Red Flags and Warning Signs: Industry Edition

It’s time for another post in our series on red flags and warning signs. Previously, we focused on operations and employees, and now we’re taking a look at different industries. There are retirement plan challenges that are specific to certain types of industries, and in this post we’ll uncover what plan sponsors need to look out for.

Government Contracting Firms

The problem for employees of government contractors isn’t really that they don’t get any of the attractive government benefits but rather in the difficulties associated with the hiring and retaining of those employees. That’s due partly to a lack of cohesive company culture, and government contracting firms have to offer solid benefits to attract and retain workers. That can be problematic, as these types of firms are often cash-strapped due to a limited amount of money available in the contract for this type of overhead. 

Another challenge government contracting firms face is with scaling up or down as contracts are won or come to a close. The systems for adjusting the workforce need to be super efficient, since you can’t waste time (or money) getting employees to the worksite or offboarding them once the contract is over. This changes the pricing schemes, operational tasks, as well as the type of compliance you have for the retirement plan. A very well-designed plan is a must for government contracting firms in order to withstand the many changes that will occur. 

Healthcare

Healthcare retirement plans are a hot mess of communications! Employees are on the move when on the job, so it can be hard, if not impossible (and unprofitable) to get them to sit down and receive the education they need regarding their benefits. Patient care should be the main focus, so communicating to employees about their retirement plan and other benefits is going to be difficult. You’ll need a thoughtful, targeted communication plan to hit employees with bite-sized messages served up at ideal times.

There’s a disparity of income levels in the healthcare industry, posing compliance testing challenges, possible shortfalls in retirement income for certain employees, and multiple benefits stack options.  Recruitment and retention of employees, especially of nurses, is also a struggle in this industry. As a result, providers are going to need a different compensation strategy than the rest of the staff, just to keep nurses and other non-provider employees from leaving to work somewhere else for a few bucks more an hour. Providers may have a math problem in being able to save enough just from 401k or 403b plan alone. Creating a plan that’s beneficial for all staff is key, as is figuring out how to deliver the benefits education they need without taking them away from patients for too long. 

Law Firms

As with healthcare, it’s crucial to create a plan that benefits not only the law firm’s partners, but the staff, too. There are a wide variety of roles in a typical law firm, with different types of compensation, from a partner with an ownership stake in the firm, to lawyers that don’t have an ownership stake but who do get bonuses, to administrative staff who get salaries. Law firm plans serve a very wide range of participants, and it can be quite challenging to make sure the right compensation and benefits are going to the right people. With different tiers of employees, you might need a retirement plan that is also tiered, or serves and or targets the participants in different ways.

Professional Service Firms

Professional service firms run the gamut, from virtual assistant agencies to CPA firms to engineering companies, but let’s consider a web design and development firm for a moment. On one hand you have the programmers, who work with code all the time, obsessing over details, and similarly, they generally love learning about the details of their retirement plan. Then you have the creative staff, who want a good user experience and typically just want the big picture on the plan. (These are both generalizations, of course!) These differences in perspective among the staff often present obstacles in communicating with them about their benefits, but also who you choose as a provider and plan design in order to accommodate their very different interactions with the plan and their account.

Another challenge in this industry (and others, as well) is the popularity of remote workers, which makes communication virtual and/or asynchronous. That means plan sponsors will have to determine which channels are best for conveying benefits information, and will have to make sure that the information actually reaches the audience. After all, if the employees aren’t engaging with the plan, why bother offering it?

Fast Growth / Capital Constrained Companies

Companies don’t go into business to offer a retirement plan -- they go into business to offer a service or product. Money spent on the retirement plan (and benefits in general) siphons money away that could be used for salaries or other types of compensation. Therefore, when we talk about a benefits package, it’s important to explain how the retirement plan and other benefits work together. Total compensation statements are crucial for companies with capital constraints, e.g. fast-growing companies, early stage companies, or those on a precipice of change.

In these types of companies, the employees that are overseeing the plan (often HR) are wearing many hats and the retirement plan is #398 on their to-do list in priority order. It’s important to be operations and systems focused with as much automation as possible, so that administrators don’t get bogged down. If it’s too much to handle, that’s where the mistakes start piling up. Automation and outsourcing can both help take care of some of the workload. Retirement plan advisors like us who obsess about these details can help you position you for success so you don’t drown in distractions from your real focus.

Nonprofits

Nonprofit employees may be mission-driven, but that’s not enough to keep them on staff. After all, they need to be able to pay their mortgage and save for retirement just like for-profit employees, so having a good benefits package is important. Nonprofits also have access to a few other plan types, such as 403bs and 457bs, which can make plan selection a bit overwhelming and all the more important to get right.

As with other industries, making sure the right staff are compensated the right way is key, especially for retention purposes; board members need to be on board with your compensation and benefits strategy. 

Final Thoughts

While these are all industry-specific challenges, they all have thoughtful solutions. If you partner with a retirement plan advisory firm like ours, who obsess about these details and more, you can be positioned for success so you don’t drown in distractions from your real focus or spend unnecessarily, and get the right results for your organization from the plan.

If you have questions or comments, or want me to focus on your industry in particular in a future blog post or LinkedIn Live, reach out to us! We’re happy to help you make your way through the retirement plan maze, no matter what industry you’re in.