The Southern California Permanente Medical Group Keogh is a Dinosaur - But does it still make sense for SCPMG Associates to use it? 5 important questions about the SCPMG 401(k), Keogh and Pension
Alongside the fossilized bones of a T. Rex, they uncovered something almost as old: an ancient retirement plan from a bygone era—so old that the tax codedoesn't even call it by its original name anymore.
And apparently, a few of them once roamed the streets of Pasadena and Pomona, California.
The Southern California Permanente Medical Group Keogh has been around for a very long time—since 1973, in fact. But “old” isn't necessarily the same thing as “bad,” so let's take a closer look at how this unusual retirement structure works and whether it still makes sense for today's early-career SCPMG physicians.
D.R. Harris & Co. is based in the San Diego region of California, and over the years we've had the opportunity to work with many SCPMG physicians. We've consistently heard positive things about the organization and the experience of practicing there. So while the Keogh's Jurassic-era origins make for a fun opening, this article isn't intended as a criticism of SCPMG. Rather, we're interested in helping you understand an unusual and rarely seen retirement plan and helping physicians make sense of how it fits together with the 401(k) and Common Plan Pension.
After all, you don't run across a Keogh plan every day—particularly at an organization with thousands of physicians. The purpose of this article is therefore pretty simple: to answer some of the common questions we hear about Southern California Permanente Medical Group retirement benefits, particularly from the perspective of an early-career physician.
1. Should I elect the Keogh option in the Southern California Permanente Medical Group Plan—and at what level?
This is the most consequential and repeated question we hear from our physician clients at SCPMG as well as elsewhere. Incoming associate physicians want to know whether electing 25%, 50%, 70%/75%, or 100% is wise before they are partners and before they know their future income, family expenses, home-buying plans, or long-term commitment to SCPMG.
Common questions we see and hear include:
“I’m beginning my journey with Kaiser SoCal and am considering whether investing in a Keogh plan is a wise choice.”
“Keogh plan participation has to be decided (and cannot be revised) at the time of starting your employment.”
“I do plan on participating, but I would like to know if year to year I can change how much I plan to contribute … Or is that also determined forever at the start date?”
The Keogh Plan was adopted in 1973, about two years before the government created Individual Retirement Accounts, and Keogh Plans are total dinosaurs today. We rarely see them, and when we do see these types of plans, you usually see them with very small employers. With over 8,000 physicians working for Southern California Permanente Medical Group, SCPMG is not a small business by any definition.
Many businesses moved on fully to better plans like 401(k)s, but SCPMG maintains a hybrid system.
Here is our take on the Keogh – you can generally put up to 25% of your pay into it, in a pre-tax account, we believe. So you take your salary and multiply it by 25%, and that is your Keogh compensation limit. If you make more than $360,000 in 2026, we do not believe income above that limit is considered.
However, there is a second reduction – you have what is known as a 415(c) limit, or a total limit of about $72,000 in retirement contributions, so you take your 401(k) contributions, add your Keogh contributions, and max out at $72k a year in savings in 2026, to our knowledge.
We’ve worked with Kaiser physicians in many markets, and the SCPMG Keogh is really unique and, to be honest, we don’t really like it as much as we like the SCPMG 401(k) for our clients.
There are a couple of reasons for this. First, to our knowledge, the SCPMG Plan administrator has historically blocked rollovers of the Keogh Plan into IRAs if you haven’t worked at Kaiser for at least 15 years. This is a plan-specific restriction that we believe applies to the Keogh plan but not the 401(k) plan. If you leave Kaiser, we believe you can roll over your 401(k) assets anywhere you want right away. If the Keogh potentially locks up your assets for 15 years and you can’t switch financial vendors and the 401(k) has no lock up after you leave and you can roll it over wherever you want – that is a huge advantage for the 401(k) over the Keogh in our view.
