Established Dental Practices
Q: I have an established dental practice and I need to reconsider my retirement investment options. I’ve heard about “cross-testing” but I’m not too sure how this affects me.
A: We get asked this a lot. Let’s break it down.
No two dental practices are the same. You have goals, resources and employees that are unique to your practice.
And no two retirement plans are the same, either.
What is Cross-Testing?
A 401(k) is certainly a retirement savings plan that you can consider, but there are other options that could produce stronger advantages to maximize your savings: 401(k) plans with a profit sharing option, straight profit sharing plans, and age weighted plans, to name a few.
These plans fall under the category of “cross-testing.”
Cross-testing allows us to weigh factors like your age, service or compensation to build a customized retirement plan for you that may produce a better advantage not found in other plans.
For example, if you are older than the average age of most of your employees, we may suggest an age weighted plan.
You have fewer years to accumulate assets before your retirement. In this scenario your individual contributions should be higher in order to defer money to your retirement plan at the same level of benefits as your younger staff.
Once we factor in your age, and your plan passes the federally mandated “threshold” testing by the IRS, you may be allowed to contribute a larger amount.
This “threshold” testing mandated by the IRS must prove that your retirement plan does not discriminate against any other plan participants as to the benefits received.
Cross-testing is just one of the many services that we administer and manage for our members.
At the end of every year your plan must be cross-tested by a third party administrator to ensure compliancy with the law and to dictate your level of benefits.
For more information and a complimentary retirement analysis, please
call (800) 851-0008.
For more information and a complimentary retirement analysis:
Ask for Elizabeth E. Clark, our Chief Executive Officer.
Elizabeth will speak with you about your investment needs, and introduce you to our Retirement Program Specialists.