Central Maine Health is going Prime Time - what Central Maine Medical Center Physicians and other Central Maine Health Physicians need to know about the Prime Healthcare Retirement Plan

D.R. Harris & Co is based out of La Jolla, CA - in the San Diego Metropolitan Area - only a few hours away from Prime's headquarters in Ontario, CA. Because Prime Healthcare already runs hospitals in the San Diego region we are already familiar with their retirement plans and employee benefits and we have advised physicians who have received job offers from Prime Healthcare.

Prime Healthcare has been spreading across the nation, buying struggling, often unprofitable hospitals and turning around and making them profitable.

Overall, the Prime Healthcare Retirement Plan is pretty good, in our view, if you know how to use it

The Prime Healthcare Retirement Plan has a self directed brokerage account through Charles Schwab (a personal choice retirement account) which allows you to invest in a variety of funds. If you are in a 403(b) retirement plan - you may be limited to mutual funds only - but if you end in Prime's 401(k) retirement plan you generally should be allowed invest directly in stocks, bonds, exchange traded funds, low cost mutual funds, CDs or lots of different instruments.

It doesn't really matter how good or bad a 401(k) plan is if it has a Personal Choice Retirement Account because you can always drive down your fees using that account.

Eligibility in the Prime Healthcare Retirement Plan is extremely competitive and matching of up to $4,800 a year or 4% of the first $120k of compensation (as of 4/19/25) is a little low but still fair in our view

To our knowledge you can usually enroll in a Prime Healthcare Retirement Plan 30 days after you start which is a lot better than some of their competitors like Kaiser, which has a 6 month waiting period to enroll sometimes, and they provide a very fair employer match if you've 1,000 hours within the calendar year and you are still an employee on 12/31 of that year.

The match on the Prime Healthcare plans is $4,800 according to our research. Basically Prime set a cap on eligible compensation that is considered for retirement plan matching and that cap historically has been $120,000 so even if you make $300,000 and there is a 4% match - you are only going to get a $4,800 baseline match because the plan only considers your first $120,000 of compensation when calculating how big your 4% match is going to be.

There is sometimes an often an additional match at Prime Healthcare that can be anywhere from a 25% match to a 100% match on retirement contributions based on years of service. So it is possible that the retirement plan matches go up with more years with Prime Healthcare.

For physicians, the low $4,800 match means that it may be only 1-2% of compensation, but in the scheme of things the rest of the retirement plan is good and a lot of employers, including in Maine, put their retirement contributions in 457(b) plans where the money could disappear if the entity goes bankrupt. It is better to have a 1-2% match that is actually yours than money put away for you that could disappear in a bankruptcy.

Because Prime's compensation packages at not necessarily low, a low 401(k) match is just part of the package deal.

Is the vesting schedule fair?

Prime's vesting schedule is very fair. Basically you vest 20% for each completed year on the job and after 5 years you are completely vested, according to our research and when this article was written.

It would be nice to see Prime have a quicker vesting match say 33% per year and fully vested after 3 years because they tend to operate in more economically distressed areas and it is harder to recruit providers to those areas but their 20% a year vesting schedule is definitely better than Northern Light's vesting schedule at Eastern Maine Medical Center and a little worse than Maine Health's vesting schedule at Maine Medical Center - so they are in the middle in terms of their vesting schedule from what we've seen.

How are the investing options and fees? Do they perform well over time?

So first of all, Prime Healthcare is being very smart about fees by separating administrative fees and charging them as a flat fee from investment fees.

A retirement account basically has two sets of fees and the employees pay them, not the company for the most part.

The first set is recordkeeping or administrative fees. Prime Healthcare is being extremely smart in charging these fees on a flat fee, per person basis. Typically in Prime Healthcare retirement plans your administrative fee is $6 a quarter. This typically covers the costs of moving the money from your paycheck to your 401(k), the cost of the audit of the plan assets each year, the cost of any administration or legal advice the plan needs to stay qualified and stay tax advantaged. Basically anything that is required to run a 401(k) is paid for by this flat fee.