Second, to our knowledge, the Keogh plan is generally a tax-deferred plan and not a Roth or after-tax plan. Just so you understand after tax contributions usually get converted to Roth almost immediately in most plans, so the choice is usually between Roth and tax deferred assets. Deferring taxes is a little bit like deferring student loan payments – the tax bill typically grows for higher-income earners the longer you defer the payments. Many people assume the Keogh is a tax deduction – it is not – it is a tax deferral. A tax deduction doesn’t necessarily have to be paid back – a tax deferral does have to be paid back, typically with interest over time.
It is true that tax rates do tend to fall over time, but if the amount the tax applies to goes up enough, the total taxes paid to the government typically can increase when using tax deferrals, similar to how student loan deferrals can increase the total amount you pay on student loans if the interest accrues while being deferred. It is true for lower-income people that the tax rate declines in retirement are sufficient to offset this growing interest and they can come out ahead – this is less often the case for higher-earning families like SCPMG physicians, in our experience.
While you have to make your own decision and/or talk to your own professional advisors, what we usually advise our clients is to check with the plan administrator and ask “If I become a partner what is the total amount of 401(k) contributions will I still be allowed to make” – if they say you can still make $72,000 in contributions to the SCPMG 401(k) I would personally be tempted to make 401(k) contributions over Keogh contributions.
If they said I could make less than $72,000 in 401(k) contributions, I might be tempted to figure out what the difference would be and potentially putting that in the Keogh if I wanted to save that much and it was aligned with my goals.
Everyone is an individual and has to make their own decision, and this is not specific financial advice for you – but we would also prioritize the 401(k) over the Keogh after clarifying what someone could actually contribute to the 401(k) using 2026 numbers if they were a partner instead of an associate.
To get this answer about what you can put into the 401(k) when you are a partner at SCPMG you can call Jackie Cooperstein at 626-405-2654 in the SCPMG Retirement office.
Here is Jackie’s linkedin by the way: https://www.linkedin.com/in/jackie-cooperstein-9840102
Future tax and investment decisions are always made in an environment of uncertainty but dollar for dollar we view the SCPMG 401(k) superior to the Keogh Plan for a variety of reasons laid out above.
2. Will maxing out the Keogh make me cash-poor?
The second major concern is not investment return—it is cash-flow pressure. Early-career Southern California Permanente Medical Group physicians may be simultaneously facing a first Southern California home purchase, high rent or mortgage costs, student loans, childcare, relocation, private-school costs, and the unpredictability of the partnership transition.
It is important that SCPMG early-career physicians make sure that their take-home income after they become partners will still be enough for their goals.
Some SCPMG physicians have regreted maxing out their Keogh elections because they later have trouble saving for a down payment or meeting other goals.
Some SCPMG physicians wonder if a high-yield savings account or an IRA would be better than committing employment income to Keogh contributions.
Our viewpoint is that the Keogh can make you cash-poor, and we’re not a fan of retirement structures that completely take your optionality away or make you make a permanent choice when you don’t know what your life circumstances might be. High-yield savings accounts and IRAs do provide more flexibility than the Keogh, but the first line of retirement savings at SCPMG is usually going to be the 401(k), and we do not currently believe that the 401(k) goes away when you become a partner.
The Keogh contributions all come from your own money, but they are inflexible under the plan rules and, to a large degree, the law. The Keogh was designed for small businesses where an owner of a three-person firm could project their cash flows, and it was designed in 1962 to create a retirement plan for self-employed individuals who wouldn’t otherwise have a retirement plan.
But since the first 401(k) was created and accepted by the IRS in 1981, and 401(k)s have been substantially improved by the Economic Growth and Tax Reconciliation Act of 2001 (allowing self-employed individuals to get a 401(k) for the first time), the Pension Protection Act of 2006 (adding Roth features), and the IRS’s changes in 2014 permitting after-tax contributions, the 401(k) has been consistently improved over the last 30 years while the Keogh has basically stayed stagnant in its features since the early 1980s. Unfortunately, Keogh plans realy haven't seen any meaningful improvements in features since the early 1980s, in our view, leaving them a little bit less capable than a modern 401(k).
