How Do I Choose My Company Benefits During Open Enrollment? An Ultimate Guide

Info terkini Data SGP 2020 – 2021. Diskon spesial lainnya tampak dipandang secara terencana melewati pengumuman yang kami sisipkan di web itu, serta juga dapat ditanyakan kepada operator LiveChat pendukung kita yang stanby 24 jam On-line buat mengservis semua keperluan para player. Ayo buruan daftar, dan kenakan bonus Buntut serta Live Casino Online terbesar yang tersedia di situs kita.

What’s the best part about fall?

While your mind may instantly turn to pumpkin spice, light layers, and jewel-tone leaves, those lovely seasonal novelties won’t impact your money too much (or so we hope)!

At Gen Y Planning, the best part about fall is helping clients choose their company benefits. 

You might be thinking, isn’t selecting benefits just an HR formality? Why spend so much time wading through the documents when it’s all going to stay the same anyway?

To that, we’d like to offer a different perspective. Strategically selecting your company benefits is a fantastic way to save yourself a lot of money, potentially thousands of dollars.

Why?

SO many of these benefits come from using pre-tax dollars. Paying with pre-tax dollars lowers your taxable income, which is a huge perk if you’re trying to lower your tax bill. 

For example: if you are in the 24% Federal tax bracket and 6% state tax bracket and you max out your 401(k) with $19,500 in pre-tax contributions and your HSA with $3,650 (max for 2022), then you’d be lowering your taxable income by $23,150, which could result in a tax savings of almost $7,000!

October and November marks the open enrollment season for many companies, and it’s the only time of year when you can make changes to your elections outside of a qualifying event (getting married, having kids, spouse losing a job, divorce, etc.)

So cozy up with your spiced coffee and plaid blanket, pull out that giant booklet and start reading.

Here is Gen Y’s ultimate guide to understanding what type of benefits your company may have to offer and how to choose the best ones for you.

Selecting Health Insurance (Plus Added Saving Opportunities)

We’ll start off with the big kahuna, medical insurance.

Your medical insurance is likely the biggest ticket item and presents an opportunity for more savings.  

Selecting the right healthcare plan for you and your family can go a long way to offering the protection you need with a price to match. Let’s dive into a few options you may have.  

HDHP + HSA – High-Deductible Health Plan with a Health Savings Account

Qualifying high deductible health plans must set a minimum deductible of $1,400 for an individual or $2,800 for a family in 2022. Annual out-of-pocket maximums, including copays, deductibles, and coinsurance, must also be limited to $7,050 for an individual and $14,100 for family coverage. Those limits don’t apply to services not in-network. You’ll likely need to cover any out-of-network services on your own dime. 

While out-of-pocket expenses and deductibles are higher with HDHPs, these plans usually have very low monthly premiums in exchange. Keep in mind that you must hit the deductible before the plan pays for any covered expenses.

HDHPs Are The Gateway to HSAs

You have to be enrolled in an HDHP to contribute to a Health Savings Account (HSA). Not all HDHPs are HSA eligible so make sure that yours is if you plan to go this route. An HSA is a saving and/or investment account for health-related expenses. 

Below are some HSA “fun” facts.  

  • The maximum contribution for 2022 is $3,650 for an individual or $7,300 for a family. This number includes any company contributions. Depending on the HSA administration/setup, you may be able to automate monthly contributions. So, if your goal is to max out your HSA for 2022, you’re looking at just a little over $300 a month for single coverage. 
  • You can use your HSA to cover most out-of-pocket medical, dental, and vision costs. The CARES Act helped HSA dollars travel even further than before. For example, you no longer need a prescription to get reimbursed for cold and flu remedies. Women’s health also made the cut, as HSA funds can be used to pay for menstrual care products. Using HSA funds for ineligible expenses could stick you with a 10% penalty plus income tax on the distribution. Learn more about eligible and ineligible expenses for HSA funds here
  • You will receive a debit card for your HSA to pay for eligible health expenses. Doing so makes it simple to access the money when you’re picking up your prescriptions at the pharmacy or paying your therapist.

Contributing to an HSA gives you a triple tax benefit. HSAs are genuinely investment unicorns. 

  • Any funds you contribute to your company HSA are pre-tax
  • Gains grow tax-free, and
  • Taking the money out for qualified medical expenses is also tax-free!

