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Table 1. Comparison of Non-integrated and Integrated Plans a. Non-integrated Plan Participant Physician Nurse b. Integrated Plan Compensation $150,000 15.000 10% of Compensation $15,000 1.500 Total Contribution to Plan: Plan Contribution $15,000 1,500 $16,500 Participant Physician Nurse Compensation $150,000 15,000 5% of $15,000 10.7% of Excess £750.00 $14,445 750.00 -0- Total Contribution to Plan: Plan Contribution $15,195 750 $15,945 contribution the employee makes to the plan. This includes amounts he elects to defer under a 401(k) plan. This makes sense because, after all, the employee could have received the amounts deferred in a 401 (k) plan immediately as cash. C. '^Discrimination" and ''Integration." 1. ' 'Discrimination.'' Qualified retirement plans cannot "discriminate." This means they cannot favor officers, shareholders or highly-compensated employees over the employer's other employees. The prohibition against discrimination does not mean that all contributions an employer makes on behalf of employees under a defined contribution plan or all benefits a defined benefit plan pays to retired employees must be equal. Rather, the law provides that as long as those allocations or benefits reflect a uniform percentage of each employee's compensation, the plan is non-discriminatory. Thus, the allocation formula in a qualified defined contribution plan can allocate $25,000 to a physician's account, representing 25% of his $100,000 annual compensation. and $2,500 to a staff member's account, representing 25% of the staff member's $10,000 annual compensation. Similariy. a qualified defined benefit plan may pay an annual benefit of $90,000 to a retired physician and $10,000 to a retired staff member representing 100% of the physician's and staff member's final compensation. 2. "Integration." When retirement plan advisors speak of "integration" they mean the process of combining the Social Security system with the employer's qualified retirement plan. An employer with a qualified defined contribution plan can count contributions made to the Social Security system on behalf of an employee as if the employer made those contributions to the employer's plan. An employer with a qualified defined benefit plan can count the benefits an employee receives from the Social Security system as if the employer's plan paid the benefits. Integration can be a cost-saving feature in a qualified retirement plan. Naturally there are many rules regarding how an employer can integrate a plan. In a defined con- tribution plan, for example, an employer can contribute a certain percentage of compensation under the "integration level" and a higher percentage (currently a maximum of 5.7 percentage points higher) of compensation over the "integration level." The "integration level" is any compensation cut-off point the employer chooses, although if the employer uses a higher integration level than the Social Security wage base (currently $37,800) the employer must adjust the difference in contribution percentages downward. Retirement plan advisors generally recommend an integration level for physician's plans at or slightly above the highest staff salary for maximum cost efficiency. Integrating a defined benefit plan is more difficult and depends on the benefit formula in the plan. However, the theory is similar since it allows employers to integrate the benefits a retired employee will receive from the Social Security system with the benefits he will receive from the plan. For example, one type of integrated defined benefit plan allows an employer to "offset" the benefits its qualified retirement plan provides with the benefits the Social Security system provides. As a result, the employer can reduce its contribution to the defined benefit plan. Table I compares a non-integrated defined contribution plan with an integrated defined contribution plan. The integrated plan has an integration level of $15,000 and 5.7 percentage points difference between the two contribution percentages. You can see that with an integrated defined contribution plan the physician can make higher contributions to his own account while reducing the overall cost of the plan. IV. Conclusion We have just taken a glance at the tip of an iceberg. We hope that a basic understanding of some of the more common qualified retirement plan terms will help you communicate more efficiently with your retirement plan advisor. Our next article will cover in more detail recent tax law changes in this area, including the changes requiring plan amendments many of you are or will be adopting before the end of this year. 668 Vol. 45. No. 10
Object Description
Rating | |
Fixed Title * | NCHH-17: North Carolina Medical Journal [1940-2001] |
Document Title | North Carolina Medical Journal [1940-2001] |
Subject Topical Other | Public Health -- Periodicals.; Physicians -- North Carolina -- Directory.; Societies, Medical -- North Carolina -- Periodicals. |
