Evaluate your employee benefits offerings and plan for 2023.
Do you have a plan to recruit new employees and retain your team?
PSIvet has 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 many other financial services.
We asked 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 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. A retirement plan should very much be integrated with the practice owner’s 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. Practices outgrow the Simple IRA, so it’s good to revisit this. 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 and corporates.
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 sometimes hours worked. And the practice owners make those decisions, so the criteria can 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: What options are available for practices that have no plan in place or a Simple IRA they have outgrown?
A: There are many 401(k) products on the market. PSIvet partnered with Principal Financial Group because of its excellent 401(k) offerings. For a start-up plan (i.e., there is no plan in place or there is a Simple IRA they have outgrown), Principal offers the “Simply” 401(k) plan.
It is inexpensive, the investment fiduciary duties are included, and it can be up and running in 30 days. Principal has offered to waive the one-time start-up fee for the plan if practices get a quote and initiate setting it up by the end of 2022. Even if the plan starts in 2023, it is worth getting things rolling to save that fee; it’s a $500 savings! (Note: If a practice has a Simple and did not notify all employees by Nov. 2, 2022, that the Simple was to terminate to start a 401(k) plan in 2023, it is too late. That notice is required; so this means the practices must wait until fall of 2023 to send out that notice if they want to move to the 401k plan for 2024.)
Q: How do Pooled Employer Plans (PEP) benefit small businesses?
A: A PEP allows employers to pool their retirement plan 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 their unique needs.
The PEP may be a great fit for practices that already have a 401(k) plan; it is not available for a start-up plan. The 401(k) space has undergone some exciting changes, so it is well worth revisiting to determine if the PEP is a better fit than your current 401(k) plan. I recommend we get your 401(k) plan onto the exam table for a wellness check!
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) plan. 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, student loan analysis and 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 to revisit their existing stand-alone 401(k)—they have many other priorities—but it’s so important to have it reviewed to see if that plan is still the right plan for your practice.
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.”
Questions? Need more guidance?
Contact Dr. Affeldt at (206) 321-6566 or Darby.Affeldt@northstarfinancial.com.