. As far as I can tell there is no advantage to selecting anything longer, since it can be rolled back in 5 year increments. 

    Click to expand…

    Completely agree. I do the same.

    I am selecting for the payout to be disbursed quarterly over a 5 year period. I think getting paid out over a 5 year period is better than lump sum as presumably the investment will continue to appreciate over the disbursement period, and you are avoiding a lump sum tax hit. 

    Click to expand…

    I look at this a bit differently. Since each years contribution is a separate entity (ie not one pile of money but each year is considered separately), having the payments spread out over a 5 year period will result in getting partial payments from different years in the same year. Hmmm… that was an awkward sentence. Example of what I’m trying to say. Assume several years of consecutive contributions all disbursed quarterly over a 5 year period. In years 1-5, no disbursement. In year 6, you start receiving quarterly payments from year 1. In year 7, quarterly payments from years 1 and 2. Year 8, quarterly payments from years 1-3. etc So starting in year 10 (and every year thereafter) you are getting 5 years worth of partial payments each quarter which doesn’t seem all that different from just getting a lump sum from one year at a time (and it is more complicated to manage, at least to me!). I hope this makes some sense.

    Also, the fact that I’m putting away less $ in DCP than in your example makes this a less important decision for me.
    Best,
    WW
    Click to expand…

    Hi Wally World, yes i agree with your analysis. the fact that each year of contributions is treated as a separate entity, with the possibility of varying distribution scheuldes, makes it flexible but kind of unwieldly as well due to overlapping payouts.

    I did have a question for you: I have seen several physicians (who have >20 years service) work past the age of 60. Do you agree that there really is no (or minimal) financial reason or benefit to do so, as they could start drawing a un-reduced pension at 60. Working part time at 60 makes even less sense as you would make more retired than working.

    #216857 Reply
    Wally World Wally World 
    Participant
    Status: Physician
    Posts: 37
    Joined: 01/08/2016

    I did have a question for you: I have seen several physicians (who have >20 years service) work past the age of 60. Do you agree that there really is no (or minimal) financial reason or benefit to do so, as they could start drawing a un-reduced pension at 60. Working part time at 60 makes even less sense as you would make more retired than working.

    Click to expand…

    I do know a few physicians who have chosen (or plan) to work past the age of 60 despite qualifying for Full Early Retirement. It doesn’t make much sense to me from a financial perspective. If you want to continue to practice medicine, there are plenty of non-Kaiser options out there (I know of docs who have retired around 60 and then started working at the VA or county hospital, staffing resident clinics etc while collecting their pensions).

    I think it is important to keep in mind that the Full Early Pension will only pay when retired from ages 60 to 65 (after 65 is your regular pension which is really a separate entity entirely). I suppose that’s why there’s no actuarial reduction in the Plan 1 payment when taking Full Early, it’s a separate plan (as opposed to taking early retirement between 55 and 60). Any time still working during those years leads to a loss of the Full Early payments that would have been paid out forever (ie one can only get a maximum of 5 years worth of these payment and only during those ages). Since your Full Early payments are based on your maximum salary during your tenure (not based on the IRS compensation limit like your regular pension [Plan 1] starting at 65), that can be a lot of “free” money left behind on the table.

    My own plan (at the moment) with just over a decade left to 60:

    1. Retire at 60. Lifetime health insurance and $ benefits just seem too good to pass up on (KP version of golden handcuffs). And working for KP isn’t too bad (most of the time :-)). Probably will look to reduce my work schedule leading up to 60 but not so much that I don’t hit 20 years of service (don’t want to miss out on any of the 2% years).

    2. Collect Full Early Payments from 60-65. (so at least 40% of my 3 year ave max salary)

    3. Collect Supplemental Retirement Lump Sum Payment at 65 and 1 month. If they deliver as promised (and interest rates don’t do anything crazy given that a 1% rise in interest rates leads to a 10% drop in the SRP), it’ll be a fairly large check & after taxes should be able to provide living expenses for several years.

    4. Defer regular pension payments (plan 1) until 70 or so. For every year the Plan 1 payment is deferred after 65, the payment goes up by 8% (assuming you pick the 100% joint retirement income annuity with 15 year minimum period and pop-up option).

    5. Look to do some Roth conversions ages 66-69 (assuming I don’t screw up my Deferred Compensation accounts and have too much paid out during that time!)

    Any criticism or comments on this plan are welcome. Of course, who knows what Kaiser or TPMG (or the federal government or California or ?) will do and what may change over the next 10-20+ years (health, family issues, climate, earthquake, etc etc). “Best laid plans of mice and men…” and all that 😉

    #216978 Reply
    Liked by Hank, StarTrekDoc

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