The SCPMG Keogh is a true dinosaur, and while it was innovative and forward-thinking when it was created in 1972 and did benefit physicians back then, given a choice between a flexible dollar into the 401(k) or the same dollar into the Keogh, if it were me, I would always choose the 401(k) due to superior tax benefits, more flexibility on contributions, and far less restrictive rules on distributions.
An Illustration of the Potential Issues of the Keogh for a Hypothetical SCPMG Associate: imagine an associate SCPMG physician who commits at the top Keogh election level (100% or the allowed amount) and makes partner may find that a substantial amount is automatically directed into retirement savings just as they need liquid money for a down payment, day care or preschool for the kids or other needs.
Sure, their retirement balances may look impressive, yet their household may have inadequate accessible cash and liquidity to pay for their immediate needs. This is less of a risk in some higher paid specialties at SCPMG but I would regard this to be a fairly high risk for households with under $300k in income.
In that situation, the problem is not poor investing; it is that pre-tax retirement funds are generally not the same as an emergency reserve or home-purchase fund.
SCPMG’s guide says the exact annual contribution limit is actuarially determined (and in recent years we've heard it might be round 12% of pay) and that the Keogh election dictates the percentage of that limit the physician must contribute. That makes the future payroll impact harder to intuit at the moment of initial enrollment. Moreover, it was not uncommon for 1980s-era retirement plans for small businesses to have stiff restrictions on contributions and contribution lock-ins—but over time, many sophisticated financial actors have migrated to the 401(k) system because, in our view, it is superior.
In fairness, SCPMG has both systems, so associate physicians can pick and choose and are not forced onto the older system, but for the reasons laid out above, I personally prefer the 401(k) system in a dollar-for-dollar comparison and typically recommend using that first for our physician clients at SCPMG before recommending the Keogh for the surplus.
Of course, everyone’s situation is different, and we highly encourage you to talk to your own fiduciary financial advisor or do your own research before making any permanent decisions about Keogh contributions.
So in short maxing out the Keogh may make you cash poor, or may not – it really depends on your living expenses and those do change a lot over time (especially after children). Childcare and the early years of a mortgage (especially at today's 7% rates) can be expensive and a little bit of a cash flow squeeze is normal - so for SCPMG physicians who opt for a big Keogh contribution - it can be beneficial to get a good handle on your current and future expenses and cash flows to make sure it is a good fit for you.
3. How do the Keogh and 401(k) limits actually work?
To our knowledge, this is how it works:
Calculation | Amount |
415(c) limit — total amount that can be contributed to all the Kaiser retirement plan(s) | $72,000 |
Less: Elective deferrals (regular employee contributions) — 2026 amounts assuming you are under 50 | − $24,500 |
Less: Keogh contribution | − $_____ |
Voluntary after-tax contributions | $47,500 − Keogh contribution |
This is a simplified formula and does not include the higher contribution limits available to individuals age 50 and older. The basic point is that, at SCPMG in 2026, there is a $72,000 total contribution limit for the 401(k) and Keogh retirement accounts if you are under age 50. The limit is somewhat higher if you are age 50 or older.
The calculation works by counting your regular 401(k) employee contributions (elective deferrals) first, followed by the Keogh contribution, and then determining how much room remains for voluntary after-tax contributions to the 401(k).
In other words, the tax-deferred Keogh contribution generally reduces the amount available for voluntary after-tax 401(k) contributions. Those after-tax contributions can often be converted to Roth assets in plans that permit such conversions.
It is important to note that Roth assets are hugely tax advantaged assets compared to Keogh assets for higher income earners because Roth assets can be distributed tax free eventually whereas there is often a growing deferred tax bill on the Keogh assets so the total amount paid in taxes on Keogh distributions may exceed the total amount of tax savings on Keogh contributions, even adjusted for inflation for higher income earners. This outcome of growing your taxes along with your investments is not set in stone - but it is more likely in our experience if you are a good saver and will likely have an income above $100k in retirement - which is easy to hit with the Kaiser pension and social security.