It probably cost around $800,000 to cover these administrative expenses and that is because there are 33,000 people in the Prime Healthcare Retirement Plan so each person should be paying about $24 a year to have a retirement plan - which is totally reasonable and fair. If for some reason administrative and recordkeeping costs go higher than $24 a year per participant in the retirement plan additional fees will be assessed on a per person basis, which is the right and fair way to do this, because this keeps costs from escalating out of control without anyone noticing.

Incidentally Prime Healthcare won their ERISA lawsit a few years back in part because they capped administrative fees that have run out of control on other plans. The plaintiffs in the case alleged, amongst other things, that instead of paying $50 a year for administration and recordkeeping they should have paid $36 and the judge just rejected these claims because a $14 a year difference in fees per person is not a good basis to win a lawsuit. So these fixed fees are a good model for other plan administrators to learn from because they do reduce liability exposure for the company on a 401(k) or 403(b) plan.

The self directed brokerage account annual fee of $50 at this time of this writing (4/19/25) is also very reasonable in our view.

For a lot of physicians the self directed brokerage account is the way to go if you don't use the target date fund. You save a lot in fees using the self directed brokerage account.

The investment options are generally pretty good in the Prime Health Retirement Plan and they have performed reasonably well over time, but there are some high fee funds in there, relative to the size of the plan which might be worth considering whether you want to pay those fees. Here is a list of those high fee funds inside the retirement plan for Prime Healthcare:

Fund Name	Expense Ratio
Cohen & Steers US Realty Trust	0.55%
PGIM Jennison Growth R6	0.58%
GQG Partners International Equity CIT	0.63%
T. Rowe Price US Mid Cap Value Equity Trust	0.64%
T. Rowe Price Diversified Mid Cap Growth	0.68%
MFS International Intrinsic Value R6	0.69%
Loomis Sayles Small Company Growth N	0.83%
Victory Sycamore Small Company R6	0.85%

On a big retirement plan approaching and soon to surplass $2 billion in assets, you always want to be careful about using funds that cost more than 0.30% in fees, and definitely 0.50% in fees because they can expose the plan to liability. Although the balances in these high fee funds are not as high as what is in the low cost options, it is still a liability to the firm and at the next RFP it might be useful to evaluate whether lower price similar alternatives are available.

Firms like Fidelity and Vanguard have good reputations for low fee funds and they can be a fertile place to look for any retirement plan looking to lower their expense ratios.

However, if I was a physician at Prime Healthcare, I wouldn't bother to even bring this up because the self directed brokerage account (The Schwab PCRA) is basically a get out of jail free card and you can invest in low fee options at Schwab especially if you find yourself on the for profit 401(k) side and not the not for profit 403(b) side at Prime Healthcare.

Overall my expectation would be that if they own the same type of assets a lower fee fund would likely perform better than a higher fee fund, if history is a guide. If they own different assets, a higher fee fund can do better than a lower fee fund, but it doesn't happen that often in my experience, even though it does happen sometimes.

Prime Healthcare Physicians, should you use the financial advisors in the plan at up to 0.45% a year in additional fees on top of the fund fees (as of this writing on 4/19/25).

If you're a physician at Prime Healthcare, you may have access to financial advisors through your 401(k) or 403(b) plan—for a fee of up to 0.45% annually on top of fund expenses. On the surface, this might seem like a helpful perk. But is it worth it?

I’ll admit up front: I’m biased. I’m not a fan of these “captive” advisor arrangements. And here’s why.

The Hidden Cost of Captive Advice

When your employer includes an advisor in your retirement plan, that advisor often becomes the only game in town—able to charge fees directly from plan assets, with little competition. You, the employee, are a captive audience. And in any captive setup—whether it’s the overpriced water at a stadium concession stand or a financial advisor in your retirement plan—you typically get fewer options, lower quality, and/or higher costs, in my experience.

Historically, financial firms used these 401(k) and 403(b) plans as a form of marketing. They’d manage a company's retirement plan at low margins, knowing that when employees retired, they’d likely roll their funds into a higher-fee IRA or buy products like annuities from the firm. That’s where the real money was made.

