If you are employed by a company or organization it is likely that you have access to a number of employee benefits
such as health insurance. Fall is typically open enrollment season for many companies. During this timeframe, employees are allowed to make changes to the benefits they choose to take advantage of. In most organizations, open enrollment is the only time during the year that you can make changes to your benefits package, except for certain life events as defined by the company.
Your benefits package can add up to a significant percentage of your overall compensation. I recall working in the budgeting and planning area for a corporation many years ago and benefits amounted to about 30% or more of total cash compensation. So you can see these benefits are potentially quite valuable to you and your family. In fact I generally include a review of employee benefits utilization as an element of a financial plan when applicable to a client’s situation.
Some things to consider as your review your benefits options for the coming year:
- Are there changes in the coverage offered for similar plans from prior years? For example have the company’s medical and dental care providers changed? If so how will this impact you in terms of the doctors, dentists, or hospitals that you might normally use?
- Has your personal situation changed such that your health insurance needs have changed? Perhaps you have gone with a lower deductible health insurance plan in past years, but if the kids are gone and your income has risen perhaps you might look into a higher deductible option that carries a lower monthly premium. You will want to look at your spending in this area over the prior year and also try to determine what next year might look like for your family.
- You may have the option to fund a Flexible Spending Account (FSA) or a Health Savings Account (HSA). Both allow for the payment of medical expenses via pre-tax dollars. The FSA is a “use it or loss it” proposition, the HSA is generally not. Take a look at your spending patterns for health care and also look at your out-of-pocket expenditures from past years. Both accounts have their pros and cons so read up, ask your benefits people and decide if either of these options (if offered) are right for your situation.
- You might have the option for life insurance via your company. Often, but not always, coverage can be competitive in terms of price and the death benefits offered. Also if you have a health condition that might preclude you from buying life insurance outside the company this coverage can be crucial. I do suggest to most clients that we look outside the company for coverage so that they will have the coverage they need should they leave their current employer, regardless of any change in their future health status.
- Many companies also offer Accidental Death & Dismemberment (AD&D) life insurance coverage. On the plus side the coverage is generally quite inexpensive; on the con side you must die from very specific circumstances for your beneficiaries to collect a death benefit.
- If you are offered disability coverage I generally suggest to most clients that they take advantage of this coverage and buy any extra benefit that is available to them. Disability coverage is “life style” insurance in my opinion. There is generally a short-term component and a long-term component. The long-term portion generally covers 60% of your base salary, though coverage can vary so be sure to check on this. Also if you usually receive a substantial bonus or compensation of other sorts beyond your base salary you might want to consider looking into a supplemental policy from an outside insurance carrier.
- While you can generally make changes to your investments and to the amount of salary that you defer during the year, many companies roll out changes to their 401(k) plans during this time period as well. This might include changes to the matching contribution and changes to the investments offered. While you are thinking of benefits this can be a good time to review your investment allocations and to see if you can afford to increase your contributions for the upcoming year (unless you are already contributing the maximum).
Depending upon your organization, you might also have access to benefits for transportation, parking, child care, deferred compensation (if you are at a high enough level in the organization), and many others. These are all potentially valuable options depending upon your needs.
If you and your spouse both work look at both benefits packages and coordinate the best options between the two plans. Above all, don’t just let your selections default to your existing choices. As you receive the information for open enrollment, take the time to review and understand your benefits and make the best choices for you and your family.
Please feel free to contact me with your financial planning questions.
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