Moonlighting
Moonlighting Tips for Officers in Navy Medicine
Someone who donated some money in support of the blog requested a post addressing moonlighting. Here are some questions they had or issues they raised plus a few more:
Should You Moonlight?
Moonlighting is not required to advance your career in the Navy. I barely moonlighted. Moonlighting is optional.
For many specialties and locations, moonlighting is essential to maintain the full scope of your skills. If you need it for case complexity or volume, that is certainly a valid reason to do it.
The extra money doesn’t hurt either, but you need to make sure that you do not become dependent on the moonlighting income. For example, during COVID the Surgeon General prohibited all moonlighting. You can also lose the ability to moonlight due to a deployment or permanent change of station (PCS). If you are dependent on that extra money, now you have a real financial problem. Make sure moonlighting income is extra and you are not dependent on it.
Get Approved First
Everyone who is active duty needs to get approval from their command before they engage in moonlighting. There may be ways to do it without command approval, like when you are on leave, but I would still recommend you run this by a legal officer before you do it.
The safe bet is to just get approval before you do it.
Should You Set Up an LLC?
Many people think that if they moonlight they should set up a Limited Liability Corporation (LLC) to get extra protection against malpractice judgements. There may be reasons to set up an LLC, but protection from malpractice liability is not one of them. You cannot shield yourself from malpractice liability with an LLC.
If you are going to setup an LLC or some other corporate structure like an S Corporation (S Corp), it would be for tax or financial purposes, not to limit malpractice liability.
Do you need an LLC? No. If you moonlight as an employee, you are employed by that employer and your income is handled like any other employed income. If you moonlight as an independent contractor without an LLC, the IRS considers you to be a “sole proprietor” and your income just flows to your personal income tax return. This is how a single person LLC works too. It is what they call a “disregarded entity” and your income just flows through to your personal income tax return.
If you have consistent income from moonlighting, you could form an S Corp for tax reasons. All of these issues are best summarized in this White Coat Investor article. I’d check it out for a complete explanation.
The bottom line is that most people who moonlight probably will not form an LLC or other type of corporation. They will either be an employee or a sole proprietor.
SEP IRA vs Solo/Individual 401K
If you choose to moonlight, you can do so as an employee or as an independent contractor. Most people are tempted to do it as an employee because it seems like the easy button. Your employer will take care of withholding taxes on any income you make. If the employer offers a 401K, you may be able to use it.
If you moonlight as an independent contractor, you will have to make sure your taxes are properly withheld, usually by submitting quarterly taxes. This is a little bit of a pain, but you or your accountant can easily take care of this.
The real reason to consider moonlighting as an independent contractor is because you are eligible to open up an additional retirement account. As I mentioned above, if you are an employee you can probably use your employer’s 401K, but it doesn’t get you any additional retirement account space. In 2026, you would be limited to $24,500 total (assuming you are < 50 years old) between your Thrift Savings Plan (TSP) and your employer’s 401K. You can’t contribute the $24,500 limit twice.
If you are an independent contractor, you can open up a SEP IRA or solo/individual 401K. These accounts come with additional retirement contribution space in addition to the $24,500 limit you’d have in your TSP. In other words, moonlighting as an independent contractor allows you to have additional tax protected space to invest in.
Should you open a SEP IRA or a solo/individual 401K? The details are spelled out in this White Coat Investor post, but the bottom line is that you should probably set up a solo/individual 401K instead of a SEP IRA. A SEP IRA can mess up your backdoor Roth IRA and a solo/individual 401K allows you to put a little more away than a SEP IRA does.
Where do you open a solo/individual 401K? We used to have one at Vanguard, but they got out of that business and transferred the account to Acensus, which has worked out fine for us. I have no experience with any other providers.
Do You Need Tail Insurance and Who’s Paying For It?
If you are moonlighting, you will likely need malpractice insurance. There are two types of malpractice insurance, occurrence and claims made.
If you have occurrence malpractice insurance, you are covered even after you leave that moonlighting gig. If you have claims-made malpractice insurance, you are no longer covered after you leave that employer and will need what they call tail insurance in order to ensure you remain covered. Tail insurance can be expensive. In fact, you may find it costs more than the entire sum you made moonlighting!
If you are going to moonlight, make sure you find out ahead of time if you will need a tail and who is paying for it (you vs the employer). If you are going to be paying for it, try to find out approximately how much it will cost. You don’t want to moonlight for an extra $30K only to find out your tail insurance will cost more than that!
