Learn about SCRS 401(k) plan available to body shops with new videoBy on
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Following a recent announcement that participating shops are now receiving an even better deal on the program, the Society of Collision Repair Specialists has posted a new video educating repairers on the organization’s retirement benefit option.
SCRS Executive Director Aaron Schulenburg said in the video shot during the November 2019 SEMA that the organization seeks ways to leverage the trade group’s “size and scope.” SCRS represents more than 6,000 companies through direct membership and affiliate organizations, Schulenburg said then.
Initially, SCRS looked at developing and offering a health insurance option its members could offer employees (a project that is still planned). Schulenburg said the organization realized that members had a similar demand for retirement planning services. Many currently didn’t offer one at all, he said.
If SCRS could offer an option that saved the business money, turned out to be a better deal for employees and improved recruitment odds, “we’ve solved multiple issues for our members at that point,” Schulenburg said.
The SCRS 401(k) has been available to collision repairers since April 2019. By using the combined buying power of all the participating shops, it can command a better deal from 401(k)-related vendors than a single repairer could obtain on its own. It’s similar to how an MSO can wrangle a better deal out of a paint company or jobber than a single-shop could — it’s worth the vendor granting a discount to lock in that volume of business and economies of scale.
This helps out employees as well. A vendor charging a small shop a certain percentage of the retirement savings being managed might charge a pool of SCRS member shops a lower rate.
Schulenburg said at this month’s open board meeting SCRS had reached enough participation that businesses’ average cost had fallen from 1.03 percent to 1 percent. The SCRS plan has been prenegotiated to lower fees further at certain levels of savings being managed.
Chairman Brett Bailey (A&B) observed then that when you start looking at what small percentage drops can translate into, “it’s a huge dollar amount.”
For example, consider a shop employee making $40,000 a year and with $40,000 already saved in a retirement plan who pays in 10 percent a year. The plan earns 8 percent a year, but the employee gets charged 1.8 percentage points in fees for a net return of 6.2 percent. That employee has $631,897 at the end of those 30 years. The same employee on a plan charged just 1.02 percent in fees earns $150,625 more, retiring with $782,522.
An association plan can also command savings on the back end as well by spreading around the cost of an audit and saving time on the due diligence and fiduciary responsibility that might fall upon the owner.
Schulenburg said on the video that repairers have reported saving between $5,000 and $15,000. “That’s huge,” he said.
Some owners put the savings back into the shop’s bottom line, while others might channel the newly discovered funds into local financial education for employees or back into the employees themselves, according to Schulenburg.
An SCRS membership only costs $475 compared to that $5,000-$15,000.
“That is a tremendous return on investment,” Schulenburg said.
Shops who have a retirement plan can compare it to the SCRS one and see if switching makes sense. Shops might have an existing relationship with a 401(k) provider, but the shop owner as the fiduciary is responsible for looking out for their employees’ best interests. For that matter, a shop owner saving through the company’s 401(k) might have the largest amount of money being managed — which means switching to a lower fee might benefit him or her the most.
“Why SCRS members have better 401(k) options”
SCRS YouTube channel, Jan. 24, 2020
Featured image: SCRS Executive Director Aaron Schulenburg discusses the organization’s 401(k) plan in a video posted Jan. 24, 2020. (Screenshot from SCRS YouTube channel)