Description | Includes Transactions of the Society, -1960; 1961- , Transactions issued separately, bound in.; Includes Transactions of the auxiliary to the Medical Society of the State of North Carolina and Proceedings of the North Carolina Public Health Association. Official organ of the Medical Society of the State of North Carolina, 1940-May 1972; of the North Carolina Medical Society, June 1972-. Vols. for 1940-May 1972 published by the Medical Society of the State of North Carolina; June 1972- by the North Carolina Medical Society. |
Contributor | Medical Society of the State of North Carolina. Transactions.; Medical Society of the State of North Carolina.; North Carolina Medical Society.; North Carolina Medical Society. Transactions.; North Carolina Public Health Association. Proceedings. |
Publisher | [Winston-Salem] : North Carolina Medical Society [etc.], 1940- |
Repository | University of North Carolina at Chapel Hill. Health Sciences Library. |
Host | University of North Carolina at Chapel Hill |
Date | 1984 |
Identifier | NCHH-17-045 |
Form General | Periodicals |
Language | English |
Rights | This item is part of the North Carolina History of Health Digital Collection. Some materials in the Collection are protected by U.S. copyright law. This item is presented by the Health Sciences Library of the University of North Carolina at Chapel Hill for research and educational purposes. It may not be republished or distributed without permission of the Health Sciences Library. |
Digital Collection | North Carolina History of Health Digital Collection |
Sponsor | The North Carolina History of Health Digital Collection is an open access publishing initiative of the Health Sciences Library of the University of North Carolina at Chapel Hill. Financial support for the initiative was provided in part by a multi-year NC ECHO (Exploring Cultural Heritage Online) digitization grant, awarded by the State Library of North Carolina, and funded through the Library Services and Technology Act (LSTA). |
Volume Number | 45 |
Health Discipline | Medicine |
Digital Format | JPEG 2000 |
Print / Download PDF Version | http://archives.hsl.unc.edu/nchh/nchh-17/nchh-17-045.pdf |
Document Sort | all; nchh-17 |
Volume Link | http://dc.lib.unc.edu/cdm/search/collection/nchh/field/identi/searchterm/NCHH-17-045 |
Title Link | http://dc.lib.unc.edu/cdm/search/collection/nchh/field/documa/searchterm/NCHH-17 |
Catalog Record link | http://search.lib.unc.edu/search?R=UNCb1306322 |
Revision History | done |
Description
Fixed Title * | Page 668 (image) |
Document Title | North Carolina Medical Journal [1940-2001] |
Subject Topical Other | Public Health -- Periodicals.; Physicians -- North Carolina -- Directory.; Societies, Medical -- North Carolina -- Periodicals. |
Description | Includes Transactions of the Society, -1960; 1961- , Transactions issued separately, bound in.; Includes Transactions of the auxiliary to the Medical Society of the State of North Carolina and Proceedings of the North Carolina Public Health Association. Official organ of the Medical Society of the State of North Carolina, 1940-May 1972; of the North Carolina Medical Society, June 1972-. Vols. for 1940-May 1972 published by the Medical Society of the State of North Carolina; June 1972- by the North Carolina Medical Society. |
Contributor | Medical Society of the State of North Carolina. Transactions.; Medical Society of the State of North Carolina.; North Carolina Medical Society.; North Carolina Medical Society. Transactions.; North Carolina Public Health Association. Proceedings. |
Publisher | [Winston-Salem] : North Carolina Medical Society [etc.], 1940- |
Repository | University of North Carolina at Chapel Hill. Health Sciences Library. |
Host | University of North Carolina at Chapel Hill |
Date | 1984 |
Identifier | NCHH-17-045-0280 |
Form General | Periodicals |
Page Type | all; all images; chart/table; article |
Language | English |
Rights | This item is part of the North Carolina History of Health Digital Collection. Some materials in the Collection are protected by U.S. copyright law. This item is presented by the Health Sciences Library of the University of North Carolina at Chapel Hill for research and educational purposes. It may not be republished or distributed without permission of the Health Sciences Library. |
Filename | ncmed45v21984medi_0280.jp2 |
Digital Collection | North Carolina History of Health Digital Collection |
Sponsor | The North Carolina History of Health Digital Collection is an open access publishing initiative of the Health Sciences Library of the University of North Carolina at Chapel Hill. Financial support for the initiative was provided in part by a multi-year NC ECHO (Exploring Cultural Heritage Online) digitization grant, awarded by the State Library of North Carolina, and funded through the Library Services and Technology Act (LSTA). |
Volume Number | 45 |
Issue Number | 10 |
Page Number | 668 |
Health Discipline | Medicine |
