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It is becoming more common for us to see retirement plans where the owners are not able to fully fund their portion because it is tremendously expensive because of the employees.  We have a special retirement plan design that may allow you (the owner) to maximize your contributions in a very efficient way for the pharmacy cash flow.  We believe that this is one way you should be rewared for taking the risk of pharmacy ownership.  This site is dedicated helping you create a more efficient benefit for the company and fulfill your responsibilities for being a plan sponsor.

Pharmacy 401k plans are a great way to save money and provide a benefit to your employees. Please visit the website at www.pharmacy401k.com to learn more.  Below is Waypoint's blog dedicated to pharmacy 401k plans and retirement planning for pharmacy owners.

Pharmacy Owners! Payroll providers are co-opting your 401(k) plan and it’s costing you money

Posted by Tyler Campbell on Wed, Aug 16, 2017 @ 09:58 AM

Over the past few years, under the pretext of making your life easier, some of the largest payroll providers have been aggressively obtaining the administration portion of 401(k) plans.

We’ve had a number of pharmacy owners tell us, “I already use them for payroll, why not use them for a 401(k)? Plenty of people do it.”

It sounds so simple. And it’s true; plenty of people do use these companies to administer their payroll and 401(k). In fact, a representative from one of these companies boasted they have over 70,000 401(k) plans… like it’s a good thing!

So I did a bit of digging. A simple Internet search on problems with 

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401(k) administration by large payroll providers is very eye opening. While I’ve made a living exposing the large fees, hidden expenses, and poor service provided by these companies, it wasn’t until just recently that I realized just how much it is costing independent community pharmacy owners.

The truth of the matter is, there is not much money to be made offering a payroll service alone. So, what do these large payroll companies do? They hire hundreds and hundreds of aggressive sales people (often unlicensed) to convince business owners and pharmacy owners alike to move their 401(k) to them – all in the name of “convenience”. By doing so, this allows these payroll companies to make money on the back-end of their clients.

You may now be asking, “Is this a bad thing? I mean, this is America, right?”

No, in and of itself, convenience is not a bad thing. The bad part comes when fees and expenses in these plans are high and hidden from you.


Pros and Cons for using one of the large payroll providers for 401(k) administrations:

Pros:
  • Deferral and employer contributions are made to each employee.
This saves a little time for the owner. The more employees you have, the more time it saves.
  • Services are consolidated under a single third party

 

Well, that sums up all the pros.


Cons:

  • Hidden Expenses
These are typically found in the investments themselves. Expressed as an expense ratio. This is money deducted from the return and it is never expressed in a dollar amount on your statement. On average, I see expense ratios in these plans range from 1.5 – 2%. This means the investor is paying a fee equal to 1.5 – 2% of all the assets invested annually. This means as much as $2,000 paid annually for every $100k! Furthermore, you often find funds with “loads” within these investments. This means the investor is charged an additional percentage when a fund is bought or sold. And, if your 401(k) is held in an annuity through an insurance contract, you can expect to pay another 1% or so. It is safe to say every company hides their fees differently.
  • Cookie-cutter plans
Think about a company managing over 70,000 plans. Do you think they want to customize each plan to help their client achieve their goals? Of course not. In reality, for practical purposes, they only have a few plans they push. Also, as time passes, plans and goals change. What might be a good solution one year, might not be optimal the next.
  • Customer Service
No assigned representative or advisor for participants, well not without an additional cost anyway. Classic 1-800 approach to get to someone different every time.
  • Annually filing of 5500
The time saved from not having to enter in contributions is offset by the amount of workload placed on the owner to file form 5500 to the IRS.
  • More liability on owner/plan trustee

Fiduciary responsibility means the plan trustee must act in the best interest of their employees, including investment options. Since these high expense funds are not acting in the best interest of investors, the liability falls on the pharmacy owner.

 

I know this information is a bit harsh and I am sure many pharmacy owners have had no issues with these large payroll providers. The point I am looking to make is simply this: It is critical to understand the fees, expenses, and costs associated with your 401(k) – regardless of who you have administering it. For your sake, and the sake of your employees’, you must take the time to learn.


At Pharmacy401k we ensure each independent pharmacy owner has an optimal plan; one that’s specifically designed to achieve their retirement goals and their business goals… one that is just right for them. We start by providing complimentary plan analysis and fee benchmarking at no cost. If you want the best plan for you, email tyler@waypointus.com.
I Want The Best Plan For Me!

Topics: pharmacy 401k, 401k, financial plan, payroll providers

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