It’s that time of year again. The HR envelopes start showing up at home, meetings are held at the office, and you learn why a smaller paycheck next year will really benefit you. That’s right, it’s employee benefits enrollment season. Employee benefits come in many forms. Most common are health, disability, and life insurance. You may also be eligible for legal assistance, subsidized parking, reduced gym memberships, or even a discount on a car.
Every employer will offer different benefits, and some may not offer any. Just because benefits are offered does not mean that they are the best or will be your lowest cost option. Benefits may also be bought privately if they are not offered or need to be supplemented. Because there is no clear cut path as to what your personal benefits options are, seeking outside advice to first understand what you will or won’t receive and second seeing what else you may need is recommended.
The most common benefit people receive is health insurance. Every year the cost of health insurance seems to go up while you get less in return. This isn’t necessarily your employer’s fault, but it is still uncomfortable. Understanding where it may or may not make sense to buy the premium plan will depend on your personal situation. Also, while options on the Healthcare.gov website are limited in some areas, you do have the right to go shop for your own plan. If you and your spouse each work for an employer with a plan, see if it makes sense to combine on one or carry separate plans. I see couples all the time who are spending unnecessary money because they never went on one health plan.
Life and Disability
Life and Disability insurance are benefits most people never know they are receiving. Many companies will offer a basic life insurance benefit at no cost to the employee. If you pass your beneficiary will receive a benefit of usually between $50,000 and 1 times salary. This is a generous benefit; however, if you are raising a family and carrying a mortgage, it is probably not enough. You may have the option to add on supplemental life coverage at a cost, but often this is still not enough coverage, or the cost is not competitive. In this case, working with an independent advisor can help you shop for a better plan. If you are a person with health concerns, take advantage of the group coverage, as it typically does not involve underwriting.
Disability insurance is there to carry you through the tough times if you become injured. Policies can be broken down into short- and long-term. The biggest factor with disability insurance, and driver in cost, is “own occupation” or “any occupation”. Own Occupation means benefits will continue until you can return to your current job, any occupation means benefits will continue until you can return to any job. Disability policies will charge a “time” premium ranging from days to months before you become eligible for benefits. Lastly, policies offered by your employer will cover income paid by that employer. If you do side jobs on the weekends or moonlight as an Uber driver, this income will not be replaced. Fortunately, as with life insurance, you may purchase your own disability insurance to cover all of your income and protect your chosen career.
Health Savings Accounts and Flexible Spending Accounts
Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) are on the rise as companies look to shift the responsibility of covering medical costs to employees. These work similarly to IRA’s in that money put into them is tax-deferred if used for qualified medical expenses. FSA’s must be used in the year they are funded with some small exceptions. HSA’s may carry a balance and grow into the future; however, you must have a high deductible health plan to qualify. If you are a reasonably healthy person, contributing to an HSA may be a good way to save for retirement when your healthcare expenses will likely be higher.
Fringe benefits are a little bit of a catch-all or backstop. Employers have relationships and benefits that are passed on to employees that don’t fit under the traditional lenses. Some fringe benefits I have seen are train passes, free parking, gym memberships, mental health counseling, smoking cessation programs, or discounts at retailers. The benefit we see our clients take advantage of the most is legal counsel. I have seen several large employers offer subsidized legal assistance for their employees. We encourage all of our clients to have estate documents such as a will and power of attorney. Estate documents will typically fall under these legal assistance programs.
This enrollment season, take a look at your total benefits package. Can you combine coverage to save money? Are there gaps in your coverage to fill? Are you fully or partially protected in an accident? Can you save more in an HSA for a rainy day? Are there things you are paying for covered under a fringe program? If you speak to a captive agent, they may be knowledgeable but will only represent one product line. An Independent advisor can help you answer these questions and offer solutions from a variety of carriers finding the best one for your needs.
Enrollment season is only open for a few weeks every year, make the most of yours!