Additionally (if that weren’t great enough), unused funds stay in your account, making HSAs a great long-term savings opportunity. (This is a common point of confusion for people since Flexible Spending Accounts (FSAs) generally need to be used in the current year and only $570 can be rolled over to the next year).

Using Your HSA like an IRA for Healthcare

Many people don’t know that you can also invest the money in your HSA instead of just saving it. This savvy financial trend is only gaining momentum. As of December 31, 2020, there were over $23.8 billion in investable assets, representing a 52% year-over-year increase, according to HSA market research from Denvir (wow)! The study also found that those who invested their HSA funds had account balances 6.5 times larger than those who weren’t investing. 

Try to think about an HSA like an IRA, not like a piggy bank. Investing the money exposes your contributions to compound interest and could help you pay for larger expenses down the road. If you have the cash flow or savings to pay for out of pocket medical expenses now, I highly recommend that you contribute to your HSA and invest it so that this money can work harder for you in the future.

Another perk? Even if you leave your employer, you get to take the HSA with you!

Because the monthly premiums are so low, some companies will even contribute a specific amount to your HSA each year. (Woo hoo! Free money!) Some may also offer health incentives for completing various health and wellness tasks (like walking challenges, active minutes, etc.) that you can elect to have deposited into your HSA account.

We typically recommend HDHP/HSA policies for those that are young, relatively healthy, and don’t anticipate significant health expenses for the year.

PPO – Preferred Provider Organization

When it comes to health plans, you’ve probably noticed them labeled as either PPO or HMO. So, what’s the difference?

PPOs tend to be the more flexible of the two. It’s a type of health plan that contracts with several hospitals, doctors, and specialists, offering consumers broader access to participating providers.

Some key facts:

  • When you stay within the plan’s network, you pay less. 
  • While you can use out-of-network providers, you’ll likely incur an additional cost. 
  • Most PPOs also allow you to see a specialist of your choice without first consulting with a primary care provider, something HMO plans often require. 

PPOs tend to have higher monthly premiums but lower deductibles. As with any health plan, you must hit the deductible before the plan pays for any covered expenses, but since the thresholds are much lower, you may be able to satisfy the requirement quicker. 

When does a PPO plan make sense?

PPOs are often a good fit for people who go to the doctor regularly and expect a lot of medical expenses in the upcoming year, like if you’re having a baby. 

But before you write off an HDHP, compare what your out-of-pocket max would be on the PPO versus the HDHP because it’s possible that it can be more affordable to have a baby under an HDHP.

HMO – Health Maintenance Organization

In comparison, an HMO is a group of doctors and hospitals that provide healthcare services for a copay rather than deductibles and coinsurance. In terms of cost, HMO plans are often less expensive with more competitive premiums and affordable copays. 

But, HMOs do have some drawbacks. 

  • HMOs typically only cover in-network services and will not pay for services provided by out-of-network providers. The HMO might make an exception for urgent care, but that’s never a guarantee.
  • Many require a primary care physician to give the green light for seeking out specialist care, though there are some exceptions like mammogram screenings. 

If you are currently enrolled in an HMO, are happy with your providers, and the plan has competitive premiums, it may not be worth switching. Just remember, the plan will not cover out-of-network visits, so if you are traveling away from your HMO and need to be seen for anything other than an emergency, you may be paying out of pocket.

Healthcare Plans for Self-Employed Workers

Nearly 30% of Americans are self-employed, making obtaining affordable health insurance that much more challenging. 

If you work for yourself, you can purchase insurance via the Health Insurance Marketplace®. This option is only available for those who don’t have employees, like freelancers, independent contractors, consultants, etc. Healthcare.gov has excellent information and steps to complete an application. 

Open enrollment for 2022 begins November 1 and runs through December 15, so be sure you make your selections during this time. As with any other health plan, take a look at the total expenses and your care needs to purchase a policy that’s right for you.  

FSA – Flexible Spending Account

Flexible spending accounts are another way to save pre-tax dollars to pay for qualified medical expenses. The maximum contribution is $2,750 for 2021 and is set to bump to $2,850 in 2022, which is lower than the HSA limits.This is the max regardless of if you’re single or file your taxes jointly.

