By Katherine Vessenes, JD, CFP®

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If you missed part one of this series where Katherine discussed base pay, bonuses, restrictions, arbitration, and general tips, you can listen or read more about it here. Today we’ll cover common benefits in doctor contracts and what can be negotiated.

Doctor contracts are long and very frequently full of legal jargon. Often doctors are tired and just want to sign a contract to be done with it. However, I encourage you to take a couple of minutes and go through some of the items in this article or have a professional review it for you. We provide financial reviews of contracts for our clients and can offer referrals if you would like a legal review.

Today we are covering common benefits including paid time off, medical, dental, and vision insurance, life and disability insurance, malpractice and tail coverage, continuing medical education and licensing, retirement plans and employer match, and debt repayment programs, as well as what can and cannot be negotiated.

Paid Time Off (PTO)

A newer trend in contracts is lumping all your days off into PTO. Gone are sick days and vacation days. This is nice because you can use them how you want. You do not have to be sick to use your PTO days.

On the lower end I see doctors getting three weeks of PTO. On the higher end you could get 11 or 12 weeks of PTO per year. This depends on specialty so find out from your colleagues and friends what you should expect with your specialty.

You’ll want to make sure you clarify how much time you are allotted and how it is accrued. Does the amount of PTO increase if you stay at the company longer? Can you use more than you have accrued? You’ll want to keep this in mind if you ever plan to leave. If you go over the amount of PTO you have accrued you will have to pay it back to the company. On the other end, the company may have to pay out your unused PTO.

Medical, Dental, & Vision Insurance

As an employer myself, these benefits are crazy expensive to offer employees. In a perfect world, your employer will cover half of your personal medical, dental, vision coverage and half of your family members’. Unfortunately, that’s not true everywhere due to the costs of providing coverage.

Look at the options provided. The employer isn’t required to offer any benefits for your family. Sometimes your spouse's benefits may be better, and you should choose a plan under your spouse’s coverage. Make sure you understand the costs of each option.

I’d encourage you to consider the Health Savings Account (HSA) if that’s an option. Not every employer offers this, but they're getting a lot more common. If you're married with a family, you could set aside $8,500 a year into the HSA (in 2025). Money goes into the HSA pre-tax and any money made in that account is tax-free as long as it is put toward qualifying medical purchases (prescriptions, glasses, braces, etc.).

Now, with that said, this is not a great option for everyone. HSAs usually come with a high-deductible plan. You can run through that deductible quickly if you have a large family with children needing medical visits often. If you and your family are healthy and you rarely go to the doctor, HSAs are a great way to set aside tax-free dollars for the future. An HSA will stay with you after you leave your employer, so you can use them to pay for medical expenses into retirement as well.

Life & Disability Insurance

Generally, when it comes to life insurance at work, these are what we call temporary term policies. They cover you only during the time you're working at this particular company or hospital. I rarely include these policies in calculations when we are trying to figure out how much coverage a client needs. Why? Because, more often than not, a doctor that dies during their career will get sick, quit working, and then pass away. Once they quit working, the policy coverage ends and there is no pay out to their heirs.

Rarely have I seen portable policies provided at work. A portable policy would allow the doctor to get coverage at Hospital A and then that doctor can leave to work at Clinic B and keep the coverage. Double check if your contract is one of the few that offers this, but don’t expect it.

Typically, we see companies offering coverage equal to one or two times the doctor’s annual income. Often this is paid for entirely by the company and there are options to buy more coverage (supplemental coverage) that is paid for by the employee. Your contract may also offer life insurance on a spouse or dependent. This is almost always paid for by the employee.

You’re probably asking, if the policies are not portable, why would you want to pay for the additional ones offered by your company. It’s a great option if you have some health issues that make you un-insurable or risky to insure. You could end up with really high premiums on an individual policy due to medical underwriting, or you can pay for the company policy which does not require medical underwriting.

If you’re interested in finding out more about individual policies, feel free to reach out. We have a list of health questions that can help us estimate how much insurance will cost for each of our clients.

When it comes to disability insurance, almost every doctor has this provided through their work with the exception of those at very small clinics or some private practices. However, the coverage can vary widely. Expect disability to be listed as a percentage of your income with a monthly benefit cap on it. A common one we see is 60% of income with a $5k, 10k, or 15k per month cap.

If the coverage is paid for by your employer, the benefit is typically taxed as ordinary income. Keep this in mind when deciding if the coverage offered is enough. If you have an individual policy that is paid for by you, the benefit is not usually taxed.

Feel free to reach out to have us do a coverage assessment for you. Statistically you are four times more likely to become disabled than you are to die during your working years(1). A disability can be a lot more expensive than people think. You may need in-home care, medical devices, and other things that are not covered by your insurance. Oftentimes we find our doctors are in need of additional disability insurance due to not being completely covered by their work policy alone.

