Retirement Plan Tips for Radiology Practices

Jim Scheinberg’s article below on best tips for radiology practices is reposted with permission from imagingBiz.com. View the original PDF here

When we began working with our first radiology clients well over 10 years ago, we  assumed  they  would  be  similar  to most other medical and law groups for which  we  had  consulted.  More  than  a decade  later,  we  understand  that  radiology is one of the most dynamic and challenging (yet fertile) environments in which to operate a retirement program.

Practices  and  their  ancillary  businesses are frequently diverse; as are the constituents that their retirement plans intend  to  serve.  This  article  will  focus on  the  specific  challenges  faced  by  radiology  groups  in  offering retirement plans and will provide guidance on effectively meeting this need, as well as tips on achieving excellence that ultimately will benefit the business as a whole.

Meeting varying demographic needs

No two radiology groups are alike, either in business structure or employee make-up. Not only does size matter, so does business mix. We have one smaller radiology client that’s composed of a dozen physicians, a managing executive and two PAs. Their plan structure is largely based on what the doctors want to contribute as individuals and statutory limitations.

At the other end of the spectrum, we work with a much larger group of nearly 50 physicians and more than 100 employees in their billing service, imaging centers and real estate concerns. In this complex environment, cost-effectively meeting the needs of both physicians and staff can prove to be a challenge.

The best solutions are crafted through detailed analysis, robust employee  communications  and  custom  plan  designs.  Client  Bill Ziemann,  CFO  of  California-based  Kern  Radiology  has  the  following advice for radiology executives.

When  a  great  number  of  your  employees  make  less  than $40,000-$50,000 per year, one must get very creative with the benefits structure. Each unique organization will have an optimal plan design to maximize physician deferrals while still leading to meaningful retirement savings for all participants.

Possible solutions include combining multiple plan types, like 401(k) profit-sharing plans with Defined Benefit plans, designing modernized matching formulas and profit-sharing contributions or  using  auto-enrollment  to  drive  participation  higher.  The  key is designing it correctly and then to keeping it optimized as the organization and pension laws change.

Controlling, Managing and Reducing Costs

The  reimbursement  environment  in  healthcare—and  radiology specifically—contribute  to  the  challenges  when  crafting  retirement plans. “Radiology organizations… are constantly respond- ing to the continued reduction in reimbursement from the government and health insurance payers,” Ziemann reminds us. “As a result, we need to be very mindful of costs that we can control, with one of them being retirement plan costs.”

Efficiency in plan design and maximizing participation can go a  long  way  towards  optimizing  contribution  expenses  from  the organization, while maximizing deferrals for the partners of the practice.

A  plan’s  operational  expenses  are  another  place  where  costs can add up quickly. Radiology businesses, like many other physician  groups,  historically  bought  retirement  plans  financed  by asset-based fees (often embedded in the investment expenses).

Screen Shot 2020-06-10 at 1.00.46 PMFrequently,  as  insurance  providers  had  easy  access  to  these groups, plan services were bought from insurance entities with opaque pricing structures, further complicating matters. As the plans grew larger over the years, the fees often would grow astronomically. Dale Hansen, MD, Memphis Radiological P.C. (MRPC) describes the practice’s former insurance-based retirement plan structure before we worked together to modernize the plan.

“We would have had no way of looking at what they [were] tell- ing us and what our fee structures were, and knowing if they were good or bad,” Dr. Hansen says. “[Since the restructuring], we’ve been able to trim [out] commission structures and fees… that we didn’t even know existed.”

Recent regulatory changes and case law have brought into the spotlight the requirement to ensure that all plan expenses, both administrative as well as investment expenses, are reasonable in light of the services the plan is receiving. Plans that fail to meet these obligations expose the practice and its partners to regulatory and, potentially, litigation liability.

Helping employees save and invest

When   radiology   organizations have  a  wide  spread  in  their  demographics,   educating   participants on how much and where to invest  isn’t  as  easy  as  using  the off-the-shelf solutions most vendors offer. Dr. Hansen acknowledges  the  challenge  they  originally faced in Memphis.

