Separation from Doylestown Hospital—whether triggered by performance, restructuring, or the 2025 affiliation with Penn Medicine—turns your employment file into a financial planning dossier. We aim to convert a disruptive event into a controlled transition. Below are some of the core issues to review as soon as possible.
1. Severance: Amount, Timing, Conditions
Expect severance to be expressed as continued base salary for a defined period (often a year, sometimes more or less). Clarify three things immediately:
- How much: Is it just base salary, or are bonuses and accrued incentives included?
- How it’s paid: Lump sum vs. installments can materially change your tax profile and cash flow.
- When it starts and stops: Payments typically begin shortly after you sign and your revocation period ends, and they may cease if you’re rehired by the system or take a role deemed “comparable.”
Let Rockwood review your agreement and model the tax impact before you sign. A 30-minute consult can save five figures later.
2. Non-Compete, Non-Solicit, and Confidentiality
Pennsylvania courts generally enforce restrictive covenants that are reasonable in scope, geography, and duration. Focus on:
- Geography and scope: Negotiate language that reflects Doylestown’s actual catchment area and your specific function, not a blanket industry ban.
- Exceptions: Request carve-outs for consulting, academic appointments, telehealth vendors, or other roles that don’t harm the hospital’s legitimate interests.
Wondering if your non‑compete is actually enforceable—or negotiable? Rockwood coordinates with PA employment counsel so you know what to push (and what to accept).
3. 403(b) Distribution Choices
Upon separation, you generally have three choices for your 403(b): (1) leave the assets in the plan, (2) roll them to an IRA or a new employer’s plan, or (3) take distributions. If you depart in or after the calendar year you turn 55, the IRS “Rule of 55” lets you withdraw from that employer’s 403(b) without the 10% early-withdrawal penalty.
Consolidating into an IRA is often appealing, but moving the money too quickly can cost you that Rule-of-55 flexibility. An IRA rollover can still be a smart move—especially if it enables well-timed Roth conversions that reduce lifetime taxes—just be mindful of how those conversions affect your tax brackets and Medicare IRMAA surcharges. Before you move a dollar, have us run a ‘Rule of 55 vs. IRA rollover’ comparison and a Roth conversion bracket map.
4. Non-Qualified Deferred Compensation & Pension Equity Plan
Doylestown executives often have a two-part nonqualified arrangement: a 457(b) “top hat” plan and a separate pension equity benefit. Each is governed by stringent timing rules.
457(b) distributions
- Election window: Nonprofit 457(b) plans generally require you to elect a payout schedule (lump sum, multi-year installments, or annuity) shortly after separation if you haven’t already.
- Irrevocability: Once you choose, Section 409A usually locks that election unless you push it out at least five years and give significant advance notice.
- Taxation: 457(b) payouts are ordinary income when paid, and unlike a 403(b), they cannot be rolled to an IRA. Align the distribution schedule with your severance to avoid unintentionally stacking income.
Pension equity/cash-balance plan
Choice architecture:
These plans usually force a pivotal choice: take a rollover-eligible lump sum or select from annuity formats (single-life, joint-and-survivor, period-certain). The right answer depends on more than the payout amount—it hinges on flexibility, investment control, longevity and survivor needs, tax timing, and estate goals. Have a firm that knows your full financial picture run the internal-rate-of-return math on the annuity, model cash-flow and tax scenarios for the lump sum, and anchor the decision to your broader plan.
Need help picking a 457(b) payout schedule or testing the annuity’s IRR? We calculate the real after-tax return of each option. We build a multi-year tax smoothing plan. We prep your election forms. Talk to Rockwood before the election window closes.
5. Health Coverage and Other Insurance
COBRA eligibility
Up to 18 months of continuation coverage is standard. You pay the full premium plus a 2% administrative fee unless the hospital subsidizes a portion for a time.
Subsidy windows
Some agreements cover part of the COBRA premium for a defined period. Calendar when that subsidy ends so you’re not surprised by the full cost.
ACA comparison
If your income will drop after the severance year, an ACA marketplace plan could be cheaper—especially with premium tax credits. Compare networks, deductibles, and total out-of-pocket costs.
Portability/conversion
Group life and long-term disability coverage typically terminate at separation. You may have a 30–31 day window to convert to an individual policy without underwriting. Decide quickly; once the window closes, you may need medical evidence (and higher premiums).
Long-term disability gap
If you plan to consult or take time off, assess whether you need an individual disability policy—especially if you are under 60 and still rely on earned income.
6. Cash Flow and Credit Access
Translate gross promises into net, after-tax cash flow over the next 6–12 months:
- Build a liquidity buffer that covers living costs and health insurance premiums.
- Secure any new Mortgages, Home Equity Lines of Credit or Securities-Backed Lines of Credit before your W-2 income stops; lenders prefer active employment.
- Calendar key payment dates so you know when cash will actually arrive.
7. Charitable and Tax Planning Opportunities
A year loaded with severance and deferred-comp payouts can push you into high brackets. Consider:
- Donor-advised funds or other charitable vehicles to bunch deductions.
- Roth conversions and capital gains harvesting in lower-income years that follow.
- Estimated tax payments to avoid penalties if withholding on severance or plan payouts is too low.
A Practical Timeline
- Week 1: Gather everything—employment agreement, severance plan, 403(b)/457(b)/pension documents, and insurance summaries. Engage a tax-savvy financial planner.
- Weeks 2–4: Model severance and distribution scenarios; decide on COBRA vs. ACA; negotiate non-compete carve-outs and clarify confidentiality obligations.
- Before Signing / Election Deadlines: Execute the release (mind the review and revocation periods). Submit any distribution elections (deferred comp and pension) and insurance conversion forms within their windows. Return all employer property.
- Post-Exit (Months 1–6): Implement the agreed tax strategy (Roth conversions, charitable gifts), consolidate retirement accounts, confirm each severance installment, and monitor when any employer health subsidy ends.
Bottom line: If you’d like a single team to coordinate severance analysis, 457(b)/PEP elections, tax modeling, and insurance deadlines, Rockwood can be that partner. Reach out for a no-pressure discovery call.
Sam is committed to delivering comprehensive, conflict-free financial advice to individuals and their families. He joined Rockwood in 2016 and brings more than 15 years of experience guiding physicians at both the University of Pennsylvania and Doylestown Hospital. Today, he leads Rockwood’s initiative to support physicians and executives as they navigate the financial transitions brought on by the UPenn merger. Sam lives in Buckingham with his wife, Ellie—a physician now practicing at Doylestown after many years at UPenn—and their two sons.