It’s open enrollment time for a lot of employees around November. What are some of the key considerations when you’re signing up for benefits?
1. Health Care: well, please do sign up as a first step! Everyone needs health care coverage, with costs so high. If you’re healthy and don’t have kids, a low-cost plan with a higher deductible, co-pays, and/or co-insurance (your portion of the cost) might suit you. If you have dependents or health issues, you might prefer to pay a bit more in premium to reduce your deductible, co-pays, and/or co-insurance.
2. Health Savings Account (HSA): people who opt for those high-deductible health care plans sometimes have the option to save more for health care costs in an HSA. Contributions to an HSA are deductible from your taxes, like your 401(k) contributions. Withdrawals have to be spent on qualified medical expenses or you will pay a penalty. The money in your HSA can follow you from employer to employer, and you can roll over any unused balance to the next year. This makes it a great way to save for long-term health care costs if you’re healthy now but want to sock away cash for later. Or you can just use it along the way as you need to.
3. Flexible Savings Account (FSA): generally, if you qualify for an HSA you won’t be allowed to have an FSA as well. An FSA is just another type of account you can use to save for health care costs, and you don’t have to be on a high-deductible health care plan to get one. FSAs allow tax-deductible contributions like HSAs, but you can only roll over $500 of any unused balance to the next year. Withdrawals also have to be used for qualified medical expenses or you will have to pay the penalty.
4. Dental and Vision: the cost of coverage tends to be low, so why not? One crown, pair of glasses, or prescription for contacts will make it worth it.
5. Life Insurance: If you have anyone who depends on you for your income, you might want to maximize your life insurance through work. Since the insurer is covering the entire group of employees, the rates are usually a lot lower than they are on the open market. You might have to pay a little extra and take a short medical exam to get the maximum coverage, but it’s a great deal. I also recommend that you buy some individual coverage outside of work, because the minute you stop working there you have no life insurance.
6. Accidental Death & Dismemberment (AD&D): this one is extra fun. It will pay you (or your beneficiaries) a lump sum if you are hurt or killed in a specific way or become sick in a specific way. It’s very inexpensive because the odds of being hurt, killed, or sick in a specific way are a lot lower than the odds of just being hurt, killed, or sick. For that reason, I would focus on getting good health care coverage and maximizing your life insurance. If you have extra cash, you can certainly throw it toward AD&D.
7. Long-Term Disability (LTD): most people have free, short-term disability coverage through work which will pay them their regular compensation amount if they are sick or hurt for up to 90 days. After that, long-term disability kicks in. You will definitely want to sign up for the long-term disability coverage, and if there is an option to pay extra for more, you should maximize this coverage as well. Employers commonly offer free long-term disability coverage up to 60% of an employee’s salary only (not bonuses, stock awards, etc.), and that benefit is also taxed. You may also want an individual policy to fill any gap between that 60%-minus-taxes amount and the take-home pay you’re used to.
8. 401(k)/403(b): if you aren’t contributing to your employer’s retirement savings plan yet, now is the time to start! At least contribute enough to get your company’s match, if they have one. It’s…free…money. Take the free money.
9. Other: you may have options for spousal life insurance, child life insurance, a flexible spending account for child care, critical illness, legal coverage, and so on. As long as it’s affordable, take whatever is relevant to you. As a rule, benefits at work tend to cost less than buying them on the open market.
Spend a few extra minutes this year really leveraging what your employer offers. Read a little extra detail on one or two of the offerings. Max what you can on what’s most important for you. Once that open enrollment window closes, you’re stuck with what you’ve got until next year unless you have a big change (like getting married or having a kid). It’s definitely worth a little of your time to make the best use of what your employer has to offer.
May all your vines be blessed with fruit and all your fruit be filled with ripeness to the core. Happy Fall, friends.