The Bottom Line
Moonlighting is optional, but make sure to get command approval first. You probably won’t set up an LLC and will start as a sole proprietor, only considering a corporation if your income is steady and significant. Make sure you know if you need tail coverage and who is going to pay for it.
8 Minute Q&A Session with the Medical Corps Chief
Watch the 8 minute video below to get RDML Hancock’s take on advice for a high school senior interested in Navy Medicine, billet divestitures, moonlighting while on TAD instead of leave, the definition of “critical wartime specialties,” straight-through GME training, and NDAA 2022.
CO’s Can Permit Moonlighting Again
Here’s the memo about off-duty employment (ODE, moonlighting) that the SG signed. In brief, it says that CO’s can resume permitting ODE/moonlighting:
Throwback Thursday Classic Post – Moonlighting in the Navy
It’s August and a whole new crop of recent residency graduates can now moonlight for the first time in their Naval careers, so here is a video and blog post that discusses some of the basics of moonlighting.
Should You Moonlight?
I think the answer to this question depends on a lot of things. First, do you envision yourself working clinically when you leave the Navy? For most physicians, the answer to this question is yes, and depending on your specialty you may need to moonlight to maintain your clinical skills. We don’t always get exposed to the full scope of our specialty in the Navy. My wife is a pediatrician, and when she was on active duty I thought she had a full scope pediatric practice and did not need to moonlight to maintain her skills. As an emergency physician, though, it is rare to get exposed to the full breadth of emergency medicine in a Navy emergency department. You have to make an honest assessment of your specialty, the breadth of your Naval practice, and whether you need to moonlight to maintain your skills.
In addition, you need to figure out your motivation for moonlighting. A common motivation is to earn extra money, and that is a fine motivation, but you never want to make decisions that make you dependent on the money. You may deploy, your CO could take away your moonlighting privileges, or you could PCS somewhere where you can’t moonlight. You don’t want to be the bankrupt doctor because you bought a house you can’t afford without moonlighting.
The Navy’s Moonlighting Rules
In order to moonlight you have to get permission from your command. It is a privilege, not a right, and you can lose this privilege if you fail a PFA, don’t stay up-to-date on your training/readiness requirements, or don’t produce academically when required.
If you are going to moonlight somewhere outside of a 2 hour drive, you need to take leave. If you are flying anywhere, no matter the distance, you need to take leave. You can’t moonlight more than 16 hours/week and you need to have 6 hours of time off between clinical periods for your moonlighting job and your Naval duties. You’ll need to complete an annual attestation that says you are aware of these policies and compliant with them. If your specialty makes complying with these guidelines hard, you can ask for a waiver from your command.
Where Should You Moonlight?
If you moonlight locally you don’t need to take leave. If you can find a clinical setting you think you’d like after your time in the Navy is complete, you can even start working toward partnership.
If you work locum tenens, you can travel and sometimes chase “the big money.” If you work enough, the locum companies will cover all of your expenses, DEA, state licenses, travel, hotel, expenses, and malpractice insurance. Because you are likely traveling to a location more than a 2 hour drive away, you’ll need to take leave.
Basic Financial Planning for Moonlighters
Moonlighting allows you to put more money in tax advantaged retirement accounts. If you’re a non-moonlighter, you’d be limited to putting $19,000/year in the TSP and $6,000/year in your IRA (based on 2019 limits). If you moonlight and get paid on a 1099 as an independent contractor, you can fund a SEP IRA or solo 401k up to $56,000/year. It is rare that you’ll hit this maximum because you can’t moonlight enough to earn the amount required to do it, but you will be able to put more away than a non-moonlighter. A SEP IRA is easier to set up than a solo 401k, but a Solo 401k allows more money to be contributed at an equivalent salary. Plus, a SEP IRA messes up your backdoor Roth IRA contribution. For a great discussion on these two options, go to this article, but the bottom line is you’ll likely want to set up a Solo 401k and not use a SEP IRA:
http://whitecoatinvestor.com/sep-ira-vs-solo-401k/
Finally, moonlighters often want to incorporate because they think it provides malpractice protection, but that is a myth. Although there may be some tax advantages to incorporating, it doesn’t protect you from professional liability or malpractice.
Contract Pitfalls
If you are going to sign a contract, you are going to need to get some professional help. You should hire a healthcare or contract attorney to review any contract you are considering. You could also consider using a company that specializes in reviewing physician contracts like Contract Diagnostics. There are many issues you need to understand, including:
- Due process or termination clauses – For what reasons can they terminate you? Are you entitled to a hearing with the medical staff before your privileges are removed or restricted?
