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Kaiser Permanente SCPMG Keogh Plan

I am writing this post to shed a little light on what a Keogh plan is. Physicians at Southern California Permanente Medical Group (SCPMG) are given the option to invest in a Keogh by automatic deductions from gross paychecks. This is separate from the 401k option and different from the pension plans offered by Kaiser Permanente. Let’s get into the weeds of the SCPMG Keogh plan held at Charles Schwab.

What Is A SCPMG Keogh Plan

A Keogh plan is a type of retirement plan specifically for SCPMG, it’s a defined contribution plan (DCP). However much you contribute to this plan is what you can withdraw upon appropriate retirement age (60).

If you lost money in your investments over the years, then you’d have less to take out and if you made money on your investments, then you would have more.

The terms defined contribution and defined benefit are thrown around a lot. They are referred to also by DCP and DBP, respectively. Simply put, your traditional pension plan is a defined benefit plan, and these are becoming incredibly rare as our economic backbone is becoming less and less reliable.

Defined contribution: based on what you contribute (401k, IRA, etc).
Defined benefit: based on a set benefit amount determined by your employer (traditional pension plan).

You’ll rarely see the word Keogh used, it’s mostly referred to by professionals and the IRS as a qualified plan. Note, the term qualified plan is simply an umbrella term for any retirement plan that qualifies for the criteria set out by the IRS.

A Keogh plan is a plan that an employer or partnership can establish to set more money aside for their highly compensated employees. It’s not much different from a SEP IRA.

How Much Can You Contribute To Your Keogh Plan?

Regardless of how much income you earn as a partner at SCPMG, you are limited to 25% of up to $210,000 of your gross income (for 2017). And since many of you are also contributing to a 401k, your total retirement contribution for 2017 cannot exceed $54,000.

As I am updating this in 2022, the contribution limit is $61,000.

So, in 2017, if you max out your 401k with KP to the tune of $18,000, then you have another maximum of $36,000 that can be deducted from your paycheck (total of $54k) and stuck into that Charles Schwab Keogh plan of yours.

If you aren’t contributing to your 401k, then your benefits department will let you set aside up to $54,000 into your Keogh plan if you opt to have this deduction – as long as you earned at least $210,000. If you earned only $150,000 because you’re part-time or a slacker, then you would only be able to set aside $37,500 (25%*$150,000).

Your Fund Options In A Keogh Plan

SCPMG doctors have their Keogh held at Charles Schwab, a brokerage house. Usually, their 401k is held at the same institution. For the most part, the 401k and Keogh accounts have the same investment options – but they aren’t exactly similar.

You have 25 funds to choose from in the Keogh plan. That’s a decent list, not too big or too small. CS has included plenty of Vanguard funds. VG has funds with the lowest cost (lowest expense ratios) and is known to be a trustworthy company.

Vanguard Target Date Funds

Let me try to explain what a target fund is. Basically, a VG groups a few of its popular mutual fund products into one fund (which is why it’s sometimes called fund-of-funds) and they adjust the proportion (asset allocation) for you as you get older in age.

Their strategy is to make the portfolio more “conservative” as you get older. For this service, they are charging you a slightly higher expense ratio. Index funds aren’t “free”, the company that created them charged you an expense ratio yearly. You can find these fees on the fund’s prospectus.

When you invest in these target funds, you can get a ratio of:

  • US bonds
  • International bonds
  • US stocks
  • International stocks

Supposedly, this is a diversified portfolio. The only change from one target fund to the next is the ratio of the funds I mentioned above.

The image below shows where you can find the annual cost of your fund. This is a snapshot from Vanguard’s website.

I compiled a list of the target funds which are available in the SCPMG Keogh plan. You can read quite a bit about them on their prospectus summary (linked to by clicking on the fund) or by going to Vanguard’s website and learning more about target funds.

VFT15TP – Vanguard Target Retire Trust Plus 2015
VFT20TP – Vanguard Target Retire Trust Plus 2020
VFT25TP – Vanguard Target Retire Trust Plus 2025
VFT30TP – Vanguard Target Retire Trust Plus 2030
VFT35TP – Vanguard Target Retire Trust Plus 2035
VFT40TP – Vanguard Target Retire Trust Plus 2040
VFT45TP – Vanguard Target Retire Trust Plus 2045
VFT50TP – Vanguard Target Retire Trust Plus 2050
VFT55TP – Vanguard Target Retire Trust Plus 2055
VFT60TP – Vanguard Target Retire Trust Plus 2060
VFTITP – Vanguard Target Retire Trust Plus Income


Large Company Stock

If you prefer mutual funds, which invest mostly in larger companies then the funds below are the right option for you. I can’t recommend what you should put into your portfolio, it depends on your risk tolerance and your investment philosophy.

