Retirement Plan Tips for Radiology Practices – Revisited

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The following interview is a follow up to Managing Partner Jim Scheinberg’s article on retirement plan tips for radiology practices published by ImagingBiz in 2015. 

Just as the diverse and dynamic field of radiology has evolved over the past five years, so too has the retirement industry. Regulations have changed, service offerings have improved, and plan designs have advanced. For radiology retirement plans, what were once best practices have shifted with the times.

To identify these changes and establish new best practices for radiology companies, we spoke with North Pier’s Managing Partner Jim Scheinberg, who has advised radiology clients for over 15 years. Our interview focused on regulatory changes, tips for modernizing plans, and how radiology practices can stay competitive when hiring and retaining talent.

What can practices offer to radiologists to say competitive when recruiting and retaining talent?

In the five years since our ImagingBiz article was released, a lot has changed. Many radiology practices have shed their ancillary business units and are focusing on the physicians and key technical staff. This has led to retirement plan demographics narrowing and becoming much more focused on higher income earners. Several smaller practices have chosen to roll into bigger practice groups to take advantage of economies of scale.

This has made way for more economically viable advanced plan designs like combining 401(k) profit sharing plans with cash balance defined benefit plans. These types of structures have helped doctors defer over $200,000 a year into their qualified plans. Being able to offer plan features that increase tax deferral to this extent is a very attractive recruiting and retention tool for those who adopt it.

What recent regulatory changes or updates should radiology practices be aware of?

Radiology practices should be aware of the suspension of required minimum distribution rules in 2020, as well as the raising of the required distribution date to 72 years old from 70 ½ – these are attractive features for many radiologists, especially ones with more senior membership.

Regarding COVID-19, plans that faced temporary reductions in staff should make sure that they adopted the new CARES act loan and distribution features, which allow access of up to $100,000 to affected participants. Learn more from our recent article outlining the CARES act here.

Over the last 5 years, target date funds (TDFs) have grown to be the most dominant investment vehicle in radiology retirement plans, often as a result of being designated as the plan’s default investment (QDIA). The recent market selloff revealed a lot of unplanned risks in many of the target date series. It was not uncommon for TDFs to be selected based on superior performance, which may have looked good in the bull market but may be the last thing that doctors nearing or in retirement want in the new world of COVID-19. Litigation around these vehicles is increasing as well. For both reasons, this is a good time to step back and review them in a more comprehensive manor.

How can radiology practices modernize their plans?

Radiology practices can modernize their plans by getting into flat fee administrative pricing and optimizing the share classes utilized to ensure that the lowest net-management fee is paid. This can be very different from simply choosing the lowest cost share class because advanced recordkeeping structures now allow for direct rebate of revenue sharing back to individual accounts from which they were earned. Many advisors don’t engage in that sophisticated of a fee analysis opting for a more simplistic, no-revenue sharing approach. Adopting lowest-net can result in saving a few basis points, leading to reduced administrative costs of $500 or more annually for the most senior physicians in the practice.

There have also been many improvements in the service offerings of some of the more advanced retirement plan advisory firms in the last five years. During that time, a lot of radiology practice retirement plans have grown large enough that they now rate migrating to a more institutional platform with their recordkeeper, which can give them more flexibility and enhanced services. Shockingly, many of the recordkeepers in the industry will not proactively recommend that their clients upgrade because the very people who would make the recommendation stand to lose out on business. Either way, every five years, one should confirm that services are at the most competitive levels they can be, especially if your plan experiences meaningful growth, either due to investment performance or M&A activity, or both.

What other services should radiology practices utilize?

With the massive stock market gains of the last five years of over 50%, many retirement plans that are paying for recordkeeping and/or advisory services as a percentage of assets are now substantially overpaying for their services. This is an optimal time to run a check in the market on both your advisor and your recordkeeper relationships. This can serve two functions. Firstly,  it can lead to greatly reduced costs and potentially improved services. The second being that it is a fiduciary requirement to oversee your service providers and running an occasional RFP is the best way to meet that responsibility.

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