Fall is one of the most welcome times of the year, but one aspect of the season may be less than welcome: open enrollment. Many Americans put off reviewing their corporate benefits until the last moment, giving their options only a cursory glance. In its 2017 WorkForces Report, Aflac, an insurance provider, found that 83 percent of employees spent less than an hour researching their options. What’s more, 92 percent simply checked off on the same benefits they had the previous year.
Employee benefits serve as an important safety net. Take the time to review the details of your options so you can choose the plans that best meet your needs. The process may feel cumbersome, but the peace of mind knowing that you protected you and your family can make the extra work worth it.
Below are some key points to keep in mind for your benefits:
Health care premiums have increased—but not by the double digits that previous years witnessed. The Kaiser Family Foundation reports that annual premiums have risen by an average of 3 percent this year.
Kaiser also reports, however, that employees are paying an average of $5,714 annually toward their coverage. That is not an insignificant amount, which underscores the importance of paying attention to the details.
To decide which option is right for you, consider your needs for health care over the past year: How often did you and your family visit the doctor? What prescription medications do you take?
Also, consider changes the coming year may bring: Do you anticipate a surgery? Are you planning to have a baby?
Once you have an idea about your health care needs, study your options to determine the coverage that meets those needs. If you don’t go to the doctor a lot, you might take advantage of the lower monthly premiums provided by high-deductible health plans (HDHPs). Plus, with an HDHP, you can open a health savings account (see the next section). If you need more comprehensive coverage, then a preferred-provider plan may be your best bet.
If you decide to select the same plan that you had in the previous year, make sure to review any changes to the plan. You don’t want to get surprised by a spike in the cost of one of your medications!
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Health Care Accounts
Employers are increasingly offering two types of accounts that can help you pay for your medical expenses: flexible spending accounts (FSAs) and health savings accounts (HSAs).
- FSAs: You fund an FSA with pre-tax dollars and then use the money to pay for qualified expenses. A potential issue with the FSA is that you have to use all the money you save within the calendar year—i.e., the money can’t be carried over to the next year. Because of this, you may be tempted to make unnecessary purchases just to use up the money. That’s why we advise that FSA accounts be used for predictable expenses only, such as prescriptions or child care coverage.
- HSAs: Unlike FSAs, HSAs (which are designed to cover the costs of high-deductible health plans) allow you to carry over your unused contributions into the following years. Because of this, many people use HSAs as part of their retirement planning. They contribute to their HSA during their working years while paying for their medical expenses out of pocket, with the intention of using the HSA to fund qualified medical expenses in retirement. Regardless of whether you use your HSA now or in the future, it offers a triple tax-exempt advantage: tax-free contributions, investment growth, and withdrawals.
Life and Disability Insurance
With company insurance plans, your boss will pay a portion of the costs, reducing the expense to you. However, you should weigh your career plans before opting for your company’s life or disability insurance.
Group plans often do not have as comprehensive coverage as individual plans, and you probably won’t be able to customize your employee plan. Plus, if you qualify for preferred life insurance underwriting status, you may get a less expensive plan with better coverage than your employer’s offer.
If you anticipate leaving your job within the coming year, then buying private insurance may be a better option. On the other hand, employer plans do not carry medical qualifications. You won’t have to undergo a medical exam—a consideration if you are older or have a pre-existing condition.
Finally, most employers offer a maximum amount for life insurance benefits, which is generally one to two times your salary, and a monthly limit of $5,000 to $10,000 for disability insurance. Would these amounts take care of your family’s needs if you were unable to? If not, then consider private insurance.
A Final Note
Open enrollment is an ideal time to double-check your beneficiaries. Births, marriages, divorces—big life changes may necessitate changes to your designated beneficiaries. Use this time to make sure yours are up to date.
Beneficiary designations for retirement plans and life insurance have both a primary and a secondary (or contingent) beneficiary. The primary beneficiary would usually be a spouse, and the secondary beneficiary is commonly a trust for minor children or direct to adult children.
Your situation is unique, of course. Consult with your financial planner or estate planning attorney for specific recommendations.