Managing your Benefits as a 1099 Employee: What You Need to Know as a Locum Tenens Physician

General.

A 1099 employee is someone who works independently, meaning they are not a permanent worker for a company. The category includes independent contractors, freelancers, and locum tenens physicians. 

While some people choose to work full-time with one employer and therefore become W2 employees, others prefer the flexibility of being a 1099 worker. 

However, managing your benefits as a 1099 employee can be challenging. Locums are often hired through an agency that connects individuals with hospitals or private practices. The nature of the job and the legal guidelines that bind 1099 workers create a unique situation for locum physicians with multiple benefits and drawbacks.  

This blog post discusses some of the benefit options when working as a 1099 locum tenens physician. With the correct information, you can make informed decisions about your work options in the future. Please note: The following information is to be used for informational purposes only. We recommend consulting with the appropriate experts when making work or finiancial-related decisions.  

 

Advantages of being a 1099 employee 

The most significant advantage of locum tenens work is the flexibility it provides to physicians and advanced practice providers. You can plan contracts around your schedule and the time off you need from the pressures of work.  

The need for locum tenens to work in every state means that you’ll be able to explore different areas of the country as you work. Typically, your pay rate is higher than a permanent physician at the same facility.  

Finally, the different settings you’ll find yourself working in will help hone your professional expertise, boost your resume, and help you make professional and personal connections.  

 

Disadvantages of a 1099 employee 

The greatest disadvantage to locum tenens work is the lack of job stability and benefits.  

As an independent contractor, you’re responsible for many insurance costs that your employer would otherwise shoulder. You’ll constantly need to review and negotiate paperwork regarding hospital policies and adapt to new environments quickly and successfully. 

 

How you can use your pay to cover benefits 

Although a lack of benefits is a drawback to locums work, you can use your healthy salary to cover some of the benefits you’d expect as a full-time employee, namely access to retirement accounts, life, disability insurance, and health insurance. 

 

Retirement accounts 

Because you’re solely responsible for saving for retirement, the earlier you start, the better off you’ll be later in life.  

Here are some options to consider when choosing retirement accounts: 

• Traditional IRA: A traditional IRA allows you to invest tax-deductible contributions towards your retirement. When you withdraw your money, it’ll then be taxed as ordinary income. Contributions to a traditional IRA are capped at $6,000 per year.  

• Roth IRA: A Roth IRA works like a traditional IRA, but with one big difference. Instead of tax deductions upfront, you can withdraw money tax-free. If you predict that you’ll be in a higher tax bracket when you retire, a Roth IRA will be the more attractive option. However, there are specific eligibility requirements that you must meet to contribute to a Roth IRA. For example, single filers cannot contribute to a Roth IRA if they make more than $140,000 a year.  
• SEP-IRA: A SEP-IRA is a basic retirement plan that’ll allow you to make annual tax-deductible contributions to your account. An advantage of this plan is that you can contribute much more money than a traditional Roth IRA plan. The limit is 25% of your income capped at $58,000. Like traditional IRAs, any withdrawals made from a SEP-IRA is taxed as ordinary income. It’s also more straightforward to set up and comes with no yearly maintenance fees, making them an attractive option.  
• Individual 401k: An individual 401k works much like a SEP-IRA, with a maximum annual contribution of $58,000. Your contributions are tax-deferred, so you will only be taxed for it when you withdraw your money.  
• Defined-benefit plan: A defined-benefit plan is a pension plan that allows you to make more significant tax-deductible contributions, up to $230,000. After you retire, this program will give you a monthly fixed income. This may be more attractive to physicians with higher income, although the annual fees are greater.  

No matter which option looks the most attractive, always make sure to talk to a financial advisor before settling on your retirement plans.  

 

Life and disability insurance 

If you have a family dependent on your income, a life or disability insurance policy protects them against financial hardship should something happen to you. 

You can purchase short-term, long-term life insurance, and disability policies.  

Ask a financial advisor or use this tool to calculate how much insurance you need.  

 

Health insurance 

As a locums physician or APP, you are also responsible for providing your own health insurance. In this case, you may be looking to purchase health insurance through a private company.  

Although it isn’t typically mandatory to have health insurance, it is a wise precaution. Unexpected illnesses or accidents leading to even minor injuries, like a fractured bone, can result in disastrous financial consequences.  

In the government’s Healthcare Marketplace, enrollment is still available due to an extension put in place because of COVID. 

There are many different health insurance plans with various features, including HMO, PPO, EPO, and POS plans. Policies balance the cost and premiums with the scope of access to healthcare providers.  

 

National Association for the Self-Employed (NASE)  

If you’re a 1099 worker, consider joining the National Association for the Self-Employed. They provide help, support, and valuable resources for self-employed professionals.