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What a Dentist Near Retirement Should Ask About Plan Funding
Build a dental practice runoff budget, test delayed collections, and coordinate reduced earnings with defined benefit plan funding and termination work.
A dentist approaching retirement should ask how defined benefit plan obligations will be funded as clinical earnings decline, which costs continue after the last patient visit, and how the practice transition connects to the plan's own timeline. Start with a staged cash forecast and a written actuarial review before reducing work or committing sale proceeds elsewhere.
This guide focuses on an owner who already sponsors a plan and expects to reduce clinical work or sell. Our dentist decision guide covers initial workforce and plan preparation. Here the decision is how to finance the transition while completing the plan responsibilities.
Separate four dates before forecasting cash
Write down the planned reduction in clinical days, last owner payroll, practice sale or closure, and any proposed plan termination. These dates may differ. Ask who will employ the dentist after a sale and which entity will remain responsible for the plan. Have the transaction attorney and plan advisers resolve responsibilities before documents are signed.
A retirement announcement does not complete a plan termination. The IRS termination guide describes amendments, notices, outstanding required contributions, benefit distribution, and applicable final filings. It also explains that a plan with undistributed assets remains ongoing for qualification purposes.
Ask for a review using the reduced-work facts
Give the administrator and actuary the proposed schedule, compensation arrangements, employee changes, latest asset statements, and transaction outline. Ask which assumptions in the latest valuation change and whether additional work is needed before relying on its figures. A projection prepared while the owner worked full time deserves review when the transition changes those facts.
Ask the actuary to distinguish ongoing funding from the amount and timing needed for an intended termination. Ask about costs and obligations affecting employees as well as the retiring dentist. The IRS plan overview identifies the enrolled actuary's funding role and states that benefits cannot be reduced retroactively. A smaller collections forecast cannot establish permission to reduce accrued benefits or skip required funding.
Build a runoff budget outside the household plan
Prepare monthly business cash through the expected completion of transition tasks. Include remaining insurance collections, patient credits and refunds, final payroll, laboratory invoices, lease obligations, debt payments, professional fees, taxes, and plan payments supplied by the advisers. Mark which entity owes each item and whether cash is restricted or already committed.
Separately prepare the household budget, including the owner's expected pay and distributions during reduced work. Agree on one transfer between the business and household forecasts so the same dollar does not fund both. Keep trust assets outside operating cash. A projected practice sale price also needs its own bridge to actual proceeds after debt, transaction costs, taxes, and contractual holdbacks.
Hypothetical: can the transition absorb a late collection?
Illustrative six-month business runoff budget: All amounts below are invented management assumptions in thousands of dollars. They are not client results, benchmarks, actuarial estimates, allowable contributions, or tax calculations. Opening cash is unrestricted business cash. The household transfer includes all planned owner draws in this window; operating payments exclude those draws and the separately listed rows.
| Cash item ($000) | Base case | Delayed-collection case |
|---|---|---|
| Opening available cash | 180 | 180 |
| Collections received during the window | 260 | 210 |
| Operating and closure payments | (230) | (230) |
| Additional tax cash earmark | (35) | (35) |
| Transfer to household | (90) | (90) |
| Cash before plan and plan-administration payments | 85 | 35 |
| Management's protected closing cash floor | (40) | (40) |
| Room above the cash floor | 45 | (5) |
The base calculation is $180,000 plus $260,000 less $230,000, $35,000, and $90,000, leaving $85,000. After protecting $40,000, the budget shows $45,000 above the floor. Delaying $50,000 of collections beyond the window reduces closing cash to $35,000, which is $5,000 below that floor before any plan payments.
The collection delay is a timing assumption, not a permanent loss. Keep the tax earmark unchanged for this first stress test, then have the CPA update actual tax needs. Neither case establishes what the plan requires. Insert the advisers' dated payment schedule next; any shortfall needs a documented funding response before household withdrawals or sale distributions are committed.
Ask what a freeze or termination would actually change
Request separate written explanations of continued operation, any proposed change to future accruals, and termination. Ask what notices, amendments, valuation work, participant elections, and expenses each path entails. Do not assume that ending future accruals settles benefits already earned or eliminates administration.
Have the advisers confirm whether PBGC coverage applies. For a covered single-employer plan, PBGC's standard termination guidance describes settling all accrued benefits, participant notices, and required filings. Its Notice of Intent to Terminate timing is at least 60 and no more than 90 days before the proposed termination date. That notice window is one step in a larger process, not a promise of completion within 90 days.
Keep a transition register until the last task closes
Use one register with each obligation, responsible entity, adviser, cash requirement, target date, and completion evidence. Ask when assets will be valued again, what could change the amount needed, and who monitors unpaid invoices and missing participant information. For ongoing administration, retain the operating account and records the responsible professionals say are necessary.
Review the register whenever the sale date, work schedule, collections forecast, or adviser timeline changes. Our variable collections guide helps map the professionally determined payments into monthly cash. TaxBowl's dental accounting team and tax advisers can organize the business forecast and tax records for the actuary and transaction team before the dentist commits to a retirement date.
Video: cash forecasting and scenarios
The Financial Tech Lab by Clara CFO Group tutorial demonstrates general cash forecasting, cash floors, and scenarios. Use it to map the business cash assumptions above. It does not determine defined benefit plan funding, benefits, eligibility, tax treatment, or termination requirements.