Now, some firms have shifted strategy: they want to sell advice within the plan, charging fees that can range from 0.30% to 2% annually depending on the plan size. For them, it’s easy money in my view—a very low amount of work, recurring revenue, and limited oversight. But for employers, this shift may come with serious supervisory responsibilities under ERISA law.

Potential Legal Risks for Employers

When a company offers in-plan financial advice to the employees, the company itself takes on the duty to monitor not just the investment lineup, but the financial advice given to employees. Is the advice reasonable? Are the fees fair? Are advisors acting in employees’ best interests? Has the company ensured that the employees' interests are prioritized over the financial advisory firm's interest not just on the investments but on the financial advice given within the plan?

Courts have recently heard cases where employees sued over high fees and poor fund choices. In the 2018 Home Depot case, Home Depot was ultimately cleared, but not before facing years of litigation because of how they handled fund selection and financial advisor fees. Another similar case (Goose vs. Dover) was dismissed in the summer of 2024, but only due to a technicality, and that case can be refiled.

In both cases, the plan's financial advisor got off easy—the employer bore all the legal risk. That’s a pattern. These advisors can charge steep fees while avoiding fiduciary liability, leaving employers exposed to lawsuits if they haven’t been closely monitoring what’s going on.

In Plan Financial Advisors

Let’s shift back to the employee’s point of view. Think about a concession stand at a sports arena: overpriced drinks, limited options, and nothing close to what you’d choose if you could shop freely. That’s what in-plan advice often feels like—especially when the advisor has no real incentive to provide top-tier service or personalized guidance.

Many of my clients have paid thousands—sometimes perhaps tens of thousands—over the years for portfolios that I estimate would take less than three minutes of work per year for an experienced financial advisor to put together. Prior to hiring me some of my clients rarely, if ever, spoke to their in retirement plan advisor. Meanwhile, their fees quietly tick up year after year like a forgotten subscription.

That doesn’t mean you can’t use in-plan advice. It just means you should know what you’re paying for—and whether it’s actually providing value.

So, What Should You Do?

If I were a Prime Healthcare physician, I’d probably hire my own advisor and pay them outside the plan. That way, I’d get to choose who I work with, ensure the fees are clear, and potentially even deduct those fees on my state taxes (check with a tax advisor).

That’s not to say everyone should do the same. Maybe the convenience of an in-plan advisor fits your situation. But understand the trade-offs. Being a captive customer rarely leads to the best deal—whether you're buying financial advice, hot dogs, or bottled water.

Roth vs Pre-tax

Finally Roth vs Pre-tax contributions are an important decision. Essentially investors are given the choice to pay taxes now or pay taxes later.

This choice can end up matering quite a bit especially if you are kind of cutting it close going into retirement. Taxes can eat up a lot of retirement income and sometimes deferred taxes can put people beneath the level of income they need in retirement.

On the other hand, for others, pre-tax contributions and getting a deferral (not a tax deduction because you have to pay back that deferral later with interest - similar to defering a student loan payment) can be valueable because it helps them save today in a way that they couldn't if they paid taxes on their 401(k) contributions.

Unique Employment Contracts

I've had physicians I work with get offers from Prime, sometimes as an independent contractor. If you get an independent contractor offer it is extremely important in my view that you understand what the costs are of being an independent contractor if you've not been one before, and what the economic value of Prime's full time employee benefits or an alternative offer's benefits are versus working as an independent contractor at Prime.

Prime is a very impressive company because they have been able to turn around rural hospitals and they are growing throughout the US. But they are also very business savvy - often a lot more business savvy than the physicians who work for them and so if you get an offer that isn't a full time offer it can be very beneficial to seek out professional advice to really understand what you are getting and what you are giving up relative to the alternatives.

That covers everything - the Prime transition at CMMC will be a big one if the merger goes through but Prime does have a demonstrated track record of turning around unprofitable hospitals and making them profitable.

If you'd like to learn more about D.R. Harris & Co. you can learn more about us here and you can learn more about Daniel Harris's background here.

If you'd like to set up a phone call with us - you can fill out the contact form here: https://www.drharrisandco.com/schedule-an-introductory-call