Q&A: Multiple 401(k) plans for multiple businesses?

Q: Our group practice has a 401(k) plan. I plan to defer the maximum $16,500 to the plan from my salary. I also do some medical-legal consulting on the side. Can I also establish a 401(k) plan for that business and fund another $16,500?

A: No. Deferrals into a 401(k) plan are restricted to the annual limit ($16,500 for 2009, with an additional $5,500 if you are 50 years or older) per individual. Remember that a 401(k) is only a feature of a profit-sharing plan. For most doctors, contributions to a profit-sharing plan consist of two parts-the 401(k) deferral and the profit-sharing amount. Unlike the 401(k) deferral, there is no such restriction for the profit-sharing portion from more than one business. In your case, as long as you are not a 50 percent or greater owner of your group practice, you can fund a profit-sharing plan for your medical-legal consulting business up to the legal amount allowed, in addition to your group 401(k) plan. To keep things simple, you might want to establish a Simplified Employee Pension IRA, which will allow for the same retirement plan contribution. Both the SEP–IRA and the profit-sharing plan allow for discretionary funding ranging from 0 to 25 percent of salary or net consulting income, up to a maximum of $49,000.