For all of the pharmacists in retail: I was wondering how much of YOUR salary, % or $, can you contribute where you work? I am wondering because of, you know, the IRS rule about highly compensated employees in a company. I hear that retail pharmacists are really limited in the amount that they can contribute to their 401k.
retail 401k
- Thread starter danzeb
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Aaaah - I just lost a long reply.....I'll try again!
This is a big problem with retail phrmacists.
The contribution maximums & definitions for highly compensated employees is set by the IRS annually. For 2006 - a highly compensated employee is one who makes greater than $100,000 (last year it was $96,000) & the maximum is $15,000 with an extra $5000 for those over 50.
The maximum % you can contribute is determined by your employer & can be as high as 40%. If they match, it is ususally lower - your employer will choose the rate & maximum amount they match. HOwever, if there is no match, it really is what you can afford, up to the amount allowed by the IRS.
The determination if the highly compensated employee participation rule becomes an issue because each year, the employer's retirement plan must demonstrate a set participation by lower compensated employees in proportion to the higher compensated employees. So...if there is not enough participation, IRS rules require the contribution is less. For my corporation last year (the max was $14,000), because there was not enough participation from low paid employees - the maximum was reduced to $8500. The participation is not determined until the end of the retirement plan year.
This is a problem in 2 ways:
First - you get a check back for $5500 with all taxes taken out in Jan - unplanned.
Second - you can't rely on a set amount each year you can set aside for retirement.
This is not as much of a problem in hospitals because there are more highly compensated employees & the employees, in all pay categories, generally tend to be more educated which has been shown to increase retirement participation. (Remember - all those courtsey clerks, or stock clerks who are high school or college students count - it is not just full time employees)
The maximums are determined by the IRS & change every year. That is why some of us choose to work only to the maximum which will not make us highly compensated employees - in the case this year to $100,000 & then work elsewhere. It saves the maximum 401K contribution & allows participation in not just another work environment, but also in another retirement plan.
If you are a business owner, the rules are different.
Its confusing, but I hope this helps.
This is a big problem with retail phrmacists.
The contribution maximums & definitions for highly compensated employees is set by the IRS annually. For 2006 - a highly compensated employee is one who makes greater than $100,000 (last year it was $96,000) & the maximum is $15,000 with an extra $5000 for those over 50.
The maximum % you can contribute is determined by your employer & can be as high as 40%. If they match, it is ususally lower - your employer will choose the rate & maximum amount they match. HOwever, if there is no match, it really is what you can afford, up to the amount allowed by the IRS.
The determination if the highly compensated employee participation rule becomes an issue because each year, the employer's retirement plan must demonstrate a set participation by lower compensated employees in proportion to the higher compensated employees. So...if there is not enough participation, IRS rules require the contribution is less. For my corporation last year (the max was $14,000), because there was not enough participation from low paid employees - the maximum was reduced to $8500. The participation is not determined until the end of the retirement plan year.
This is a problem in 2 ways:
First - you get a check back for $5500 with all taxes taken out in Jan - unplanned.
Second - you can't rely on a set amount each year you can set aside for retirement.
This is not as much of a problem in hospitals because there are more highly compensated employees & the employees, in all pay categories, generally tend to be more educated which has been shown to increase retirement participation. (Remember - all those courtsey clerks, or stock clerks who are high school or college students count - it is not just full time employees)
The maximums are determined by the IRS & change every year. That is why some of us choose to work only to the maximum which will not make us highly compensated employees - in the case this year to $100,000 & then work elsewhere. It saves the maximum 401K contribution & allows participation in not just another work environment, but also in another retirement plan.
If you are a business owner, the rules are different.
Its confusing, but I hope this helps.
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sdn1977 said:
Wow.. that is so cool that you can do both. Did you have to do a residency to work part-time in a hospital?
Ideally, when I graduate, I would love to be able to have the flexibility to do both..
sandyliu113 said:
No...I didn't do a residency, but that was a long, long time ago. The residencies at that time were predominantly administrative & I didn't want to do that (sorry Zpack!). I wanted to stay clinical. So...I was a hospital pharmacist for 23 years (not full time mind you - some full, some part-time, but specialized in ICU & nutritional support). Then I got fed up with staffing - a different thread completely! Finally, went part-time completely with both. I have much more patient interaction in the retail setting, but much more acute interventions in the hospital setting. Both are rewarding in different ways. Plus...I have 2 retirements
!I think you'd have to do a residency now to get more involved in hospital pharmacy than checking pyxis - which is EXTREMELY boring! So...do it while you're young! Also - contribute as much as you can to your retirement as early as you can.......life goes by so much faster than you ever realized!
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sdn1977 said:No...I didn't do a residency, but that was a long, long time ago. The residencies at that time were predominantly administrative & I didn't want to do that (sorry Zpack!). I wanted to stay clinical. So...I was a hospital pharmacist for 23 years (not full time mind you - some full, some part-time, but specialized in ICU & nutritional support). Then I got fed up with staffing - a different thread completely! Finally, went part-time completely with both. I have much more patient interaction in the retail setting, but much more acute interventions in the hospital setting. Both are rewarding in different ways. Plus...I have 2 retirements
So. do you mind me asking.. which retail setting do you work in.. To be honest, I am surprised that you get more patient contact in retail setting.. How do you manage that?
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Does anyone work for Walgreens? I was talking with their DM and he said their 401k matches 3 for 1. Does anyone know their limit for matching? It sounds too good to be true. I'm starting to get seduced by the power of the dark side...