4. Are the plan investments good enough?
In our opinion, the investments in the SCPMG 401(k) and Keogh Plan are generally very good. The only weakness in the SCPMG plan, in our experience, is that the amount allowed in the brokerage window, or PCRA, at SCPMG could sometimes be restricted to 50% of your plan assets. The industry standard is actually 95%, and Kaiser, to our knowledge, allows physicians in other regions, like the Northwest Permanente Medical Group, to put 95% of their 401(k) assets in the PCRA.
Generally, it can be worthwhile to reach out to the plan sponsor, Jackie Cooperstein, at 626-405-2654 and ask if the PCRA limit can be raised to 95% of 401(k)/Keogh assets for SCPMG physicians. This would bring SCPMG more in line with industry standards, as well as how physicians are treated in other regions.
It should be clear that the 95% limit on amounts allowed in the PCRA does not hurt SCPMG in any way, but it benefits SCPMG physicians tremendously by having their assets unlocked and being able to invest in the best investments Charles Schwab offers in their PCRA, instead of the very limited 30–35 investment options available in the standard funds. The more choices you have, the better you can customize your portfolio to your needs.
SCPMG physicians in our view are fiarly financial sophisticated. They already heavily use the PCRA (a sign of high financial sophistication in our view) and if there are limits on PCRA contributions below 95% it can be useful to reach out to Jackie Cooperstein and see if the permitted PCRA levels can be raised to 95% of a SCPMG physicians total holdings if they aren't there already.
5. Can I count on the Common Plan pension—and will inflation erode it?
The general rule of thumb on pension plans is that if a pension is 80% or more funded, you are okay. To our knowledge the Kaiser pension is 92% funded, last time we checked.
Kaiser also has a AA- rating from Fitch credit agency as of June 2026, last we checked, which is very good and it is profitable and well run to our knowledge. Credit ratings run on a AAA to CCC scale with a AA sort of like getting an A in school - so if Kaiser were a student they would be a solid A student in terms of their current financial security according to Fitch.
From what we can tell Sothern California Kaiser is gaining market share and is growing in revenue and members. These are all signs of a healthy pension.
After being underfunded in years past, Kaiser’s pension has improved tremenedously and is now well funded to our knowledge.
We are not currently concerned about SCPMG and Kaiser Health Foundation’s financial prospects.
Still Not Sure What to Do With Your Keogh or your other finances?
We work with SCPMG physicians on decisions like this all the time.
If you're trying to decide how much to contribute to your Keogh, how to invest your 401(k), preparing to become a partner, buying a home, starting a family, or simply trying to figure out whether your overall financial plan is on track, we'd be happy to talk through your situation.
There is no obligation to become an ongoing client, and you don't need to know exactly what you need before you reach out.
We'll learn about your situation, answer your questions, explain how we work with SCPMG physicians, and tell you what we'd recommend as a next step—including whether we think we're the right advisor for you.
If you prefer a one-time engagement rather than an ongoing advisory relationship, we also offer a 30-minute Second Opinion for $550 for SCPMG physicians, which can be credited toward an advisory relationship established within 60 days. Certain terms apply which we can discuss with you if you are interested.
Disclaimer: The information in this article is written for educational and entertainment purposes only. Neither Daniel Harris nor D.R. Harris & Co. are your financial advisor unless you have a signed written advisory agreement with us. While we believe the information in this article is correct to the best of our knowledge at the time it was written on 9/17/26, we make no warranties as to its accuracy and you should do all of your own independent research and talk to your own professional advisors before acting on any information you learned about in this article. This article most likely will not be updated after it was written on 9/17/26 so information in it may become less accurate over time.