  • FSAs require a bit more financial leg work than HSAs, namely because you can only roll over $500 ($570 in 2022) each year. So, any unused funds in the account at the end of the year are simply lost. This is often why FSAs are dubbed the “use it or lose it” account. Do your best to estimate how much you typically spend on medical costs each year (glasses, contacts, doctor’s visits, etc.) so you don’t overfund the account. 
  • Also, your FSA doesn’t move with you if you change employers. 
  • Generally, you’ll use an FSA in conjunction with a PPO or HMO, whereas you’d save in an HSA in combination with an HDHP.

In general, you will choose between funding an HSA or an FSA. If you qualify, you should elect to contribute to an HSA. The rollover provision makes the HSA more beneficial than the FSA. (You technically can have both if you use the FSA only for dental and vision costs, but it adds unnecessary complexity unless you know you’re paying for braces or major dental costs next year.)

Dependent Care FSA

Dependent Care FSAs are excellent accounts for those in a caregiving position. They allow you to use your pre-tax dollars to pay for eligible dependent care costs. Caregiving can take on several different forms, from daycare to after school costs, to helping a disabled spouse, to caring for an older parent or relative. 

The American Rescue Plan increased the contribution limit per family from $5,000 to $10,500 in 2021 (2022 numbers haven’t been announced yet). Keep in mind that companies don’t have to adopt this new limit. Check with your HR department to see how they are handling this and if you might be able to increase your contribution if you have high dependent care costs.

Dependent Care FSAs can be quite beneficial for working families with young children. You can use the money for daycare, summer day camps, before or after-school programs, and more, so be sure any programs you’re considering accept funds from this type of account. 

Health Benefits Round-Up

Whew, that was a lot of information. What are the primary things you should look at when it comes to your health plan for the next year?

  • Know your ongoing costs like premiums, deductibles, copays, coinsurance, etc., and how they work for each option. Keep in mind that one variable tends to offset the other. A plan with a high premium will likely have a lower deductible and vice versa. 
  • Examine your out-of-pocket maximums—this is where some plans can surprise you. This is especially important if you are expecting a lot of medical expenses for the year, like if you plan to have a newborn baby or have an underlying condition that requires regular medical visits and/or treatment.
  • Understand your care options. What constitutes in-network? Do you need access to specialists and other professionals? Remember, in-network will always be more affordable, no matter which option you choose.
  • Be confident in the care you need. How often will you need to see a doctor/specialist? Are you anticipating more medical spending in the next year? Knowing the type of care you need will be instrumental in selecting the right plan. 
  • Keep saving for medical costs along the way. Whether you save via an HSA with a high-deductible plan or an FSA with a PPO or HMO, keep saving for your medical expenses. Working parents should also look at dependent care FSAs to pay for some childcare costs pre-tax.
  • Coordinate benefits with your spouse. If you’re married and your spouse also has company benefits you’ll want to compare these plans to see which one is the best fit for you as a couple or family. Sometimes it makes sense for you to each be on your own plan through your employers.  

Protect Your Income With Disability Insurance

Long-Term Disability Insurance

As Madonna says, we are living in a material world, and the material world is expensive. 

Your ability to earn an income is likely your most significant and valuable asset, making it critical to protect. One way to do that is to secure long-term disability (LTD) insurance.

Some companies offer a “base” or “standard” amount of coverage, but you often have to enroll in this benefit. You won’t want to miss out on this opportunity!

Once you enroll, take a look at the plan’s stipulations. 

  • What percentage of your salary is covered? Many plans offer anywhere from 40-60% of your base salary, but if you have the option to increase your coverage to 60-70% then you should strongly consider it
  • How long will you have to wait to receive your benefits, i.e., how long is the elimination period? Elimination periods can be lengthy, usually 90-180 days. 
  • How long will the benefits last? Perhaps your company’s LTD policy will pay out a maximum benefit over a certain period. 

Should you need to use the benefit, payments would be taxable. Your company may also offer supplemental LTD insurance. Since insurance and risk management are so unique to every person, speak with your financial planner to discuss if an additional policy makes sense for you.

Many people benefit from obtaining LTD policies through work since a group plan is much more affordable than purchasing an individual policy. 