The very last one on this list, the Vanguard Social Index fund, supposedly invests in funds that are socially and environmentally responsible.

USEQF – BTC US Equity Market Index Fund
JFRNX – Janus Forty N
VHCAX – Vanguard Capital Opportunity Adm
VFTNX – Vanguard FTSE Social Index I


Small/Mid Cap

So we just talked about large companies. Well, here are options for small or mid-cap (cap=capitalization). The theory is that these are likely to return more on your investment but are more volatile.

159H – Cambiar Small Cap Value
DFQTX – DFA US Core Equity 2 I
180J – Robeco Boston Partners Small Mid-Cap Value Fund
VSCPX – Vanguard Small Cap Index InstlPlus

International & Global

You might be interested in investing in funds outside of the US. Maybe you aren’t happy that we have artificially kept interest rates low, flooded the economy with a ton of currency and that we are way overextended on borrowing.

These are the options that you have below. Remember, if you invest in the target funds which I mentioned above, then you will have exposure to international funds as well.

RWIGX – American Funds Capital World Gr&Inc R6
CCYIX – Columbia Acorn International Y
DODFX – Dodge & Cox International Stock


Rest of the Hodge Podge

I didn’t know how to categorize the rest of these so I included them last. The Wellington seems to be invested mostly in dividend-paying funds, great for someone who wants to be positioned in a dividend strategy.

The last two are “fixed income”, they are likely invested in CD’s or bonds or something of the sort. I haven’t looked at them, I have no interest in them. Though these might be great for someone who wants an incredibly conservative portfolio that’s even more shielded from market fluctuations.

VWENX – Vanguard Wellington Admiral

180D – Standish Mellon Fixed Income Fund

180C – Interest Income Fund


What Should You Invest In?

I think this is a common enough question, and I’m sure you’ve noticed that everyone tries their best not to answer that question, which is a bit silly but also has a reason.

You can’t start with the question of what to invest in. What risks you are willing to take, whether you want to invest at all, how much work you are willing to put into researching your investments and what you will do when your investments drop in value? You need to know how soon you need your investments and how secure your job is.

Do you want to do what most financial advisers are recommending? Well, then you want to follow the modern portfolio theoryand invest in a mix of low-cost index funds of mostly stocks and some bonds.

Out of the mixed funds I see on there, it seems that the Vanguard Target Funds are among the best options. Generally, these have high expense ratios, but because they are offered as institutional funds, their costs have been drastically cut for SCPMG doctors – you only pay 0.06% to hold the 2060 Vanguard Target Fund.

How much Is Your Keogh Costing You?

We already talked about the expense ratio. So if you have $100,000 invested in the Vanguard 2060 Target Fund, you’ll pay 0.06% per year or $60 per year. Yes, the math is correct, that’s: 0.0006*100,000=60.

What are the fees for the Keogh plan held by CS? I couldn’t tell you. Yeap, after all the drama we had in 2008 from shady bankers getting away with risky investments and lack of transparency, I am still unable to find the fees for CS to manage our Keogh plan.

Managing Your Keogh Outside Of Charles Schwab

What if you prefer to be mostly invested in REITs or invest in junk bonds (no comment), how do you do that within your Keogh? Well, we’re gonna get into the 2 options you have with your particular Keogh plan, which you wouldn’t have with 401k’s and most IRA’s.

There is so much jargon used in the financial industry purely for the sake of confusing the end-user. Charles Schwab gives you 2 option for self-managing your investments, get ready to be be confused.

Options 1: You open a private Charles Schwab account, called a PCRA (Personal Choice Retirement Account). How much does this option cost? No idea.

Options 2: You can open an ESDBA (External Self Directed Brokerage Account). In this option, you can take your Keogh money and transfer it (roll it over) to a limited list of brokerage houses. Again, the advantage here is that you’ll get an even bigger list of investment options.

For option 2, I actually found a little blurb about costs, read it for yourself. Naturally, they will charge extra fees for taking your money outside the Keogh plan. In CS’s defense, a Keogh is a pain in the ass to set up, which is why very few brokerage houses offer it.

FYI, back when I was employed at SCPMG, I chose this ESDBA option which was a nightmare to set up. CS “mistakenly” turned my application into a PCRA. How convenient, since with a PCRA the money would stay at CS.

I wouldn’t recommend investing outside of what you see in your Keogh unless you know something that others don’t. It’s too much work and there isn’t enough transparency to safeguard you against fees.

Your Keogh After You Leave KP

A Keogh is a fantastic investment vehicle and the funds offered within KP’s Keogh are among the best. I wanted to say that first before going on to say that Charles Schwab is simply an incompetent business when it comes to customer service and much like KP’s benefits department, the representative know very little.