- Tail coverage – Does your malpractice insurance require tail coverage? If so, who is paying for it? Tail coverage is malpractice insurance that covers you after you stop working for that employer, and it can be VERY EXPENSIVE so you will want to know who is paying for it.
- TRICARE or VA eligible patients – You can’t bill these patients as they are already entitled to your services. This is spelled out very well in the moonlighting paperwork you will file with your command, but make sure your employer understands this.
Here are the Powerpoint slides for the video podcast below:
Moonlighting in the Navy
It’s July and a whole new crop of recent residency graduates can now moonlight for the first time in their Naval careers, so here is a video podcast and blog post that discusses some of the basics of moonlighting.
Should You Moonlight?
I think the answer to this question depends on a lot of things. First, do you envision yourself working clinically when you leave the Navy? For most physicians, the answer to this question is yes, and depending on your specialty you may need to moonlight to maintain your clinical skills. We don’t always get exposed to the full scope of our specialty in the Navy. My wife is a pediatrician, and when she was on active duty I thought she had a full scope pediatric practice and did not need to moonlight to maintain her skills. As an emergency physician, though, it is rare to get exposed to the full breadth of emergency medicine in a Navy emergency department. You have to make an honest assessment of your specialty, the breadth of your Naval practice, and whether you need to moonlight to maintain your skills.
In addition, you need to figure out your motivation for moonlighting. A common motivation is to earn extra money, and that is a fine motivation, but you never want to make decisions that make you dependent on the money. You may deploy, your CO could take away your moonlighting privileges, or you could PCS somewhere where you can’t moonlight. You don’t want to be the bankrupt doctor because you bought a house you can’t afford without moonlighting.
The Navy’s Moonlighting Rules
In order to moonlight you have to get permission from your command. It is a privilege, not a right, and you can lose this privilege if you fail a PFA, don’t stay up-to-date on your training/readiness requirements, or don’t produce academically when required.
If you are going to moonlight somewhere outside of a 2 hour drive, you need to take leave. If you are flying anywhere, no matter the distance, you need to take leave. You can’t moonlight more than 16 hours/week and you need to have 6 hours of time off between clinical periods for your moonlighting job and your Naval duties. You’ll need to complete an annual attestation that says you are aware of these policies and compliant with them.
Where Should You Moonlight?
If you moonlight locally you don’t need to take leave. If you can find a clinical setting you think you’d like after your time in the Navy is complete, you can even start working toward partnership.
If you work locum tenens, you can travel and sometimes chase “the big money.” If you work enough, the locum companies will cover all of your expenses, DEA, state licenses, travel, hotel, expenses, and malpractice insurance. Because you are likely traveling to a location more than a 2 hour drive away, you’ll need to take leave.
Basic Financial Planning for Moonlighters
Moonlighting allows you to put more money in tax advantaged retirement accounts. If you’re a non-moonlighter, you’d be limited to putting $18,000/year in the TSP and $5,500/year in your IRA (based on 2015 limits). If you moonlight and get paid on a 1099 as an independent contractor, you can fund a SEP IRA or solo 401k up to $53,000/year. It is rare that you’ll hit this maximum because you can’t moonlight enough to earn the amount required to do it, but you will be able to put more away than a non-moonlighter. A SEP IRA is easier to set up than a solo 401k, but a Solo 401k allows more money to be contributed at an equivalent salary. For a great discussion on these two options, go to:
http://whitecoatinvestor.com/sep-ira-vs-solo-401k/
Finally, moonlighters often want to incorporate because they think it provides malpractice protection, but that is a myth. Although there may be some tax advantages to incorporating, it doesn’t protect you from professional liability or malpractice.
Contract Pitfalls
If you are going to sign a contract, you are going to need to get some professional help. You should hire a healthcare or contract attorney to review any contract you are considering. There are many issues you need to understand, including:
- Due process or termination clauses – For what reasons can they terminate you? Are you entitled to a hearing with the medical staff before your privileges are removed or restricted?
- Tail coverage – Does your malpractice insurance require tail coverage? If so, who is paying for it? Tail coverage is malpractice insurance that covers you after you stop working for that employer, and it can be VERY EXPENSIVE so you will want to know who is paying for it.
- TRICARE or VA eligible patients – You can’t bill these patients as they are already entitled to your services. This is spelled out very well in the moonlighting paperwork you will file with your command, but make sure your employer understands this.
Here are the Powerpoint slides for the video podcast below: