Why thriving practices are prioritizing retirement plans

Excerpted from page 20 of the Winter 2024 edition of AOA Focus 

Nathanael Kelley, senior retirement program specialist for Equitable Financial, an AOAExcel®-endorsed business partner, explains how these plans can be optimized to benefit your practice. 

How are successful practice owners leveraging retirement plans to benefit their practices? 

Choosing to offer a retirement plan can have a substantial impact on a practice. Here are a couple of benefits that tend to stand out to practice owners: 

Attract and retain top talent. It’s no secret that high-quality employees are a significant factor in the success of a practice. Offering a retirement plan signals that you care about your employees’ well-being, giving your practice an edge in a competitive job market. By investing in your employees, you provide them with long-term financial security, encouraging them to stay dedicated to their work and the success of your practice. 

Gain tax advantages. Offering a retirement plan within your practice could reduce your taxable income and provide tax deductions for your contributions to employee accounts. You should speak with your accountant for tax advice. 

Isn’t it expensive to offer a retirement plan to employees? 

Many practice owners have discovered that offering a retirement savings plan is more affordable than they initially believed. Several plan options are available, allowing practice owners to choose the option that best fits the financial goals of their practice. Many retirement plans are designed for small businesses and are well-suited for optometry practices. Practice owners can maintain flexibility with their contributions by selecting a plan that does not require employer contributions, or one that allows for contribution variance from year to year. Your contributions may even be offset by government tax credits. 

Which plan types are practice owners implementing? 

Many of the AOA members I’ve worked with have found that Safe Harbor 401(k) plans work best with the goals of their practices. Other plan types include Traditional 401(k), Simple 401(k) and Cash Balance. Choosing the right plan for your practice requires research and careful consideration. As a member benefit, AOA members are eligible for a complimentary consultation where I can help them explore their options and choose the plan that makes the most sense for their practice and employees. 

Are there any options for independent contractors or practice owners who are looking for a plan for themselves? 

Yes! In these situations, an Owners 401(k) or Cash Balance plan might be appropriate. An Owners 401(k) Plan provides doctors of optometry the flexibility to decide each year whether to contribute, without the restrictions imposed by traditional 401(k) plans. 

Cash Balance offers higher contribution limits than 401(k) plans, significantly reducing tax burdens. They are especially suitable for practice owners nearing retirement but can benefit owners of any age depending on your income. 

How are practice owners deciding which plan is best for their practice? 

Several important factors should be weighed when choosing a retirement plan, including: 

• Employee demographics and participation. Factor in the age, income levels, retirement goals and likelihood of employee participation. 

• Administrative complexity. Some plans are more complex than others and require more time and resources to administer and comply with regulatory requirements. 
• Affordability. Consider the costs of setting up and maintaining the plan, along with employer contributions and tax incentives. Keep in mind that some plans allow for more flexibility with employer contributions than others. 

• Future growth. Think about how your practice will grow and change over time. It is important to choose a plan that can scale with the growth of your practice. During a complimentary consultation, I review these factors and more with AOA members to help them choose the plan that fits the needs of their practice. 

How can an employee of a practice approach their employer about offering a retirement plan? 

When asking a practice owner to consider offering a retirement plan as an employee benefit, it is important to come prepared. Be ready to discuss how a retirement plan might benefit both the practice and the employees. Take some of the burden off the practice owner by researching the different plan options and providing a comparison. AOA members who are employees of a practice can take advantage of a complimentary consultation to learn more about the different plan types and how to highlight them when speaking with their practice owners.