Compare defined benefit plan proposals for a multi-dentist practice using identical census facts, individual owner funding, employee costs, recurring fees, and practice cash.
A multi-dentist practice should compare defined benefit plan proposals using one dated employee census, the same ownership and compensation facts, and a complete view of practice cash required. Compare each owner's illustrated benefit separately, then add employee funding, recurring administration, investment costs, and setup charges. A larger owner contribution headline does not tell the partners which proposal they can sustain.
This guide addresses the decision between proposals already requested. The dental practice decision guide covers the earlier workforce and financial preparation. Here, the deliverable is a comparison sheet that makes differences visible before the partners approve a design.
Create one input packet and label its version date. Include every worker's service and compensation records, ownership percentages, employing entities, related business relationships, existing retirement plan documents, and intended owner retirement goals. Ask each provider to acknowledge the packet used and list any exclusions or unresolved questions.
For a hypothetical comparison, assume one practice entity with two dentist owners, ages 52 and 44, each owning 50%; one employed associate, age 35; and eight other employees. Assume annual owner compensation of $260,000 and $220,000, associate compensation of $180,000, and aggregate compensation of $480,000 for the other employees. Both proposals use identical individual staff records, service histories, and existing 401(k) documents. These invented facts organize the comparison; they do not calculate eligibility or funding.
The IRS qualified-plan requirements guide addresses participation, coverage, nondiscrimination, compensation, and operation under plan terms. Ask the plan professionals to explain the population and compensation definitions they applied. A proposal that omits the associate or uses different owner pay needs reconciliation before its headline is compared.
Ask for two comparisons: the proposed benefit design and the provider's service quote. Otherwise a lower administration fee can distract from a materially different funding commitment. Request each owner's benefit illustration, the employee benefit approach, the assumptions used, and the interaction with the existing 401(k). Have the actuary distinguish minimum required funding, the proposed funding target, and any other illustrated funding amount.
The IRS defined benefit plan overview describes a formula-based benefit and identifies the enrolled actuary's funding role. The numbers in a sales illustration therefore need an explanation of their meaning. They are not a promise that the same contribution will remain available or required in every later year.
The following dollar amounts are invented budgeting inputs, not actuary-derived contribution estimates, permissible funding ranges, provider prices, or tax deductions. They demonstrate comparison arithmetic only. Both hypothetical proposals use the practice facts above, but illustrate different benefit designs. The “other employer funding” row includes all additional employer funding shown for the associate, staff, and coordinated 401(k); it excludes employee salary deferrals.
| Comparison row | Proposal A | Proposal B |
|---|---|---|
| Illustrated owner funding, owner 1 | $150,000 | $140,000 |
| Illustrated owner funding, owner 2 | $90,000 | $85,000 |
| Total owner funding | $240,000 | $225,000 |
| Other employer funding | $48,000 | $36,000 |
| Recurring administration and actuarial fees | $6,000 | $7,000 |
| Recurring practice cash subtotal | $294,000 | $268,000 |
| One-time setup charges | $4,000 | $5,000 |
| First-year practice cash subtotal | $298,000 | $273,000 |
Proposal A shows $15,000 more owner funding but requires $26,000 more recurring practice cash: $15,000 additional owner funding plus $12,000 additional other employer funding, less $1,000 in recurring fees. Its first-year subtotal is $25,000 higher because its setup charge is $1,000 lower. These subtotals exclude investment expenses and any unquoted services; the comparison is incomplete until those items are disclosed.
Do not subtract an assumed tax saving to declare a winner. The CPA must determine deduction treatment and each owner's tax consequences from the actual design and facts. Also distinguish employer funding from an individual participant's account value or promised retirement benefit; those labels are not interchangeable.
Request a dated actuarial explanation of funding under the proposed design and ask what happens when compensation, employee facts, or investment results change. Put expected payments into the practice's cash forecast. The funding-estimate guide explains the inputs behind later revisions.
For a separate budget sensitivity exercise, suppose the practice tests total annual cash requirements of $294,000–$330,000 for A and $268,000–$310,000 for B. These are deliberately invented stress ranges, not actuarial ranges or legal minimums and maximums. If the partners earmark $320,000 after protecting operating reserves, A's upper scenario exceeds that budget by $10,000, while B's leaves $10,000. Neither result establishes what the practice is legally allowed or required to contribute.
Ask whether the quote includes the actuarial valuation, testing, plan documents, participant communications, required filing preparation, and coordination with the existing administrator. Request separate pricing for amendments, distributions, corrections, and eventual termination. Clarify investment expenses, who pays each charge, and who answers questions after adoption.
For plans subject to ERISA, the Department of Labor's service-provider guidance recommends obtaining comparable information about services, experience, and costs, documenting selection, and monitoring performance and actual fees. Assign one partner to collect answers and record unresolved items before approval.
Close the comparison with each partner's benefit goal, the total practice cash schedule, written provider scope, and the advisers' remaining conditions. TaxBowl's dental practice accounting team can reconcile the common financial packet and prepare the cash comparison; our tax team can coordinate tax questions with the plan professionals before the partners commit.
