Open Enrollment for Physicians (2027 Plan Year): HSA or PPO, 457(b), Disability, Life, and FSAs

Most hospitals and health systems hold open enrollment in late October and November for a January 1 plan year. The packet looks routine, and many physicians click through it in ten minutes between patients. That's a mistake on a physician income, where the tax rate on every pre-tax dollar is high and a few elections are hard to undo.

This guide walks through the choices in the order they matter, with the 2026 and 2027 limits from IRS revenue procedures and the tax rules behind each election. Your own plan documents decide the details, such as premiums, employer HSA contributions, and disability definitions, so keep your summary plan description open as you read.

Medical, dental, and vision coverage, health and dependent care FSAs, and the premiums you pay pre-tax all run through your employer's cafeteria plan. Those elections generally can't be changed during the plan year. Treasury regulations allow a midyear change only after a change in status the plan recognizes, such as marriage or divorce, a birth or adoption, a change in your spouse's employment, or gaining or losing other coverage, and the change has to be consistent with that event (26 CFR 1.125-4).

Two elections don't work that way. HSA contributions through payroll can usually be started, stopped, or changed during the year, as long as you stay HSA-eligible; check how often your employer accepts changes. And 401(k), 403(b), and 457(b) deferrals aren't cafeteria plan elections at all; most plans let you change them through the year, although some 457(b) plans only accept a new election before the month it takes effect.

Check what carries over. Many employers roll your medical plan forward if you do nothing, but FSA elections usually have to be made again each year. If you skip enrollment, you can end up with no dependent care FSA for 2027 and no way to add one until a qualifying event.

The IRS publishes HSA limits in the spring, so the 2027 numbers are already out. The 2027 limits for FSAs, commuter benefits, and retirement plans usually come in late October or November. Until then, plan with the 2026 figures; you can raise a retirement deferral once the new limit is announced.

This is usually the biggest dollar decision in the packet. Compare the plans on total yearly cost, not on the deductible alone:

1. Add up each plan's premiums for the year from your paycheck.
2. Add what you expect to pay out of pocket in a normal year, and separately in a bad year, which is capped at each plan's out-of-pocket maximum.
3. On the HDHP side, subtract any money your employer puts in your HSA and the tax you save on your own HSA contributions.

Why the tax savings are large for physicians. HSA contributions made through a cafeteria plan come out of your pay before federal income tax and before Social Security and Medicare tax (Pub. 969; Pub. 15-B), and in most states before state income tax. An attending in the 32% federal bracket whose pay is already past the $184,500 Social Security wage base (Pub. 15) still saves the 1.45% Medicare tax, and 0.9% more if they owe the Additional Medicare Tax. On a $9,000 family contribution in 2027, that is about $3,000 of federal tax before any state tax savings. Contributions you make on your own, outside payroll, are deducted on your return instead, which lowers income tax but comes after Social Security and Medicare tax was already withheld from that pay, so set it up through payroll.

An illustration. Say the family HDHP premium is $2,400 a year cheaper than the PPO, the employer adds $1,000 to the HSA, and you contribute the rest of the $9,000 limit, saving about $2,700 in federal tax. Before you see a doctor, the HDHP is ahead by about $6,100. If the HDHP's family deductible is $3,500 more than the PPO's, a year in which you spend through it still leaves the HDHP ahead. The premiums here are hypothetical; put in your plan's real numbers, and compare the two out-of-pocket maximums for the year you expect to be expensive.

Three things that block or change an HSA.

• Your spouse's FSA. You can't contribute to an HSA if you are covered by a general-purpose health FSA, and that includes a spouse's FSA that can reimburse your expenses. A limited-purpose FSA for dental and vision is fine (Pub. 969; Rev. Rul. 2004-45). Coordinate both households' elections this fall.
• Medicare or other coverage. Enrollment in Medicare or in a non-HDHP plan, including a spouse's PPO that covers you, ends HSA eligibility.
• New rules from the 2025 tax law. Starting in 2026, bronze and catastrophic marketplace plans count as HSA-compatible, telehealth coverage before the deductible no longer disqualifies you, and you can pair an HSA with a direct primary care arrangement costing up to $150 a month for one person or $300 for a family, which the HSA can pay (IRS; Notice 2026-5).

If you choose the HDHP, invest the HSA rather than leaving it in cash, and consider paying routine bills out of pocket so the account can grow. Our HSA strategy guide covers that approach, and our list of HSA-eligible expenses shows what you can reimburse later.

Health FSA. If you stay on a PPO, a health FSA lets you pay predictable costs such as copays, glasses, and dental work with pre-tax pay, up to $3,400 in 2026 (Rev. Proc. 2025-32). Unused money is lost at year end unless your plan offers a carryover, capped at $680 for 2026 balances, or a grace period, and a plan can offer one or the other but not both. Elect only what you are confident you will spend.

Dependent care FSA. The 2025 tax law raised the limit from $5,000 to $7,500 per household, or $3,750 if married filing separately, starting in 2026 (P.L. 119-21, section 70404; IRS). It covers daycare, preschool, before- and after-school care, and summer day camp for children under 13 so that you and your spouse can work. The limit is per household, so if both spouses' employers offer one, split the $7,500 between you rather than electing it twice. Expenses reimbursed through the FSA can't also be used for the child and dependent care credit.

