Recruiting medical professionals can be tough, and the benefits and salary conversation can sometimes be tricky. In a previous blog, we covered the financial benefits of recruiting to an independent contractor position (aka 1099). Once medical professionals experience the financial flexibility of a 1099 role, it can be hard to transition back to a w2 (aka “employee”) position. Quite frankly, there are more tax planning opportunities as an independent contractor, but that doesn’t mean doom and gloom for those with a w2 job. See below for the top 4 financial benefits for w2 employees.
This may be a “no-duh”, but don’t undercut the value of a benefits package. Some medical professionals greatly appreciate the ease of plugging into an already defined group plan. This frees the provider’s time to not have to manage the “moving pieces” of securing individual policies. Group benefits packages usually contain health insurance coverage as well as a modest disability* and life* insurance policy. These insurances are typically offered to the employee at a subsidized rate (i.e. the health insurance premium will likely be quite a bit less expensive than if the provider had to secure his or her own individual policy). Sometimes the package will also include an annual contribution to a HSA fund (which can be used to pay for out-of-pocket medical expenses).
*It’s still a good idea for a medical professional to work with a financial adviser to determine if the disability and life insurance provided in the group plan is adequate coverage for his or her specific scenario. Some providers find they may need to purchase supplemental coverage to adequately protect their assets.
2) Other Paid Expenses
Your organization may foot the bill for other expenses like CMEs, scrubs, etc. Be sure the medical professional considering the w2 position knows all the expenses covered. This can seem like a small benefit but actually add up to be a larger benefit.
3) Retirement Savings Match
Many organizations hiring a w2 medical professional also include a way for the provider to make tax-deductible retirement contributions to a retirement account. In 2019, the maximum tax-deductible retirement contribution an employee can make is $19,000*. The employee’s contributions are made by being directly withdrawn from their paycheck.
The extra benefit of a group retirement plan is that many companies also provide a match, meaning the provider can increase his or her retirement savings on the company’s dime (and on top of the $19,000*). For example, a company might offer to contribute 50 cents for every $1 the employee contributes up to 4-6% of the employee’s pay.
4) Other Savings Opportunities
As a recruiter, you might receive objections from a candidate who knows that an independent contractor can contribute significantly more to retirement (and thus take quite a larger tax deduction). Or, you might even have a situation where you are hiring for a w2 position and are not able to offer access to a 401(k) plan. This doesn’t mean that a provider can’t meet their financial independence goals. The medical professional may just need to deploy other strategies. These can include:
- Utilizing a Backdoor Roth IRA. Roth IRAs are known for not being usable if one makes too much money. However, there is a way to use this savings tool through a conversion from a traditional IRA. The parameters are more complex, and are summarized in our blog here.
- Setting-up an after-tax savings strategy. Regardless if one is a w2 or 1099 medical professional, he or she is not limited to how much of his or her salary is invested. A financial adviser should be able to show hypotheticals that play-out various saving decisions long-term. At Financial Designs, we give client’s access to a tool that allows providers to determine if they will possibly outlive their money based on various facts input into the system. This is can be handy when determining how much a provider needs to save to meet financial goals. We can then help determine how to best invest these after-tax dollars based on goals, risk tolerance, etc.
Providers can have a lot of questions regarding the financial aspects of a position. Lean on us to educate your medical professionals on how they can leverage the financial strategies available to them. Looking for a one pager highlighting how we can help? Email us: firstname.lastname@example.org.
*$25,000 for those over the age of 50