Financial Planning for Generation X & Y Women
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Expert Q&A Archive

Whether to work independently or as an employee in her profession.
What are the pros and cons of being a dentist who is an employee versus a dentist who is an independent contractor?
How would one or the other affect my pension and benefits?
Carrie Bailey Morey:
expert info »
I would refer you to an accountant to get the exact answers you are looking for because there will be benefits to both, and depending on your situation you need to look at both options.
Bettye J. Banks:
expert info »
It depends on the anticipated salary. As an independent business, you would have to pay employment tax (even if you were the sole employee), the self employed tax is also high. You would also have to pay 100% of the insurance to cover any unfortunate event, and the resulting consequence. The cost of doing business is quite high. The flip side is that 100% of the revenue comes to the dentist/owner of the business. You can control cost and develop a strong client base to maintain your dental business.

If you work as an employee of another entity your expenses are significantly less, but you have limitation on what you earn because someone else pays your salary. I would suggest doing a little research on the cost of doing business and then creating a cost benefit analysis profile before making your decision.
Fara Goodwin:
expert info »
As an independent contractor, a dentist may not be eligible for a group health plan and a pension plan. An independent health plan could be obtained through an insurance carrier; however, most are more expensive, offer less benefits, and may impose pre-existing condition exclusions.

An independent contractor could set up separate pension accounts such as an IRA through a bank.

Given that DOL, EBSA, governs the administration and enforcement of private-sector, employer-based Group Health and Pension Plans, I am more qualified to reply on what the benefits of being an employee are. Below is a summary of employee benefits that may be available under an employer offering both Group Health and Pension Plans:

A group health plan (GHP) offers one rate for everyone (young or older), and generally provides more favorable benefits. A GHP also cannot impose pre-existing exclusions if a person does not experience a significant break (> 63 days) in coverage.

If a person does experience a significant break in coverage under a GHP, the allowable "look back" period for treatment or diagnosis is 6 months; the "look forward" period is 12 months. In addition, the individual cannot be declined from obtaining medical coverage due to a medical condition or pre-existing health factor.

On Group Pension Plans, you would be entitled to be a member of a Group Pension Plan under your employer AND could also set up a separate IRA.

**You may want to further research the benefits available as a self-employed individual. The Small Business Administration is a valuable source. Use the State Office of Insurance Commissioner web-page to check out individual insurance carriers offering medical plans. Check your local bank as well as a benefits attorney or accountant to discuss the best options available for pensions.

Whatever your current and projected needs are will help direct your decision on which course to take regarding your employ.