August 2001 Bulletin

New tax law has changes for retirement plans

Analysis will show whether current scheme is most economical approach

The Economic Growth and Tax Relief Reconciliation Act of 2001 makes significant changes to the operation of retirement plans. These changes will require an analysis of whether your current plan structure and approach is still the most economical approach for the practice. This analysis will be in terms of the cost of maintaining and funding the plan vs. the benefits that would accrue to the physicians as additional compensation without the plan.

Other tax changes during the course of the past 18 months include the elimination of the 15 percent excise tax on what was at the time determined to be the accumulation of excess retirement plan benefits, and a change in how retirement plan benefits can be paid out to beneficiaries upon the death of the eligible participant. This change now allows for the beneficiaries of the retirement plan to receive benefit distributions in equal amounts over their estimated lives, thus enabling the recipients to better manage the tax implications of the receipt of these retirement plan benefits. These types of changes continue to reinforce the value of utilizing a retirement plan as one means of accumulation of your investment asset.

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