I put in a little over 5 years at SCPMG and according to all IRS documentation and even the Keogh documentation on the CS website I should be able to take my Keogh with me but rolling it over into an IRA.

Charles Schwab SCPMG Keogh Document

I did exactly that, I rolled my IRA into my personal Vanguard because I wanted to have greater control over which funds to invest in.

About 2 years after doing so, I received a letter from SCPMG saying that I had performed an unauthorized transaction. I wasn’t able to roll the Keogh over unless I had spent 15 years at SCPMG. They went on to say some other garbage in the letter which wasn’t accurate.

Sure, I could contest this, write a letter to the IRS and battle it over the next 2-5 years. The problem is that the IRS has complete dictatorship over such decisions, and they will follow the path of least resistance. With the tax code getting more and more complicated, I’m not sure if I can blame them as congress battles tax laws day in and day out.

If I didn’t return the money from my Vanguard IRA back into my Keogh then CS would report to the IRS that I essentially took an early distribution which means a 10% penalty plus fines that I would owe to the Keogh administrator and income taxes owed on the nearly $100,000 that I rolled over.

The Massive Advantages Of A Keogh Plan

This is a quick blurb about why you should take advantage of tax-advantaged retirement plans.

Lower your income taxes. By setting aside money in your Keogh, which gets deducted from your gross paycheck, you are reducing the number of dollars on which you can be taxed.

Let your money grow tax-free. When your money is invested in a Keogh plan or any other qualified plan, then the money grows tax-free. You can buy and sell all you want, get dividend returns and not get taxed a single penny on your positive returns.

Your assets are protected from creditors. Most States will allow you to protect retirement assets from debt collectors, lawsuits or any other external forces.

The money is yours wherever you go. Even if you leave Kaiser, the money in your Keogh is yours. Pay attention to “vesting” rules. I am not aware of any for our Keogh plan but it’s not uncommon for employers to enforce a couple of years of work before they let you “vest” (own) your retirement plan.

It’s 8/2022 as I update this document and my Keogh’s value is $180,000 and I am still unable to move it out of CS.

19 replies on “Kaiser Permanente SCPMG Keogh Plan”

It’s made far more complicated than it needs to be. The brokerage houses which sponsor these plans have a lot of paperwork to maintain, in their defense it’s a pain in the ass. It’s a solid retirement vehicle, overall. Just remember that 401k+Keogh=$54k (for 2017).

They wouldn’t offer it if they didn’t make a killing. . . and they certainly do. The Keogh, in my opinion, is a total racket. It really is bordering on criminal. The best part is, knowing this, you can’t do a damn thing about it. You are contracted for the life of your employment at KP?!

They purposely create fund options that will underachieve. Meanwhile, they have a couple decades to use our money at will. Even the least risky allocations outperform these retirement date funds. They know it too. They built it that way. Return the lease amount deemed acceptable to us, and rake in the money on the way they’d really have you invest if you mattered to them.

These professionals, and KP, should put us in a position to Thrive. The only one’s thriving in this relationship are KP and CS. Why do they get away with this ?


Sick and Tired has hit the nail on the head! As in years passed and at this moment EVERY available fund is at a -7% or worse for the last 3 months. Every fund. This following a profitable set of months prior. It’s interesting how every funds losses are within about 2.5% but when they are gaining the variance can be 15%-18% from fund to fund.

Anyway, makes no difference even if you or anyone else is precisely right about CS. It could be front page news and they could be fined heavily for bad practices (omg thats exactly what is happrning with CS!?) and you still couldn’t get out of the keogh.

I just look at as forced retirement and white knuckle the safety bar in hopes the damn thing doesn’t go off the rails before I retire. Seems fair. Not.

You have the option of opting out of Keogh from the start. However, a Keogh is nothing more than sharing the profits of a corporation with it’s highly paid employees so I don’t see how it would hurt a physician to opt into it. However, you are making a much more important and global point as to whether it’s wise to work for Kaiser Permanente and from my own experience I have to say it’s a terrible idea.
You are only allowed to work for them and nobody else which means they own your hide and you are covered by a conditional malpractice insurance. Your income is solid but what’s the point if Kaiser retaliates against an employee and makes you a poor hire for other companies.
All that said, if you are someone who is going to work full-time for the rest of your life and you can play by all the rules then it’s hard to beat Kaiser Permanente as an employee.

With all do respect to your other very bright and informative posts here, the Keogh is NOT profit sharing. Kaiser contributes nothing though it posts as contributions from your employer (I’m assuming a go around for not being taxed on the spot). You contribute every penny.

