It’s that time of year. Your employer has or will likely be sending you a notification that it’s open enrollment time. This is a great time of year to take stock of your employee benefits and make changes to maximize them for 2017. If you are married and your spouse is working, it’s also a great time to compare your plans to see how they can be used together most effectively. Here’s a couple of areas to pay particular attention to:
Health Insurance (Medical, Dental, Vision)
Health insurance is probably top of mind when you enroll in employee benefits. Most employers offer a couple of different options with combinations of deductibles, benefits, and accounts that can help you put aside pre-tax dollars for medical expenses. The right choice for you is not always the cheapest option, nor the most comprehensive plan.
Think about your particular health situation. Do you have chronic conditions that require treatment throughout the year and monthly prescriptions? Are you usually healthy and only see the doctor once a year for a physical and a flu shot? Do you have small children that make it almost impossible to predict what your family’s medical needs will be? The other thing to think about is your financial situation. Do you prefer predictability in your expenses that would be more likely with an HMO, or are you willing to take the risk of potentially higher out-of-pocket costs that will allow you to save money on premiums with an HDHP?
Finally, for couples who both work, there are likely rules around which person can or cannot add their spouse to their plan, and some companies add additional charges if your spouse is eligible for their employer health plan. In these cases, it probably makes sense for each person to go with their own employer plan. What about when you add children into the mix? Then it can get very complicated and it’s crucial to see which spouse should add the children. Don’t assume that adding children is equally costly for both plans.
Pre-Tax Spending Accounts
If your employer offers a healthcare FSA, a dependent care FSA, or a health savings account (HSA) for those enrolled in the HDHP, then it almost always makes sense to participate. These accounts save you money by allowing you to use pre-tax dollars to pay out of pocket costs for co-pays, deductibles, and childcare. As always there are rules around how and when you can use them and for what, but the higher your tax bracket, the more money these benefits save you.
Many employers provide $50,000 in life insurance for their employers tax-free and some other amount above that on a taxable basis. Oftentimes you can also elect multiples of your salary in additional coverage. This can be attractive because it’s easy to enroll and some insurance is better than nothing.
However, if you are seeking to increase your coverage during open enrollment, you may be required to submit to a physical – and that’s when it makes sense to shop around. Rates on the open market for 20-year term life insurance are very competitive with employer group rates and can sometimes be better. Plus, you have the added stability of level premiums for 20 years and if you change employers, you won’t need to change insurance.
Open enrollment is a great time to look at all the other benefits your employer provides. Some examples of under-utilized benefits that many employers provide are legal plan, pet insurance, commuter benefits, and gym membership discounts.
The legal plan coverage is great because you can take care of much if not all of your estate planning needs with one visit to a plan covered attorney. Elect this at open enrollment and you will have all year to get it done. If you’re planning to buy or sell a home, the legal plan will usually cover an attorney for that as well.
Pet insurance can make a lot of sense if you have had surprise vet bills that have disrupted your budgeting. Commuter benefits are great if you pay for parking or public transportation for work.
Take some time to think about your benefits during this open enrollment season. Don’t just click submit and stick with the same elections you had last year! By making smart choices, you can save money and add peace of mind to your 2017 budget.
As always, please reach out if you would like to use a Get Started Session to maximize your benefit plans, or make 2017 the year you finally get around to Comprehensive Financial Planning to live your inspired life.