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Planning for the Future: Understanding The Permanente Medical Group (TPMG) Physician/Employee Retirement Plan Options

As a physician or employee of The Permanente Medical Group (TPMG) in Northern California, you likely have access to several retirement plan benefits to help you save for your future. These plans are designed to provide you with financial security in retirement, no matter when you plan to retire. In this article, we’ll provide a straightforward overview of the retirement plan benefits typically available to TPMG physicians and employees.

Plan 1: The Pension 

Most TPMG physicians and employees enjoy a pension plan that the TPMG organization funds on your behalf. Benefits are based on a formula that considers your compensation and years of service. TPMG physicians/employees are vested in the pension after 5 years of credited service and accumulate 2% of their highest average compensation during the first 20 years of credited service and 1% per year thereafter. For example, if you work for TPMG for 30 years at a full-time schedule with a highest average compensation (monthly) of $15,000, you could receive a monthly benefit of $7,500 at age 65 for the rest of your life. TPMG manages this benefit on your behalf, prior to receiving benefits you cannot direct investment choices.

Plan 2: The Company Contribution Plan

TPMG physicians and employees also have a company funded contribution plan. TPMG automatically contributes 5% of your total base (plus bonus) compensation, until compensation reaches the Social Security Wage Base ($160,200 in 2023). Once compensation exceeds this amount, TPMG contributes 10% of total compensation until reaching maximum annual compensation limit for contributions to retirement plans ($330,000 in 2023). The company contribution plan is fully vested after 5 years.

Plan 3: The 401(k)

This plan functions as a traditional 401(k) plan. Both traditional (pre-tax) and Roth (after-tax) options are available for employee contributions. A robust list of investment options is available for both Plan 2 and Plan 3 TPMG holdings through investment option that allows plan participants to access a self-directed (or financial advisor directed) account.

The SRP: Supplemental/Non-Qualified Retirement Plan for the Highly Compensated 

Because physicians and employees can be highly compensated, many of the benefits offered in Plans 1 and 2 are not available after a TPMG physician or employee exceeds $330,000 of earnings. To address this, TPMG chooses to fund a separate plan that falls outside of the normal IRS limits to allow highly compensated employees to continue to benefit from the retirement plans. This plan, known as the Supplemental Retirement Plan (SRP) is funded by TPMG on behalf of employees and is not eligible for certain government protections available to qualified plan participants. Additionally, all funds accumulated in the SRP are paid in a lump sum shortly after retirement, which can create some tax planning issues.

In conclusion, TPMG physicians and employees have access to a wide range of retirement plan benefits to help them save for the future. Whether you’re just starting your career or nearing retirement, it’s important to take advantage of these benefits to ensure you have a secure financial future. Speak to a Capital Advantage Financial Advisor or TPMG representative to learn more about the retirement plan benefits available to you as a TPMG physician or employee.

Disclaimer: Capital Advantage, Inc. is not affiliated, associated, authorized, endorsed by, or in any way officially connected with Kaiser Permanente® or TPMG (The Permanente Medical Group)

Author Profile

Ian Castille

The Author: Ian Castille

Ian is a Principal and Senior Financial Advisor at Capital Advantage, as well as a CERTIFIED FINANCIAL PLANNER™ (CFP®) and an Investment Advisor Representative. He is part of the investment committee, and is responsible for developing and maintaining client relationships, designing financial plans, and managing investment portfolios. Ian specializes in helping his clients navigate the financial transition to retirement. His work includes personalized strategies to reduce taxes, make smarter investment decisions, and optimize income streams. As an advisor, Ian believes his job is to bring peace of mind by providing financial clarity for his clients.