On the flip side, group plans generally have a much broader definition of disability, such as “any occupation” versus “own occupation,” which could limit your ability to qualify. It may make sense to purchase a separate individual policy outside of work, especially if you’re in a highly specialized field like a doctor or dentist. 

Short-Term Disability Insurance

In addition to long-term policies, many companies also offer short-term disability insurance. This type of policy often comes into play for maternity leave. 

Like with the long-term policy, analyze the plan’s details to see if it makes sense to enroll. 

  • How much of your base salary will be covered? Many short-term policies cover more of your income, like 70-80%, since it’s a shorter time frame. 
  • What’s the elimination period? 30, 60, 90 days?
  • How long will the coverage last? You’ll often see anywhere between 25-30 weeks. 

Most companies have separate rules for using short-term disability policies for maternity leave. If you’re planning a maternity leave this year, take a look at the options available to you.

Understanding Life Insurance

Life insurance is one of the only insurance categories that isn’t meant to protect you—it’s designed to protect your family, dependents, and loved ones in the event of your passing. 

Many companies offer employees a set amount of group term life insurance with the option to purchase additional coverage. For example, your employer might offer 2x your base salary in life insurance with the option to purchase up to 8x that number.

Remember that coverage over $50,000 is considered a taxable benefit and must be included in your income. 

Life insurance is most beneficial for those with dependents. If you don’t have anyone dependent on your income, you may not have as much of a need for a robust policy and could benefit just from the amount your employer offers. 

Those with dependents will likely need to purchase an individual policy. It’s often best to buy a separate term life insurance policy so that if you lose your job or move companies, you won’t also lose your life insurance (since group life insurance policies through your employer won’t move with you).

If you’re young and healthy, you can often get an attractive rate on 20 or 30-year term life insurance.

How much life insurance should you buy?

As a rule of thumb, you’ll want around 7-10x your annual salary. However, that amount may be too low or high depending on your family’s financial needs should you pass away (i.e., paying off a mortgage, paying for college for three children, etc.).

Here’s an insurance calculator that can give you a better sense of how much life insurance may be appropriate for your needs. 

If you can’t purchase a private term policy (you’re overseas, in poor health, or are expecting a child, etc.), then buying a supplemental policy through your employer could be a good idea. You can generally qualify for $250,000 without a medical exam, which could be helpful if you’re worried about qualifying because of your health.

A quick reminder to update your beneficiaries or make sure that you have named beneficiaries on all your life insurance and retirement plans.

Save For The Future With Your Retirement Accounts

Nowadays, most employers offer some sort of retirement savings plan, whether it’s a 401(k), 403(b), Thrift Savings Plan (TSP), SIMPLE IRA, or others. 

To sweeten the pot and support additional savings, many employers also offer a company match—usually anywhere from 3-6%. 

The minimum amount you should allocate to your retirement contributions is at least enough to receive the full company match. This is free money, so take advantage of it!

Sometimes companies have confusing language and structures to their match programs. Say, for example, your company says they’ll match 100% of the first 2% you contribute, plus 50% of the next 4%. 

Translated to everyday English, that means you’ll have to contribute at least 6% to receive a 3% match. If you’re confused about how your company’s match works, reach out to your human resources department. 

Some companies also offer profit sharing and will contribute to your retirement account on the company’s behalf.

Remember that just because you’re getting your full company match, does not mean you’re “maxing out” your work retirement plan. The current max is $19,500 on 401(k)s, 403(b)s, and TSPs, so if you can afford to save more for retirement, you should. Also, this is one of the best ways to lower your tax bill, so if you’re one of those people who complains about paying too much in taxes but isn’t maxing out their work retirement plan, then do this first.

Extra “Perk” Benefits To Investigate

Now that we’ve explored the top benefits—health plans, insurance, and retirement—we can turn our attention to other benefits your company may offer. 

Flip through your company’s benefits plan to see if there are other opportunities worth signing up for. Here’s a collection of some you may come across that could be beneficial.