For a physician in the 32% bracket, $7,500 run through the FSA saves roughly $2,400 of federal income tax, plus Medicare tax and, below the wage base, Social Security tax.

Open enrollment is a natural time to set your 2027 deferrals, even though most plans let you change them later. For 2026, the employee deferral limit is $24,500 for a 401(k) or 403(b), with an $8,000 catch-up at 50 and $11,250 at ages 60 to 63 (IRS). If you are 50 or older and earned more than $150,000 in FICA wages from your employer the year before, catch-up contributions must be Roth; the final regulations apply from 2027 (IRS).

The 457(b) is a second, separate limit. The IRS says the 457(b) limit is not combined with your 403(b) deferrals (IRS), so an employer that offers both lets you defer $49,000 in 2026. But not every 457(b) is equally safe:

• Governmental 457(b), at a public hospital, state university, or county system: the assets are held in trust for participants (IRS), and you can roll the money to an IRA or another plan when you leave (IRS comparison).
• Non-governmental 457(b), at a private nonprofit hospital: the plan must be unfunded, so the money remains the employer's property and is available to its general creditors until it is paid to you, and it can't be rolled into an IRA (IRS; IRS comparison). Many of these plans also make you choose how and when you'll be paid before you leave.

With a non-governmental plan, look at the hospital's finances and the payout options before raising the election. Our hospital bankruptcy guide explains what happens to deferred compensation if an employer fails. Once you have used the 403(b) and any 457(b), a backdoor Roth IRA and, if your plan allows it, a mega backdoor Roth are the next places to look.

Most employers include group long-term disability, often replacing around 60% of base salary up to a monthly maximum. Before you rely on it, find three things in the plan certificate: the monthly cap, whether bonuses and incentive pay count as covered earnings, and how the policy defines disability. Many group policies cover you if you can't do your own job for the first two years, then only if you can't do any job you are reasonably suited for. Our group vs. individual disability guide compares the two in detail.

Who pays the premium decides the tax. If your employer pays and doesn't include the premium in your income, disability benefits you receive are taxable. If you pay with after-tax money, the benefits are tax-free (IRS Publication 525). Some plans offer to add the premium to your taxable pay so that a future benefit is tax-free. For a physician, that trade is usually cheap: a small amount of tax now against a benefit that would otherwise lose a third or more to tax.

Voluntary and supplemental coverage. Some employers sell extra group disability coverage at enrollment, sometimes without medical questions up to a set amount. It can fill a gap if you have a health history that makes an individual policy hard to get, but it ends when you leave the job. Most physicians should still own an individual own-occupation policy; our guide to how much disability insurance you need shows how to size it on top of the group plan.

Keep the basic life coverage your employer provides; it is usually free. Two things to know about it. First, employer-paid group term coverage above $50,000 adds imputed income to your W-2, figured from an IRS table by age and subject to Social Security and Medicare tax (Pub. 15-B). Second, group coverage typically ends or has to be converted at a higher price when you leave, which physicians do often in the first years out of training.

Supplemental group life is priced by age band and often looks cheap early in a career. For a physician with a spouse or children, an individual level-term policy you own usually costs less over the term you need and goes with you from job to job. Supplemental group life is most useful as a short bridge while an individual policy is underwritten. Our term life guide by career stage covers how much to buy.

• Commuter benefits. Transit passes and qualified parking can be paid pre-tax up to $340 a month each in 2026 (Rev. Proc. 2025-32). Worth it if you pay for hospital parking.
• Student loan repayment benefits. Up to $5,250 a year of employer payments toward your student loans can be tax-free when made through a written educational assistance program; the 2025 tax law made this permanent and indexes the cap for inflation after 2026 (26 U.S.C. 127). If your employer offers it, enroll.
• Accident, critical illness, and hospital indemnity plans. These pay fixed amounts for specific events. A physician with an emergency fund and a good medical plan rarely needs them; they make the most sense if a large deductible would be hard to cover from savings.
• AD&D. Accidental death and dismemberment pays only for accidents. It is not a substitute for life insurance.
• Legal plans. Can be useful in a year you need a will or trust drafted; compare the cost with a flat-fee estate planning quote.

1. Find your enrollment deadline and put it on your calendar. Hospital windows often run only two to three weeks.
2. Price the HDHP and the PPO on total annual cost, including the employer HSA contribution and your tax savings.
3. If you choose the HDHP, set your payroll HSA contribution to reach $4,500 or $9,000 in 2027, and confirm your spouse isn't electing a general-purpose FSA.
4. Re-elect a dependent care FSA if you pay for childcare, and split the $7,500 between spouses if both are offered one.
5. Set 2027 deferrals for the 403(b) or 401(k), and decide on the 457(b) after checking whether it is governmental.
6. Read the disability plan's cap and definition, and choose the after-tax premium option if your plan has it.
7. Keep basic life coverage; buy individual term instead of large amounts of supplemental group life.
8. Update beneficiaries on life insurance and every retirement account.
9. Save the confirmation statement and check your first January paycheck to make sure the deductions match.

Residents usually have fewer choices, but the same logic applies: if you are healthy and the program offers an HDHP, the HSA is one of the few tax breaks that pays off at a resident salary, and our PGY-1 financial checklist covers the rest of the first-year paperwork. For a bigger-picture review of your pay package, see our physician employer guides.