Full Text | Table 1. Comparison of Non-integrated and Integrated Plans a. Non-integrated Plan Participant Physician Nurse b. Integrated Plan Compensation $150,000 15.000 10% of Compensation $15,000 1.500 Total Contribution to Plan: Plan Contribution $15,000 1,500 $16,500 Participant Physician Nurse Compensation $150,000 15,000 5% of $15,000 10.7% of Excess £750.00 $14,445 750.00 -0- Total Contribution to Plan: Plan Contribution $15,195 750 $15,945 contribution the employee makes to the plan. This includes amounts he elects to defer under a 401(k) plan. This makes sense because, after all, the employee could have received the amounts deferred in a 401 (k) plan immediately as cash. C. '^Discrimination" and ''Integration." 1. ' 'Discrimination.'' Qualified retirement plans cannot "discriminate." This means they cannot favor officers, shareholders or highly-compensated employees over the employer's other employees. The prohibition against discrimination does not mean that all contributions an employer makes on behalf of employees under a defined contribution plan or all benefits a defined benefit plan pays to retired employees must be equal. Rather, the law provides that as long as those allocations or benefits reflect a uniform percentage of each employee's compensation, the plan is non-discriminatory. Thus, the allocation formula in a qualified defined contribution plan can allocate $25,000 to a physician's account, representing 25% of his $100,000 annual compensation. and $2,500 to a staff member's account, representing 25% of the staff member's $10,000 annual compensation. Similariy. a qualified defined benefit plan may pay an annual benefit of $90,000 to a retired physician and $10,000 to a retired staff member representing 100% of the physician's and staff member's final compensation. 2. "Integration." When retirement plan advisors speak of "integration" they mean the process of combining the Social Security system with the employer's qualified retirement plan. An employer with a qualified defined contribution plan can count contributions made to the Social Security system on behalf of an employee as if the employer made those contributions to the employer's plan. An employer with a qualified defined benefit plan can count the benefits an employee receives from the Social Security system as if the employer's plan paid the benefits. Integration can be a cost-saving feature in a qualified retirement plan. Naturally there are many rules regarding how an employer can integrate a plan. In a defined con- tribution plan, for example, an employer can contribute a certain percentage of compensation under the "integration level" and a higher percentage (currently a maximum of 5.7 percentage points higher) of compensation over the "integration level." The "integration level" is any compensation cut-off point the employer chooses, although if the employer uses a higher integration level than the Social Security wage base (currently $37,800) the employer must adjust the difference in contribution percentages downward. Retirement plan advisors generally recommend an integration level for physician's plans at or slightly above the highest staff salary for maximum cost efficiency. Integrating a defined benefit plan is more difficult and depends on the benefit formula in the plan. However, the theory is similar since it allows employers to integrate the benefits a retired employee will receive from the Social Security system with the benefits he will receive from the plan. For example, one type of integrated defined benefit plan allows an employer to "offset" the benefits its qualified retirement plan provides with the benefits the Social Security system provides. As a result, the employer can reduce its contribution to the defined benefit plan. Table I compares a non-integrated defined contribution plan with an integrated defined contribution plan. The integrated plan has an integration level of $15,000 and 5.7 percentage points difference between the two contribution percentages. You can see that with an integrated defined contribution plan the physician can make higher contributions to his own account while reducing the overall cost of the plan. IV. Conclusion We have just taken a glance at the tip of an iceberg. We hope that a basic understanding of some of the more common qualified retirement plan terms will help you communicate more efficiently with your retirement plan advisor. Our next article will cover in more detail recent tax law changes in this area, including the changes requiring plan amendments many of you are or will be adopting before the end of this year. 668 Vol. 45. No. 10 |
Digital Format | JPEG 2000 |
Print / Download PDF Version | http://archives.hsl.unc.edu/nchh/nchh-17/nchh-17-045.pdf |
Document Sort | all; nchh-17 |
Article Title | Talking With Your Retirement Plan Advisor: Overcoming The Language Barrier |
Article Author | Walter R. Rogers; Jennifer M. Dibble |
Volume Link | http://dc.lib.unc.edu/cdm/search/collection/nchh/field/identi/searchterm/NCHH-17-045 |
Title Link | http://dc.lib.unc.edu/cdm/search/collection/nchh/field/documa/searchterm/NCHH-17 |
Catalog Record link | http://search.lib.unc.edu/search?R=UNCb1306322 |
Revision History | done |
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