Finance Focused

  • Group Legal Plan – For a low price, you can access a network of attorneys that can help you with minor defenses and document preparation. This is an excellent idea if you haven’t already prepared your estate planning documents. We highly recommend you take advantage of this benefit to put your basic estate planning documents in place.
  • Discounted Property and Casualty Insurance – There may be a group discount if you sign up for either property or casualty insurance through your employer.
  • Employee Stock Purchase Plan (ESPP) – If you work for a publicly-traded company, you may be able to purchase company stock at a discount of 10% or 15%. These purchases are generally made in bulk with other employees a few select times per year, which is how you’re able to get a discount. If you sign up for this benefit, a portion of every paycheck will be set aside for this stock purchase. Make sure you consult with your CPA before selling this stock since there are special tax considerations.
  • Store Discounts – If you work for a retail company, often you’ll receive a 10-50% off of purchases at that store. Make sure you don’t buy things you wouldn’t already use, but it can be an incredible benefit if you shop at the store frequently.

Employee Development

  • Tuition Reimbursement – If you’re planning on completing a degree relevant to your current job or going back to school for a graduate degree, some employers will help cover the costs. Many employers will cover up to $5,250 per year. Keep in mind, this is the federal amount that you can receive from your employer before paying taxes on this benefit. If your employer pays more than that in education assistance in a single year, you must generally pay the tax on the amount above $5,250.
  • Continuing Education & Professional Development – CE can be costly to keep up specific certifications, but many employers will help cover them. Find out if your employer will help foot the bill.
  • Charitable Matching and Volunteer Days Off – Many fortune 500 companies will offer to match any charitable contributions that you make each year up to a set dollar amount (usually around $1,000). Some companies even allow a certain number of paid volunteer days off each year, along with an incentive to do so.

“You” Time + Other Personal Benefits

  • Wellness Programs – You may be offered a monetary incentive for completing health and wellness-type activities, like walking, running, group fitness, etc. Again, this is free money! Your company might offer on-site fitness classes or discounts on memberships to local gyms. You might also get free or discounted flu shots at employee health fairs or retailers like CVS, Walgreens, and supermarket pharmacies.
  • Paid Vacation & Sick Time – Americans are some of the most likely people to let vacation days go to waste. Find out if you can carry over unused sick days and vacation days from one year to the next. Often, you’re given a certain amount of vacation days (i.e. 2-4 weeks) or Paid Time Off (PTO) per year. In some cases, they carry over to the following year. Some companies even allow you to buy additional PTO. If you have this option, it’s a wonderful benefit to take advantage of. Don’t let those extra days go to waste!
  • Identity Theft Monitoring – This is set to be one of the most significant company benefits for employees that work from home. Cybercrimes have increased in the pandemic, and many companies have responded by offering access to additional security and data protection measures. If you have ever been a victim of identity theft in the past, it may be worth your time to pay for this service. Otherwise, you can monitor your own accounts and be sure to check your credit report regularly.
  • Commuter Benefits – Some companies will reimburse you for everyday commuter expenses such as tolls, parking, metro cards, bus passes, etc. However, the work from home revolution may alter this benefit for some heading into 2022. 

Benefits for Parents

  • Paid Parental Leave – Gone are the days where paid time off after having a baby was only (sometimes) offered to the mother. Many companies are now embracing the idea of paid “parental” leave, meaning any new parent from birth, adoption, or surrogacy can be eligible for paid time off.
  • Childcare or Childcare Assistance – Some employers may offer reimbursements for child care up to a certain amount or even provide backup child care services on site.

Benefits You Might Skip

Although your company may offer a wide range of benefits, certain benefits aren’t as beneficial:

  • Pet Insurance – While the idea of pet insurance may seem tempting (and as much as you love your furry friends), it often doesn’t make sense financially. The monthly premiums and copays often exceed the price of the occasional vet visit.
  • Spousal Life Insurance Coverage – If your spouse is covered by a life insurance policy through their employer or has an individual policy in place, additional life insurance coverage may not be necessary.
  • Term Life Insurance for Children – Infrequent circumstances would have to happen for this type of insurance to be beneficial. These policies usually only cover a small amount ($10,000, for example), something that could be added to your emergency fund instead.
  • Supplemental AD&D – A base level of Accidental Death & Dismemberment insurance is usually provided by your employer. The base amount is often sufficient, so it makes sense to ditch any additional amount.  

Is your coffee cold yet, or are you just already onto your second cup?

We know that selecting your benefits in open enrollment can be overwhelming. If you’d like to work with a financial planner to help you sort through the process, we’d love to help!

You can learn more about becoming a client of Gen Y Planning here.

You might also enjoy reading: