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Employee and independent contractor retirement account help

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  • Employee and independent contractor retirement account help

    Hi everyone, thanks in advance for your help. I will soon be finishing up Family Med residency and going to a rural setting, working in outpatient, inpatient, and potentially an ED setting. For the outpatient and inpatient, I will be an employee and will be able to contribute to a governmental 457b with match. The ED belongs to the hospital that I will be working at. I’ve been given the option to either be paid as an employee or as an independent contractor, however, they preferred I be paid as an employee. I will have potential to earn 100k+ in the ED if that changes anything.

    My questions are:
    1. If I was paid as an independent contractor, would I be able to fund an individual 401k in addition to my 457b? Is that something that I should do?
    2. Would the contribution of one affect the other?
    3. Would that be worth the headache? If it’s a headache at all?

    Again, thanks for any help!

  • #2
    1. 457 plans are not subject to controlled and affiliated service group rules. This means you can adopt, maintain and contribute to a one-participant 401k. This is most definitely something you should do.
    2. 457 plan deferrals are not included in the 402g employee deferral limit (2020 = $19.5K). 457 (employee deferrals + employer contributions) have the same 2020 = $19.5K limit amount, but are not included in the 415c annual addition limit (2020 = $57K).
    3. I don't know if I would refer to it as a headache, but it would certainly be worth it. You do need to educate yourself of the rules and regulations involving a one-participant 401k. It is not just a bigger IRA. They are not exceedingly difficult, but it is still a 401k plan. There are many people here on WCI who have been where you are and now understand one-participant 401k plan rules and regulations well enough to help others such as yourself.
    Last edited by spiritrider; 03-12-2020, 08:45 PM.


    • #3
      Thank you for your response, I know what I’ll be reading up on now!


      • #4
        I guess a follow up question to this would be, will I be responsible for my own malpractice insurance for the work I do as an independent contractor?