Defined Benefit Plans in Detail

A Retirement Plan That Delivers Huge Tax Savings

A Defined Benefit (DB) plan is an IRS-approved qualified retirement plan that allows small business owners and self-employed professionals, like locum tenens physicians, to make large annual tax-deductible contributions that can save them tens of thousands of dollars in taxes each year.  Over the life of a Defined Benefit plan, a plan owner can potentially defer hundreds of thousands of dollars in taxes while rapidly and tax-efficiently building a multi-million dollar nest egg.

The chart illustrates how a 50-year-old locum tenens physician earning $350,000 per year could potentially cut his taxes almost $50,000 per year with a Defined Benefit plan or over $75,000 per year by combining a Defined Benefit plan with a 401(k).  In both cases, he is also saving almost $200,000 or more for retirement.

Why Do Defined Benefit Plans Work So Well For Locum Tenens?

Locum tenens physicians are ideal candidates for DB plans because they typically:

  • Are independent contractors with few or no employees
  • Earn a high income
  • Pay a high tax rate on their income
  • Have few expenses and little to no overhead, and therefore have few available tax deductions

A DB plan can also be combined with an Individual 401(k) plan to maximize tax savings and to add year-to-year flexibility to the overall plan contribution amount. Many locums whose annual income fluctuates significantly appreciate this flexibility.

Join our other locum tenens clients and learn how much you can save.               Calculate My Tax Savings

Defined Benefit Plans Offer a Number of Advantages

Highest Potential Contributions.  DB plans have the highest allowable, tax-deductible contribution limits of qualified plans. Contributions vary based on a variety of factors, including owner's age and income, but they can be as high as $100,000 per year or more.  Professionals in the right situation can combine a DB plan with a 401(k), making even larger, tax-deductible contributions, and further boosting retirement savings. 

  • In this example, a 50-year old locums making $350,000 per year could invest three to almost four times as much in a DB plan or a DB Plan with a 401(k) than he could with his 401(k) alone.  

Huge Tax Savings. The high contribution levels of DB plans allow plan owners access to larger tax deductions than possible with SEP-IRAs or 401(k)s.  These deductions can add up to big tax savings - $40,000 or more every year.

  • In this example a 50-year old locum tenens physician with an annual income of $350,000 can potentially cut his tax bill by $60,000 or over $70,000 in a single year by forming a Defined Benefit plan.

Rapid Wealth Creation.  The assets you contribute to a DB plan grow tax-deferred. This growth, combined with the higher contribution limits for DB plans, allow you to build a large retirement fund more quickly than you could with other retirement plans. 

  • If the same locums physician puts $190,000 in a Defined Benefit plan every year for ten years, his retirement savings could potentially grow to over $1.7M in 10 years.

Easy Rollover:  Tax-free rollover to an IRA at retirement (or at plan termination).

Simple Set-up: We walk you through the process from start to finish.

Flexible Investments: We work with you to develop an investment strategy suitable for your circumstances.

Will a DB plan work for you?  Read more.

Is a DB Plan Right For Me?


Learn more about how other locums are using DB plans to save on taxes.

Case Studies