Malpractice & Tail Coverage

Malpractice is almost always covered by the employer. They want to protect themselves and their doctors if something was to go wrong. The same cannot be said about tail coverage.

Do check your contracts for this. When you leave your current employer, is there tail coverage that's going to cover you at your new employment or likewise? Sometimes employers want the doctor so much that they will actually pay for tail coverage at their previous job.

Now if you must buy tail coverage yourself, depending on your specialty, it can be crazy expensive. Mark down tail coverage if you do not see it on your contract. This could be a point of negotiation where you might be able to sweeten the deal and get your new employer to cover this for you.

Continuing Medical Education (CME) & Licensing

Usually, employers offer some sort of stipend for continuing education and licensing, but they vary a lot. This could be as low as $1,500 per year. If you have to travel across the country to attend conferences, you are not going to get very far with only $1,500. Something around $5,000 a year is more realistic for doctors, but unfortunately this is a spot where employers are scaling down and saving money.

You’ll also want to find out if they offer any additional days off for CME or if any days spent training are part of your PTO. Ideally, they offer a separate pool of days for training. Does the company pay costs up front or reimburse? Do you have to provide receipts? All of this is best to know before you sign a contract and definitely before you start planning to attend a conference. Maybe there is also some room here for negotiation. Less of your own money spent on training is more money in your pocket.

Retirement Plans and Employer Match

One of the key questions to ask about retirement plans and employer match is, when do you become eligible? It’s not unusual for an employer to offer a 401K plan, but you might have to wait a year and/or put in 1,000 hours of work before you qualify. During that time period, you're probably going to want to be putting the funds you would have put into your 401K plan into a brokerage account to build up your wealth.

Almost all employers nowadays have Roth options. You can usually save into a pre-tax or a Roth (post-tax) option. What you choose is going to depend a lot on the state you live in, your tax situation, what tax bracket you're in, and so forth. Whenever possible, we love for clients to choose the Roth option. But, if you live in California, New York, or Minnesota, where the state taxes are quite high, that may not be the best option for you.

Now the key question here is the employer match. How much is it and when does it start? A 2%, 3%, or 4% match on your plan can have a huge difference in the outcome of how much money you'll have when it comes to retirement.

Generally, 401Ks and 403Bs are called defined contribution plans, and these are the most common ones. You'll see them almost everywhere. The big question though to ask is how much will your new employer match or how much are they putting in on their side?

Employer contributions always go into the pre-tax bucket, even though your contributions may go into the post-tax or the Roth bucket. The low end is usually 2% match. Most common is 3% and some lucky doctors can find as high as a 6% match. A lot of it depends upon the financial health of the institution. If you're working for a practice that is extremely healthy and very, very profitable, you might get something on top of this match.

Sometimes profit sharing is available with these types of plans. The profit sharing contributions are pre-tax and the amount put into your plan can be considerable. In 2024, between the employee and the employer contributions, you could get up to a maximum of $69,000 into these accounts. Find out if this is something your employers offer or could offer in the future.

Overall, find out what options your employer has, when they are available, and how their employer match works. Some companies require you to put in a certain amount for them to match your contributions, some fund your accounts whether you contribute to the plan or not.

Debt Repayment Programs

Debt repayment programs are almost always taxable, but they can be great for the right doctor in the right situation. Whether or not they're taxable can vary from state to state. The employer may be encouraging you to work in underpopulated areas, rural areas, and they may make some of the student debt forgiveness not taxable as an incentive.

What’s Negotiable?

At the end of the day, I think it's important for you to realize what you can and cannot negotiate for.

First, not negotiable. Whatever the retirement plans are and the match provided cannot be changed. This is usually the same for the entire company. Life and disability insurance are group policies meaning you cannot get employer coverage different than offered. Same goes for medical, dental, and vision insurance.

However, there are certain things that are negotiable, and I'm hoping you pay attention to this because most employers are leaving money on the table and if you're not taking a little bit of time to negotiate, you're leaving money there that could be yours.

So, what can be negotiated? Starting salary and increases down the road, bonuses, PTO, office space, all of these can be flexible. You just need to figure out which ones they are willing to work with you on.

Conclusion

I know that contracts can be intimidating, but if you take the time to find what is most important to you and understand the basics, you’ll feel a lot more comfortable. If you have a contract that you'd like us to look at from the financial side, we’re more than happy to do that.

(1) At age 42, it is four times more likely that you will become seriously disabled than that you will die during your working years. – Social Security Administration, Fact Sheet January 31, 2007

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Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 600 doctors from Hawaii to New York. An experienced Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at Katherine@mdfinancialadvisors.com.