What to look for in an employment benefits package

I am considering a new position. What should I look for in a benefits package?

Jeff Witz, CFP

A benefits package is an important piece of the puzzle when evaluating job opportunities. For physicians, the type of employer often affects what is provided. For example, many private medical practices provide very little in terms of traditional benefits. As a partner or shareholder, you operate more as an entrepreneur and must pay your own way when it comes to most benefits. Large hospitals and university hospitals often have a more robust benefits package, but you practice medicine as an employee. Private equity groups sometimes land more in the middle.

Regardless of whether you choose your own benefits or they are provided to you by your employer, these are the most common benefits physicians should look for.

Personal time off (PTO). Two to 3 weeks per year is common. An important question to ask is whether sick days and time off for continuing medical education (CME) are included in your PTO or if they fall into a separate category.

CME reimbursement amount. Typically, reimbursement amounts range from $2500 to $3500 annually. Make sure to verify what items are reimbursable because many employer policies have caps on airfare and hotel expenses.

Health insurance plans. Premiums, co-pays, and coinsurance are important, but be sure to give extra consideration to the deductible and out-of-pocket maximums. The deductible is the amount you must pay before the insurance starts paying. The out-of-pocket maximum is the most you will pay in a calendar year for your deductible, co-pays, and coinsurance. Once the out-of-pocket maximum is reached, the insurance plan will cover 100% of the costs above that amount.

Dental insurance. Most dental plans are standard in terms of deductibles, co-pays, and coinsurance. Pay attention to the annual maximum benefit. These typically range from $500 to $2000. This is the maximum amount the plan will pay for dental work within a calendar year.

Vision insurance. Most plans have relatively low co-pays for eye exams ($10 to $20) and provide allowances ($130 to $150) for eyeglasses and contact lenses. Medically necessary contacts are often covered in full. Elective and specialty lenses will likely have a co-pay.

Flexible spending accounts (FSA). There are 2 types of FSAs: a health care FSA and a dependent care FSA. These accounts let you contribute pretax money and then spend it on qualified expenses. The maximum you can contribute to a health care FSA in 2021 is $2750, and the maximum you can contribute to a dependent care FSA is $5000. Use caution with these accounts because for most, money remaining at the end of the calendar year is forfeited back to the plan.

Long-term disability (LTD). Employer-provided monthly benefit amounts vary. We recommend physicians have at least 60% of their predisability monthly income covered by an LTD policy. If the employer-provided plan is insufficient, then a physician should acquire a supplemental disability policy to make up the difference. When reviewing disability plans, pay close attention to how disability is defined. A “true own occupation” definition is a specialty-specific policy. If the employer-provided policy does not have this definition, consider getting as much coverage from a supplemental policy
as possible.

Life insurance. Employers often provide coverage equal to 1 to 2 times a physician’s salary. Some limit coverage to $50,000, but that is done for your tax purposes. If an employer provides life insurance above $50,000, the premium paid for the insurance above $50,000 must be included in the employee’s income and they must pay income taxes on it.

401(k)/403(b). These retirement plans allow for tax-advantaged retirement saving and investing. In 2021, an employee can contribute $19,500 of their own money to the plan on a pretax or Roth basis. Employers often contribute by making a guaranteed 3% safe harbor contribution, matching a percentage of employee contributions or a mixture of both. Employers may also make discretionary contributions. Pay attention to the vesting schedule, which will tell you how much of the employer contribution you can take with you if you leave the company. You are always 100% vested in your own contributions.

Other retirement plans. Less commonly offered plans are a 401(a), a pension plan, and a 457.

Other benefits. Additional benefits you may have include a health savings account (HSA), short-term disability, accidental death and dismemberment insurance, adoption assistance, tuition reimbursement, wellness programs, and discounted services.

Witz is educational program director at MEDIQUS Asset Advisors, Inc in Chicago, Illinois. He welcomes readers’ questions and can be reached at 800-883-8555 or witz@mediqus.com.

The information in this column is designed to be authoritative. The publisher is not engaged in rendering legal, investment, or tax advice. If you would like assistance with your individual investment strategy, please email witz@mediqus.com.