Professional groups such as law firms, engineering firms and medical practices have unique and potentially competing needs for their retirement plan. The highly
compensated owners’ main worries are saving enough for
retirement and reducing their tax liabilities, but they are also
concerned about their employees.
“Aside from their wanting to save adequately for their
own retirement, in many cases, the practice may feel like a
family to them,” says Amy Ouellette, head of operations at
Betterment for Business in New York City. “Say the business
is a medical practice; the doctors may want to treat their
employees as well as they treat their patients.”
So, the first thing a retirement plan adviser should do when
starting to work with a professional services firm, says Tom
Foster, head of strategic relationships for retirement plans, at
MassMutual in Shelton, Connecticut, “is to do [his] homework
and get to know as much as [he] can about the employer and
its existing retirement plan.” MassMutual recommends using
Planisphere, a service that culls data from the Form 5500
that retirement plan sponsors annually file with the Depart-
ment of Labor (DOL). It will let the adviser know the size of
the employer, how many employees it has and what type of
retirement plan(s) are in place, Foster says. Form 5500 search
engines are also available from BrightScope and Benefits Pro.
The next thing advisers need to do is ask the owners which
employees they most want the plan to benefit and the average
age of those who are highly compensated, Foster says. This
will help the adviser determine what type of retirement plan
would best suit the organization. Advisers should then work
with a third-party (TPA) administrator to run the numbers on
different approaches to the retirement plan design, he adds.
But advisers going down this path should do their homework on the TPAs they consider partnering with, as well. The
TPA must be familiar with advanced plan design approaches,
such as age-weighted, cross-tested and cash balance plans.
“Not all TPAs are experienced in doing that,” says Lori Reay,
a partner with DWC – The 401(k) Experts, a TPA firm in St.
Paul, Minnesota. Advisers should ask the TPA about his book
of business before hiring him to help with a professional
services company, she advises.
Art by Melinda Beck
Owners’ concerns are saving enough for retirement and reducing their tax liabilities