Planning Strategies
A "Less-Taxing" Retirement Plan
A Welfare Benefit Trust offers appealing features not available in traditional retirement plans.

In searching for ways to help you and other ophthalmologists protect your hard-earned income and get relief from the burdensome taxes that reduce your net worth, I've discovered an exciting and unique retirement program.

Increasingly, physicians who are practice owners or partners are using a wealth-accumulation strategy known as a Welfare Benefit Trust (WBT). In this article, I'll tell you how a WBT can reduce your taxes, provide additional benefits and increase your assets.

Planning for your retirement is serious business. It's been estimated that only 50% of the retirement income objectives of high-earning individuals can be satisfied with qualified retirement plans and social security. This means that financial planners must find other strategies to meet your retirement income objectives.

CURRENT PLANS HAVE DRAWBACKS

Ophthalmologists who want to defer taxation have until recently been limited primarily to traditional qualified plans. You've been further hampered by changes in tax laws that restrict the compensation used for calculating benefits. Current tax laws limit how much you can contribute to your retirement plans, both on a personal and corporate basis. And once you reach retirement age, your annual benefit amounts are limited, as well.

For most of you, traditional plans translate to high administrative costs, limited flexibility and lower benefits for you as an ophthalmologist-owner. In addition, the premiums that you pay for life insurance aren't tax deductible under traditional retirement plans.

A Welfare Benefit Trust is designed to assist business owners in achieving the tax-deferred growth of plan assets while providing for tax-deductible insurance premiums. Created in 1984 through the Deficit Reduction Act (DEFRA), Section 419A (f) (6) of the Internal Revenue Code, it exempts multiple employer-funded Welfare Benefit Plans from the funding limitations that other benefit plans must adhere to. Many ophthalmologists are discovering that this wealth-accumulation vehicle meets their needs and can be used as either an alternative or as an addition to their current pension plan.

FLEXIBILITY IS THE KEY

A Welfare Benefit Trust provides you with flexible contribution options. The plan is funded based on your needs and/or the needs of your employees. Benefits are generally calculated based on compensation and years of service. This typically results in providing key employees and ophthalmologist-owners with a higher percentage of the benefits.

Many of you are well positioned to benefit from such a program due to the following:

• You are a practice owner or partner.
• You have fully funded or over-funded pension plans.
• You desire to accumulate significant assets in addition to pension benefits.
• You wish to reduce taxes on pension distributions.
• You desire to protect your business assets from creditors.
• You may wish to pre-fund your malpractice "tail" premiums.

WILL A WBT WORK FOR YOU?

If you're interested in a Welfare Benefit Trust, you should first have your financial consultant, accountant or insurance agent conduct a feasibility analysis to determine whether a WBT works for you. This analysis will enable you to evaluate all relevant information pertaining to your income, your employees' income, and other information relating to your practice and your own retirement needs.

In sum, a Welfare Benefit Trust can offer added flexibility not typically available in traditional pension plans. Through this strategy, you can fund significant benefits for both yourselves and your employees. 

Dr. Gable is chief executive officer of Dynamic Health Connections, Inc., in Lake Forest, Calif., which provides specialized consulting expertise for subspecialty physician groups, managed care organizations and other medical organizations. You can reach him at dhc38@aol.com.