Finances

Retirement Planning Options: Staff Retention Tool

By Chad Fleming, OD, FAAO

SYNOPSIS

Offering retirement savings options can make employees feel valued.

ACTION POINTS

ASSESS OPTIONS. Offer 401k with 5 percent profit sharing and 3 percent safe harbor in addition to wages.

ASSESS COST TO PRACTICE. Can cost as much as staff compensation x 8 percent, but can start smaller.

ASSESS ROI. Staff will be more loyal to a practice that gives them retirement options reducing the turnover.

I value my staff, and want them to have the option of easily growing their retirement savings, as I am able to do. For that reason, I offer my employees ways to save that benefit them–and my practice–as helping employees this way decreases turnover. I firmly believe that caring for the financial wellbeing of your staff members goes a long way toward keeping them. Partnering with a smart and trusted financial planning organization, such as AXA Equitable Financial Services, an AOAExcel Endorsed Business Partner, can help practice owners offer this benefit to their employees without much additional burden or headache.

Sponsored Content

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Starting a retirement savings plan may be an important step for most small business owners. Yet, research shows that retirement plans are less prevalent among small employers1. Because a large number of US employees work for small businesses, many future retirees end up struggling financially during their retirement years.

At AXA, we believe it is critical to have a retirement savings plan available to supplement Social Security income and maintain the lifestyle to which an optometrist is accustomed. We have supported AOA members for over 45 years in retirement planning and are committed to helping them plan for a successful retirement from evaluation of options, to plan inception, to retirement and beyond.

Contact a Retirement Program Specialist at 800-523-1125, ext. 6316, or visit us at axa2plan.com to learn more about our offerings or to schedule a free retirement planning consultation.

1 LIMRA’s Market Facts Quarterly. A Balancing Act – Why Many U.S. Small Businesses Don’t Offer Retirement Plans. Number 4, 2013.

*”AXA” is the brand name of AXA Equitable Financial Services, LLC and its family of companies, including AXA Equitable Life Insurance Company (NY, NY). AXA S.A. is a French holding company for a group of international insurance and financial services companies, including AXA Equitable Financial Services, LLC. The obligation of AXA Equitable Life Insurance Company are backed solely by their claims-paying ability.
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Assess Options to Offer

We currently have a 401k plan set up for each of our employees, which rewards each staff member with an additional 5 percent added to their 401k. We, the owners, determine the amount based on their yearly wage. This calculation results in 5 percent of what their pre-tax income for the year is. The profit sharing is adjustable each year by the owners with a max of 5 percent and minimum of zero. We have the freedom to subjectively adjust the profit sharing contribution lower depending on the financial performance of the practice. Fortunately, our practice has continued to grow, which has allowed us to pay the full benefits for the past 12 years.

Offering profit sharing and our safe harbor contributions results in an increase of staffing overhead of 8 additional percent of staff wages. The “safe harbor” is a predetermined amount of 3 percent based on 401k guidelines. It negatively impacts our bottom line to offer these benefits, but you can’t put a price tag on the staff buy-in that occurs when they realize you want to help them save for their future.

I think it is important to just have one overarching retirement plan for staff. Once you have a retirement plan, there is usually fair diversity within the plan to offer choices for the staff. Usually owners choose the retirement tool that is best for their own financial needs first, and then make sure it will also benefit staff.

Send Positive Message to Staff

As an owner, I greatly appreciate the mature (not necessarily by age) staff who tend to be very loyal to us, partly due to our retirement planning benefits. We believe that if we provide financial tools and demonstrate our concern for our staff’s wellbeing, then staff will stay with us long-term. Also, as staff review their financial statements and notice the additional financial benefits they receive, staff morale is impacted positively. We utilize an online financial portal, Intuit QuickBooks Payroll, for staff to see their paycheck information and review the dollars that have been contributed beyond the “check.”

Partner with Financial Institution to Educate Staff

An optometrist is probably going to employ staff with a wide range of ages and life stages, which impacts retirement planning. When an optometrist partners with a knowledgeable and trusted financial institution, employees can be educated with an expertise most practice owners lack. Owners do not want the hassle of presenting retirement planning options to staff; they want the experts to do it.

In addition, the practice owner should use a financial calculator with staff to illustrate how valuable it is to put a little money away each month. Demonstrating the impact of compounded interest helps staff to make wise decisions early on.

Our staff education on retirement options also consists of reminders during staff meetings and updates to the “What’s Happening Now” section of our practice web site. The “What’s Happening Now” section of the Wichita Optometry web site is a password-protected site available only to our staff with staff resources such as retirement planning options.

Even Smaller Practices Can Offer Staff Retirement Options

A smaller practice should at least set up retirement options. The practice may not be able to contribute much initially, but beginning the process communicates to staff that you care. A financially secure staff member translates into a less anxious staff member, which is good for both the practice owner and his or her patients.

A small practice does not have to put 8 percent total into a retirement account for staff. You can start smaller. All large practices should have a retirement plan in place because, along with support staff, it greatly benefits the high income earners within the practice to put more money away for retirement.

Related ROB Articles

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Alternative Minimum Tax: Investing in Your Practice May Reduce Your Tax Bill

The New 3.8 Percent Tax: Strategies to Keep Money in Your Pocket

Chad Fleming, OD, FAAO, is a partner with Wichita Optometry, P.A. in Wichita, Kan. To contact:cflem2c@gmail.com

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