“We have people making as little as $10 per hour,” he explains. “It’s been hard, because we are so diverse, to provide something that meets  everyone’s  needs…  That’s one of the things that we’ve gotten that we didn’t have before.”

In  helping  clients  like  Memphis  Radiological,  we’ve  tailored programs to each segment of their demographics within the organization, piloting towards specific goals of participant prepared- ness.

For large organizations, group educational sessions can be very effective,  but  there  is  no  substitute  for  one-on-one  advice.  We have met individually with hundreds of radiology staff members over the years, some of who would otherwise never have had ac- cess to unbiased professional advice. In just 15 to 20 minutes, you can literally change someone’s financial life.

Screen Shot 2020-06-10 at 1.00.55 PMKeeping things relatively simple is a key to successful outcomes. Northwest Imaging’s (NWI) Tyler Weber, chief administrative officer, advises caution before adopting the more exotic investments requested by some physicians. “Over time, a good balanced menu is going to be best for them,” he suggests.

Staying competitive: Recruiting and retaining talent

We don’t need to tell radiology executives how fierce the competition is for talented radiologists and staff. “Designing a plan that is an effective employee recruiting tool in an industry where skilled technical staff is difficult to attract [is a key recruiting strategy],” notes Kern Radiology’s Ziemann.

In the new era of medicine, what once used to be an assumed comfortable retirement for physicians has now become a meaningful  concern  for  most  radiologists.  According  to  the  authors of  a  study  published  last  year  in  Academic  Radiology  based  on a survey of more than 2000 radiologists: “Participants reported working more hours and expecting to retire later than desired.”

Proper plan design and strategy can turn this potential vulnerability into a strength. Dr. Hansen points to a generous plan de- sign as a key to their success at Memphis Radiological, “This plan has been exceedingly generous, particularly to our lower earning individuals.” That generosity has led to high participation levels (in excess of 90%), which allowed the physicians to max out their contributions.

We’ve personally seen the effects of the Memphis plan on many of their lower-income workers. Non-physician employees, many of  whom  were  living  paycheck  to  paycheck,  were  able  to  amass $100,000 or more for their retirement due to MRPC’s generosity, tax incentives, great plan design and helpful advice. Imagine arming your recruiters with those statistics?

Staying at the front of the pack

The retirement plan industry has evolved meaningfully in the last decade. Vendors have consolidated through waves of acquisition. In fact, it’s a sure bet that your record keeper has either been buy- ing or been sold since you hired them.

Competition and economies of scale have made pricing of just a few years ago, out of date. Meanwhile, regulatory changes have created vast new opportunities… and liabilities.

Zeimann say it best: “The days of contributing to your retirement plan and leaving it on autopilot are long gone.” Radiology groups need to stay on top of their plans to stay efficient, compliant and competitive.

Dr. Hansen offers this advice to managing partners and executives: “Get … an outside consult just to vet what [your retirement plan managers] are doing. They may be doing everything well. It doesn’t cost you very much to get a consultant to take a look at what you’re doing to see if there’s anything you’re missing.”

Even  if  you’re  confident  that  you  have  a  competent  advisor, there’s always something fresh eyes can bring to the table, and it’s a regulatory requirement to have even the most trusted relationships reviewed periodically. But Hansen correctly cautions to make sure that review is “non-commissioned advice. I’d warn that.”

As a veteran retirement industry consultant, I’d echo his suggestion. If you’re going to take the wise step of engaging a third-party, check their motivation. Unless you are looking to replace your existing advisor, only engage a consultant who recuses themselves from being considered for the services that they are reviewing.

As  NWI’s  Weber  says,  “Make  sure  the  person  you  are  using doesn’t have a dog in the fight.” Fees should be flat, not variable based  on  recommendations  to  assure  their  objectivity.   Hiring someone to conduct a periodic RFP or RFI can go a long way in ensuring competitive services, structure and pricing.

Lastly, and perhaps most importantly, make sure that this out- side consultant will serve a fiduciary for the review; this will confirm that their interests are solely aligned with the needs of your plan and its participants.

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