First attending level job but no 401k offered. What are the options?

[Swat]

Just started the physician job search as I will be a rising senior resident in a well paying specialty. Some potential employers have offered a 401k with profit sharing as well as some other great retirement plan options that I’m looking to take advantage of with a much higher salary than I currently make in residency.

However, one private practice that I’m incredibly interested in is a two physician couple (plus 2 midlevels) who each make very good money. However, on inquiring more about the job specifics further, they said they got rid of their 401k because it was too costly because they had to pay for their employees too. Seems to me that as a two physician couple, the pros would outweigh the cons. But then again, I've never started a small business 401k myself so I have no grounds for this.

Does it cost that much to setup a 401k plan for a small business for highly compensated owners but poorly compensated employees in comparison? How much extra for setting up a profit sharing component? Any recommended sites for information that I could direct them to in order to get it up and running? Any other thoughts?

I normally wouldn't focus on this practice at all given I'd be joining a husband/wife combo with no 401k, but the one physician has been my mentor for 5 years and takes care of my parents...essentially I like the way he practices. Thanks!

[Proud Foot]

My guess is that to non-discrimination testing they were not able to take full advantage of the tax benefits of having a small business 401k plan and then any matching offered for employees.  I'm not sure on costs of a small business plan or related components though. Is there a way you could set yourself up as an LLC and contract to work in their offices? This way you could set us a solo 401k for yourself. 

[frugaliknowit]

If you get a job offer there that you really like and think you won't be staying that long, you can always stockpile money, then when you change jobs in the future, funnell it into the new job's 401K (by maxing it out, then if necessary, subsidize some of your living with the stockpiled cash...).

You can also use IRA's to the extent you are allowed to (maximum incomes apply) and can invest in low turnover mutual funds (Vanguard Total Market and the like).

[mm1970]

I don't know the actual nitty gritty details.  Smaller 401ks can be expensive to manage.  Our company is about 80 employees, and our 401k fees are pretty high.

On top of that, we don't match.  And *most* of our employees are highly compensated.  (not me. wheeee.)  But I'd say that probably 60% are because it seems like we are mostly directors and above.

That means, since we don't match, that the highly compensated employees are limited to the amount that they put in.  I'm not sure of the number here, but at a prior company it was 4-5%.

I'd imagine that if you add up the fees, then figure that the doctors are either limited to putting in a few percent *OR* they have to do a company-wide match, they would consider it too costly.

The total amount put in by HCEs (average) cannot exceed that put in by non-HCEs (average) by more than 2%.

If half of your staff is making $200k and the other half $35k, you can see the problem.