Recruiting to the Financial Benefits of IC/1099 Positions

By Terry Westlund, ChFC^®

Recruiting physicians can be tough whether you are a healthcare recruiter, a physician responsible for building your team, or an administrator. When the conversation turns to benefits and pay for an independent contractor position (aka 1099), things can get complicated. Sometimes this as a difficult conversation to navigate, but you can make the financial flexibility of an independent contractor position a top selling point of the job. See below for the top 3 financial benefits.

1) Dramatically Reduce the Bill to Uncle Sam

Independent contractor clinicians have the unique ability to drastically reduce their tax bill. Some of the bigger deductions include retirement contributions (in 2025, clinicians can contribute up to $70,00* in a tax-deductible retirement plan), business expenses, the QBI deduction introduced with tax reform, and health insurance premiums (see below). When you take all these strategies into consideration, a clinician can easily deduct $150,000 from their taxable income. In a 30% tax bracket, that means saving $42,000 in taxes in a single year. See an example here.

2) Accelerate Retirement Savings & Financial Independence

As mentioned above, an independent contractor clinician can save up to $70,000* in a tax-deductible retirement plan (vs. $23,500 as a W-2 employee). If the independent contractor clinician chooses to hire a spouse, an additional $25,000 can be saved. If that’s still not enough and/or the clinician is looking to save even more in taxes, a Defined Benefit Plan can be deployed (aka “pension plan”). All of these strategies are unique to the independent contractor (1099) status.

3) Design a Portable Benefits Package

When clinicians are in an IC/1099 role, they get to create their own custom insurance package rather than relying on a “set in stone” group benefits package. Working with a broker is a good idea as it allows the clinician the ability to see various options across carriers for items like health, disability, life and long-term care coverage. The clinician has flexibility in choosing how much coverage fits their needs and budget. Here are some of the other benefits of designing a portable benefits package:

• Health plans can be tailored, and the premiums are 100% tax-deductible. If a high-deductible plan is selected, a HSA account can be used. HSA accounts offer triple tax benefits by not being subject to federal income taxes, earning interest tax free, and the funds withdrawn are tax free (as long as they are used for qualifying health, dental and vision expenses). The funds also roll over year-to-year.
• For disability insurance, clinicians can secure a permanent plan, meaning if the clinician were to change jobs in the future, he/she can keep the insurance coverage when making the job change. This is important because as clinicians get older, disability coverage premiums dramatically increase. Securing disability coverage early in one’s career keeps the cost down. Clinicians should also be aware of discounts available for disability coverage. Depending on the employer, here at FDI we can secure discounts that no other brokers have access to. For more tips on how to secure the best possible disability policy, go here.
• For life insurance, premiums are often less expensive for an individual life plan than a group policy. Additionally, one has the flexibility to choose a larger benefit if necessary and can consider whether a term or permanent policy best fits their needs.

Looking for material to share with your clinicians that outlines the financial benefits of being an independent contractor? Share this link Financial Resources for W2 Physicians or Email us: connect@financialdesignsinc.com for additional information.

*$77,500 for those over the age of 50