Question on Malpractice Insurance

[ajm184]

Looking for some thoughts/advice on the following:

My wife is in process of re-negotiating her contract with her employer, a relatively small three physician practice in a relatively low cost of living part of the country.  My wife is currently paying her medical malpractice premium with after-tax dollars.  I am interested in having the practice 'paying' the premium via pre-tax deductions from my wife's pay versus the current after tax approach.  The goal being to allow my wife to pay medical malpractice with pre-tax money without running afoul of the IRS.

The person in charge of practice is generally supportive of the approach, though her accountant is less so.  My understanding from the practice accountant is that pre-tax medical malpractice is part of a 'cafeteria plan'.  Before, I get our family's accountant (who is well verses in small business accounting) and the practice accountant together to hash this out; I would appreciate this forum's wisdom on thoughts/what I should expect and any tips/approaches?

[Dreamgiver]

It is very interesting to me that malpractice is paid with after tax money. I have never heard of that even for those of us getting W2s. I wonder how this group is structured, why the accountant recommends that, and what else is "unusual."

[VagabondMD]

I have never heard of this either. Med mal insurance is an obvious business expense and should be treated as such.

[Zaphod]

Is she w2? Seems strange. Im 1099, so it comes out pre tax. Actually they tax it out before the check but the effect is the same, but I get to say I make 25k less.

[Dreamgiver]

Zaphod wrote:

Is she w2? Seems strange. Im 1099, so it comes out pre tax. Actually they tax it out before the check but the effect is the same, but I get to say I make 25k less.

Click to expand...

I am W2 and it still comes out pre-tax. In fact, it does not even make it to the pay stub, comes out directly from gross collections.

[ajm184]

Thank you for the feedback thus far.  Yes, my wife is a W2 employee.  I do not know understand the business's legal structure, though there is a possibility that the practice and the building in which she practices maybe separate legal entities though effectively controlled by the same people.

Interesting that the premium's come out directly from gross collections as my wife also has a gross collections compensation structure.  Also not making it to the paystub.  Perhaps this is something to bring up.

I was able to save an estimated 6k per year in opportunity costs for my wife by getting the practice to use Vanguard for her Simple IRA versus Edward Jones, so I consider that a win, though a different topic.

[Hatton]

I am in a solo practice.  No one pays malpractice with after-tax money.  Either the accountant that the practice is using or the practice itself has some educational issues.  I would be concerned that there may other issues going forward.  The only item that I can think of like this that you pay for with after-tax money is disability insurance.