The performance? Very hard to to feel good about. It hasn’t even doubled the contributed funds amount. Yet, the DJ breaks record after record year after year. It’s a racket. We make 1-2%, CS makes some obscene multiple of that on every $ that flows in…and it flows in the millions to them, from us, every couple weeks. Kaiser thrives.

Such is life.

Thank you for sharing. I may not have fully understood your comment on the Keogh. I’ve since long broken away from Kaiser and just have the statement on my Keogh.

By the way, if you have a Keogh, you don’t have to only invest in the funds they offer.

You can have a PCRA and invest in other things. For example, I have leveraged products like TQQQ and MORL.

Valid point. You can even use your Keogh to invest in individual stocks. I had a PCRA and still do since I still have my Keogh. Sadly they won’t let you ever take the money out of CS even when you part with SCPMG. But the PCRA can be a little complex and there is a small fee to invest your money through the PCRA.

Anyone know of a way to get out of the keogh while still employed by KP? I need my money back and it seems your election is for life. Seems implausible.

It’s your money so if you are vested in it – which you should be – you can withdraw it and pay the penalty on it. I don’t see how they could keep you from doing that. It’s not a pension and it’s not even a cash balance plan. You’ll pay traditional income taxes on the money and a 10% tax penalty. Charles Schwab will likely withhold an automatic 20% before distributing the money to you so that they can cover any potential income taxes you may not pay but that money will be returned to you when you go to file income taxes.

Retire early, forfeit any future pension, pay penalties for expecting your money to be yours, and pay heavy taxes on your capital gain (keogh disbursement). They have you right where they want you. All parties except you are profiting wildly with your money. Why would they let you out early without sticking it to you?

I would add that the Keogh contribution isn’t mandatory. What I didn’t know is that you cannot transfer it out and roll it into an IRA. But I haven’t been hit too hard based on my own fund selection.

Yeah, you actually sign an enrollment form saying you cannot change you elections once made. So for the remainder of your career, you are vested in the amount you made by no later than 6 months after you start employment (though the contribution starts when you make partner at 3 years). I am told by colleagues that it has to do with some law but I’ve been pouring over IRS law and don’t see anything to that effect.

It’s not an IRS matter. The plan documents are drawn up by Charles Schwab. To keep things in their favor, and since really nobody else in the US offers a Keogh, it’s made exceedingly onerous so that they can continue to profit off of your money in the account. That’s why I wasn’t allowed to withdraw the money once I left SCPMG. The IRS said it’s okay but CS said it wasn’t. So I had to either have CS recharacterize the money as no longer tax-advantaged and pay a ton of taxes or I could leave it with CS and forgo the taxes. It created a huge headache for me and I couldn’t get any info from CS beforehand and obviously there was no issue on the IRS side.
Once you’re locked into that Keogh you don’t have any other options as far as renegotiating the deal.

Thank you for helpful site and post, that I have just come across. I am confused about one item that you may be able to clarify. For context, I’m a new associate at SCPMG, past my Keogh election deadline. I elected 70% contribution into the Keogh once I make partner. I did this as a single income household needing more take home pay in HCOLA, confident I plan to stay with kaiser for the long haul utilizing the pension, and I have the HSA HDHP which I am using as in investment / retirement avenue and don’t plan to pull from.
When the 70% contribution begins after partnership, does that 70% value change whether or not I contribute into my 401k? I understand your point regarding the 100% keogh election making up either the total $61,000 contribution limit for 2022 (if you don’t max out your 401k) or the remaining $61,000-401k contribution. How would that factor in, a 70% election if I DO contribute to the 401k or if I DO NOT? Do those numbers differ? I work full time making above the $210,000 you refer to. Still a bit confused on the actual number value of the 70% election for Keogh. Thanks in advance!

Glad it’s helpful. Your Keogh is going to get filled up after your 401k contributions. Let’s say you put in $20k into your 401k, then you’ll have another 41k to put into your Keogh. But you are going to have 70% of your max 25% from your base salary (not total salary) which likely wouldn’t fill the potential 41k bucket.

So there are different levels of Keogh plan participation? Besides 100% and the 70% mentioned, are there other levels (e.g., 80%, 60%)? I am going to start later this year at SCPMG and also in a position of trying to figure out how to balance tax advantages of retirement contributions vs. cash flow needed for a family in a high cost of living area. Once you choose a participation level, can you change it later? I am getting the sense that everything about Keogh is not modifiable once you make your selections. Thank you!

Only 0%, 70%, and 100% as far as I’m aware.
You cannot change it later.
And remember that you won’t be able to move it out of Charles Schwab in the future; not a big deal but I found out the hard way.

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