How to get started with customized benefit packages to build your team.
Do you have a plan to recruit new employees and retain your team?
PSIvet has expanded our service offerings to include “Business Services”—a full range of premier financial planning and benefits designed to help our members compete for employees. This includes one-on-one consultations with Darby Affeldt, a DVM/financial advisor who can customize benefits packages ranging from 401(k) plans to IRAs, among other financial services.
We turned to Dr. Affeldt for her take on financial strategies that independent veterinarians can use to build their teams and keep them happy for the long haul.
Q: What is your No. 1 piece of advice for independent veterinary practice owners who want to provide financial benefits for their employees?
A: Practice owners should understand what well-managed practice metrics are. For example, COGS, or cost of goods sold—or in this case, cost of labor/benefits, such as health insurance and retirement plans. In general, benefits should run 2% to 3% of gross income. From there, it’s critical to assess when to offer benefits, which benefits are affordable, and/or how to design them so that they are affordable. And, retirement plans should very much be integrated with the practice owners’ personal financial planning and not placed in a vacuum; this creates the efficiency necessary to ensure that no gaps or opportunities are being missed.
Most practice owners overestimate the cost of a 401(k), for example, so they either stick with a Simple IRA or do nothing. PSIvet has partnered with Vault for health plans and Principal and my financial practice to offer a myriad of retirement plans, so we’re out here to help owners assess this and stay competitive with other practices.
Q: How are benefits packages for employees typically determined?
A: Laws dictate that health and retirement packages cannot be offered to a select group of employees (for example, by title) and that all employees must be given access if they meet certain criteria. For retirement plans, eligibility is driven by length of service and hours worked, and the practice owners make those decisions, so they can sure vary.
Typically, the first step is to think through the goals the practice has in offering the plan. Is it to attract and retain the best talent? Keep them from going to the competition to make a couple of dollars more an hour? Or perhaps it is to help the practice owners put away as much money as possible for retirement on a pre-tax, tax deferred basis. Once we determine goals, then we customize the plan eligibility to match those goals—with a keen eye toward how the benefit package structure affects the bottom line.
Q: How do Pooled Employer Plans (PEP) benefit small businesses?
A: The Pooled Employer Plan is a brand-new type of 401(k) plan that Congress passed into law. It became available on Jan. 1, 2021. A PEP is the latest evolution in the U.S. retirement marketplace and a key provision of the Setting Every Community Up for Retirement Enhancement (SECURE) Act enacted in 2019.
A PEP allows employers of any size to pool their retirement plans into a single 401(k) plan with a single service provider—PSIvet chose Principal. While the practices that join the PEP participate in a single pooled plan, each employer can choose from flexible options to tailor key plan elements to meet that employer’s unique needs.
And the value is significant; there is now a 95% reduction in the strict fiduciary duties that the practice owner retains in a regular “stand-alone” 401(k). Most practice owners have no idea that they must complete some administrative and investment review procedures in their stand-alone plan. If they don’t, they are at risk of being out of DOL compliance.
The PEP also offers some fantastic perks that are typically not available to small stand-alone 401(k) plans. For example, the PEP includes complimentary will and legal services, an entire suite of financial wellness educational resources, and student loan analysis, or the option to meet one-on-one with a salaried Principal retirement counselor to get investment advice. Administrative fees may be lower for practice owners, and investment expense ratios could be lower since there are so many assets in the PEP. It is well worth looking into to shed the fiduciary work and responsibility that a practice owner really doesn’t need!
Q: What advantage does a PEP give independent practices competing for employees?
A: Employees consistently rank a 401(k) plan as one of the most desired benefits an employer can offer, second only to health insurance. “Do you offer a 401(k) plan with a match?” is often one of the first questions employees ask prospective employers. Few practices have the bandwidth or budget to implement a stand-alone 401(k)—they have many other priorities! Yet it’s so important to give employees the option to save for retirement too.
The PEP allows independent practices to offer employees the same or better benefits as large organizations, while reducing or eliminating the administrative burden of running the plan. Through the partnership with PSIvet, these practice owners can now say, “Yes, we do offer a 401(k) plan and we offer some additional really unique benefits—like financial wellness education, etc.”