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Author: sonyajm Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75669  
Subject: Setting up company retirement plan Date: 4/22/1998 3:25 PM
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I am a physician with a practice set up as a corporation. After the 1997 tax bite (ouch), I want to proceed with setting up a retirement plan for myself and my employees. Been meaning to do it for a while. Nothing like a kick from uncle Sam to get you going!! I am paid as an employee of the corporation. I would like to defer the maximum amount of my compensation that I can. I believe that I will have to set up a 401k and/or profit sharing plan.

Now the question(s). Most of the entities that want to "help" us out with this,have an agenda of their own, and are certainly not "foolish". Most push high load Mutual funds as the investment vehicles of choice. Can I use a discount brokerage firm after I have my accountant draw up the plan document? The accountant would also administer the plan.

Would this fulfill my fiduciary responsibilities? Can the employees invest as they see fit, or do I have to limit their options?

I want to defer taxes on the maximum amount of my compensation, but I do not want to limit myself to mutual funds. Did any of this make any sense?
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2989 of 75669
Subject: Re: Setting up company retirement plan Date: 4/22/1998 5:28 PM
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Greetings, Sonyajm, and welcome.

<<I am a physician with a practice set up as a corporation. After the 1997 tax bite (ouch), I want to proceed with setting up a retirement plan for myself and my employees. Been meaning to do it for a while. Nothing like a kick from uncle Sam to get you going!! I am paid as an employee of the corporation. I would like to defer the maximum amount of my compensation that I can. I believe that I will have to set up a 401k and/or profit sharing plan.

Now the question(s). Most of the entities that want to "help" us out with this,have an agenda of their own, and are certainly not "foolish". Most push high load Mutual funds as the investment vehicles of choice. Can I use a discount brokerage firm after I have my accountant draw up the plan document? The accountant would also administer the plan.

Would this fulfill my fiduciary responsibilities? Can the employees invest as they see fit, or do I have to limit their options?

I want to defer taxes on the maximum amount of my compensation, but I do not want to limit myself to mutual funds. Did any of this make any sense?>>

It sounds like you're about to set up a qualified defined contribution retirement plan for yourself and your employees. I certainly hope your accountant is truly skilled in these matters. Otherwise, you should bite the bullet and spend $500 to $1K in consultation with an attorney and a Certified Financial Planner who specialize in such plans for small businesses. It's too easy to make some costly mistakes here.

As far as your investment options go, it will depend on the wording in the prototype document you implement with your provider. At a minimum you will need a conservative, medium and high risk set of options in the plan. These are typically satisfied with a money market fund, a bond fund and a stock fund. Personally, I would like to see multiple fund options that cut across the risk spectrum and one of them should definitely be a stock index fund. For those like you who want to invest on their own, you should ensure the plan includes a self-directed option as well.

Typically, discounters don't offer prototype plans for defined contribution arrangements. However, you can find what you want with Vanguard, Fidelity, Schwab and (I think), Jack White. Just check around and you can find a host of no-load, low-load offerings for your employees in addition to a self-directed option. Better yet, get yourself some additional consulting help beyond your accountant.

Regards.....Pixy

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