California’s Vargo Physical Therapy Makes Saving for Retirement an Easy Exercise

Jeff Vargo had a plan in 2000 when he opened his first physical therapy clinic in Westlake, California. Guided by the tenets of his chosen profession, he wanted to improve quality of life through prescribed exercise.

He also wanted to retire at a reasonable age. Over the past 21 years, he has opened nine additional Vargo Physical Therapy clinics while paving a smoother road to retirement for himself and his employees.

And it began with a simple decision in 2004 to offer a retirement plan that included profit-sharing. By that time, he had opened his third clinic and seen his workforce balloon to 50 employees. By the end of the following year, there were six eponymous clinics dotting the landscape around Los Angeles.

“When you are growing at that rate, having a retirement plan is a key differentiator for a company,” said Bob Grieder, president of Vargo Physical Therapy since 2005. “It’s a competitive industry. You want to offer competitive benefits.

“If someone is comparing us to someone else, we look good because it’s like getting a bonus in every check.”

What Grieder is referring to is the entire value of the benefits package offered by Vargo PT which, when including health benefits and the retirement plan, is the equivalent of receiving $8 to $10 extra per hour.

Back in 2000, not many small-business owners had the forethought to offer a retirement plan. Now, with the California mandate requiring most businesses to implement a workplace retirement program for employees, employers must now start thinking about it. California, similar to Oregon and Illinois, started a state-sponsored IRA plan named CalSavers to begin addressing the nationwide retirement crisis.

“It is surprising to hear that businesses are hesitant to have a retirement plan,” he said. “Retirement comes for us all, so why not plan now to avoid serious [financial] issues later on?”

When Jeff Vargo implemented a 401(k) plan at his clinics, that’s exactly what he was thinking, according to Grieder. “He wanted to do right by himself and by his employees. And, we do that,” he said. “We get tax savings by having the plan and by matching dollar for dollar up to 4 percent.”

Not to mention the benefit of the profit-sharing plan that is available to Vargo PT employees after a year of service, plus 1,000 hours of work. The company places an annual payment of 3 to 5 percent in the 401(k) plan of every eligible employee, from aides and physical therapists to managers and company officers. After six years at the company, an employee is fully vested and able to keep everything saved in his or her account even if there was separation from the company.

Grieder indicated that doesn’t happen very often, noting that several employees have been with Vargo PT since day 1, while others start as aides in the clinic, go to PT school for a handful of years and return as physical therapists or physical therapist assistants.

“Many of our directors began here as aides,” Grieder said. “I think that is a testament to how we treat our people.”

Not many recent college graduates think about retirement, a thought process further hindered by the amount of debt these individuals amassed seeking that education. Grieder said Vargo PT takes that into consideration when explaining their retirement plan to recent hires, giving an example of someone who might not participate in the 401(k) but who eventually would be eligible for the profit-sharing plan.

“If we gave a physical therapist $3,500 a year [as part of the profit-sharing plan] and they stayed with us for 10 years, then when they left the company, they would have $35,000 from us saved,” he said. “And that’s not even counting compounded interest on that money. That’s quite a start to a nest egg.”

Grieder said that some of the younger employees take that to heart and come in contributing more than they need to get the full 4% match — a few putting aside as much as 15% of their paycheck. In fact, he said he’d give the same advice to companies about a workplace retirement plan: set one up quickly and take advantage of the benefits a plan offers.

“It’s so easy to set up a plan; Jeff did it before I got here in 2005 when he had 50 employees, and now we have over 165 people working for Vargo Physical Therapy,” Grieder said. “Paychex makes it so easy, and if I had to implement a plan today, I would have no problem selecting Paychex. They’ve worked with so many clients on their retirement plans that they’ve simplified it.”

Paychex is the largest 401(k) administrator recordkeeper by total number of 401(k) plans with nearly 110,000, according to PLANSPONSOR magazine. Paychex is also the second-leading provider by number of new plans added in 2023, with more than 23,000.  

“Having a retirement plan does a great service for employees,” Grieder said. “If you care about them at work, then show that you care about them after they are done working for you. It’s a valuable expense but one I feel they’ll be thankful for 30 years down the road.”

Does the state in which you operate have a state-sponsored retirement program? Find our more by visiting our state retirement program guide for the latest details on workplace retirement program requirements, along with details on the types of retirement plans that can help you satisfy program criteria.