Now that the Fall season is upon us and the holidays are right around the corner, it is also the annual benefits open enrollment season for many employers. I know it can be tempting to quickly flip through the booklet checking the boxes on the forms without too much consideration, especially if things haven’t changed too much in your situation. You’re certainly not alone. However, setting aside some extra time to review your options is important for not only understanding the benefits you have and what might be changing, but also for identifying potential gaps in your coverages or underutilized opportunities.
Below are some benefits that, if offered by your employer, you should keep top of mind as you are making your elections.
Retirement plan contributions (401(k)/403(b) )
Are you contributing up to the maximum employer match? (Take advantage of free money!)
Are you maximizing the account? ($18,500 or $24,500 for age 50 and over in 2018)
Traditional 401(k) vs. Roth 401(k) options?
Click here for a summary of 2018 retirement plan contribution limits and adjustments
Health insurance plans
Review and compare your available plan offerings (e.g. PPO vs HMO). Want to explore some of the differences between plan types in more detail? Click here.
Focus on more than just the premium cost. Think about the deductibles, copays, and the annual out-of-pocket maximums
Consider your health history and the amount of services you use. For example, are you likely to hit the deductible or maximum out-of-pocket costs each year? The benefit of lower premiums for a high deductible plan may be outweighed by higher overall costs out-of-pocket. Are you less likely to hit the deductible but you have excess cash saving just in case? A lower premium, high deductible plan could make sense.
Health Care Flexible Spending Accounts vs. Health Savings Accounts
Flexible Spending Accounts and Health Savings Accounts both allow you to contribute pre-tax funds to an account that you can then withdraw tax-free to pay for qualified out-of-pocket medical expenses. There are, however, some key differences to remember.
Flexible Spending Account for health care (FSA)
Maximum employee contribution in 2018 is $2,650
Generally must spend the balance on eligible expenses by the end of each plan year or forfeit unspent amounts (use-or-lose provision).
Employers MAY offer more time to use the funds through either a grace period option (you have an extra 2 ½ months to spend the funds) or a carryover option (you can carry over up to $500 of the balance into the following year)
For more information on the FSA click here.
Health Savings Account (HSA)
Can only be used with a high deductible health insurance plan
Maximum contribution in 2018 for an individual $ 3,450 ($4,450 for age 55 and over)
Maximum contribution in 2018 for an family plan $6,900 ($7,900 for age 55 and over)
All HSA balances carryover (no use-or-lose limitations apply)
Click here for more information about the basics of using an HSA
Dependent Care Flexible Spending Account
Pre-tax contributions to an account that can be withdrawn tax-free for qualified dependent care expenses within the plan year
Maximum contribution in 2018 is $5,000 ($2,500 if married filing separately)
Use-or-lose provision applies
Life and Disability Insurance
Employers often provide a basic amount of life insurance coverage at no cost to you (typically 1 x salary).
You may have the option to purchase additional group coverage up to certain limits at a low cost.
Many employers also provide a group disability insurance benefit. This can include a short-term benefit (typically covering up to 90 or 180 days) and/or a long-term benefit (covering a specified number of years or up through a certain age such as 65).
Disability benefits often cover a base percentage of income such as 50% or 60% of salary at no cost with some plans offering supplemental coverage for an additional premium charge.
Life and disability insurance benefits can vary widely from employer to employer and in many cases only provide a portion of an employee’s needs.It is important to consult with your advisor on the appropriate amount of coverage for your own situation.
Like most things related to financial planning, your benefit selections are specific for your family’s own unique circumstances; and your choices probably would not make sense for your co-worker or neighbor. We encourage all clients to have conversations with us as they are reviewing their benefit options during open enrollment, so don’t hesitate to pass along any questions you might have. If we can be a resource for you, please let us know.