There is one crisis affecting the healthcare industry that’s receiving little to no airtime. No, it’s not in the legislative space — and it doesn’t include the words “reform” or “Obamacare.” It’s the poor financial wellbeing of healthcare professionals across the country, a rising issue that could have an irreparable impact on the vast majority’s ability to retire.
From physicians to nurses to administrators, recent surveys have exposed the alarming state of retirement readiness among healthcare workers today. A snapshot: 62 percent of nurses fail to adequately save for retirement, while 44 percent believe they will never be able to fully retire, according to a 2013 Fidelity report.1
What’s more concerning? A whopping 93 percent of healthcare organizations have acknowledged the importance of supporting their employees’ retirement capabilities, but less than half of them actually implement programs to encourage smart, proactive saving, according to a 2015 Lincoln Financial Group survey on the topic.2
So…What’s the Solution?
As a practice owner, what role can you play in resolving the problem? How can you help give your employees a better retirement? Sponsoring a workplace retirement plan can be a major step toward making a real, positive difference. Beyond providing your staff with a platform for stockpiling savings, the right retirement plan can bring tangible personal and business advantages, as well.
Stress, Cultural & Productivity Benefits
Many studies have shown that financial stress can be a key contributor to lower productivity and confidence in the workplace. The Employee Benefit Research Institute (EBRI)’s 27th annual Retirement Confidence Study found that three in 10 American workers feel very or somewhat mentally or emotionally stressed about preparing for retirement.3 And in that same study, respondents cited employer-sponsored retirement planning and financial planning programs as the most helpful tools for increasing their productivity on the job.4
Your ability to provide exemplary care and service to your patients is dependent on the viability of your staff — those who currently work for your practice, as well as rising, talented healthcare professionals who will go on to work for you in the future. Regardless of the size of your organization, there are plenty of valuable plan options available to give employees an outlet for retirement savings, while also helping you amass more funds for your own retirement.
Finding the Right Fit
Once you’ve made the decision to implement a retirement plan, the next question becomes: which type of plan makes the most sense for my practice? While there are many types of plans to choose from, some of the most common options used by practice owners include the Simplified Employee Pension (SEP) plan and the Savings Incentive Match Plan for Employees (SIMPLE) — both of which are variations of the IRA — and the 401(k) plan. We’ve provided a side-by-side comparison of these three plan types below:
Remember that the retirement plan you choose isn’t the “end-all-be-all;” your needs will likely change as your practice and workforce grow, which could warrant a transition to a new type of plan. It’s crucial to enlist the guidance of a highly qualified, professional advisor who can facilitate the selection process and help you find the plan that works best for your practice. While we’re on the topic…
Choosing an Advisor
Deciding which retirement plan to implement is only one piece of the puzzle; it’s also important to ensure your plan is managed and designed to deliver the best-possible benefits to your employees and practice. This is also where the support of an experienced, knowledgeable provider can come into play. Here are some questions to keep top of mind when interviewing potential providers:
“What is your approach to designing my plan?”
From a design perspective, your provider should come to the table with suggestions and ideas about how to structure your retirement plan so that it’s well-positioned to help you meet your goals. You should expect the team to put together plan design illustrations that can properly convey the overall plan expenses, how much tax you will be able to save and how much the plan will cost you in contributions for non-owner employees, among other factors.
“What level of service do you provide to plan sponsors and participants?”
Outside of technical knowledge, your team of professionals should spend ample time explaining their service approach and process, and the resources they can provide to both your practice and to your employees. When retirement laws and deferral limits change, your provider should be proactive in scheduling meetings with you to re-evaluate plan design and determine whether your current arrangement still makes sense.
“Are you a fiduciary?”
This level of personalized service, support and transparency also extends to the individuals advising on the investments that make up your plan. As a physician, you uphold the duty to provide high-quality, well-conceived care to your patients. Similarly, the advisor who oversees the investments in your retirement plan upholds his or her own duty to you and your employees: to serve as a fiduciary and to act solely in your collective best interests when making recommendations on behalf of the plan.
Be sure that the provider you choose states, in writing, that it is legally bound to serve as a fiduciary to your plan. Additionally, your provider should be highly involved in educating your employees to help them make the right selection of investments, given their risk tolerance, retirement time horizon and goals. The provider should make it easy for employees to select a well-diversified, low-cost investment portfolio, and be available to meet with them one-on-one to answer questions about the investment program.
Analyzing Your Plan & Needs
Finding the right retirement plan provider does require ample due diligence and research, but it isn’t an undertaking you need to shoulder on your own. There are resources available to assist you in finding a provider with the experience and tools necessary to help you fulfill your fiduciary responsibilities, and ensure that your plan and processes are compliant. For instance, Wipfli and Wipfli Hewins offer a complimentary retirement plan analysis service that benchmarks practice owners’ current plan fees, costs, investment options and more (if you currently do not have a plan, we can assess your needs as well). You may also visit the U.S. Department of Labor’s website for a complete list of the actions expected of retirement plan fiduciaries, under the law.
Tax advantages, talent retention — benefits abound for practice owners that choose to sponsor a workplace retirement plan. But perhaps the most fulfilling and rewarding outcome of the decision is directly connected to your employees. By sponsoring a retirement plan, you have the opportunity to enrich the lives of the staff members who care for your patients, drive your mission and help keep the practice running every day.