This is an update of Employee Benefits Open Enrollment – Make Good Choices which originally appeared on the blog on September 12, 2012.
Fall is traditionally open enrollment season for many companies. In our house I’m self-employed and my wife works for a major corporation with a full array of employee benefits. As you might suspect she hands me any information about her benefits with the implicit instructions “… deal with this…”
While it has never been a good practice to just “check the box” and to automatically go with the same benefit choices year-to-year, this is an especially risky practice as you enroll in your 2014 benefits this open enrollment season. All of the hoopla over ObamaCare and its impact on health insurance for those without coverage and for those with employer provided plans is front and center in the news media. The general trend across all employee benefit options is for companies to seek ways to reduce costs which often translates to reduced benefits.
Clearly the trend here is less coverage for more money. Beyond this some companies are making some major changes in their coverage. As an example one major Chicago area company is setting up a private exchange for their employees. Another major corporation eliminated the option of spousal coverage for employees whose spouses have access to coverage elsewhere. Even in our case, if I had access to outside coverage and still wanted to be covered under my wife’s plan there would have been a monthly surcharge. The bottom line with health coverage is that you need to take a fresh look at the options offered for 2014 and align those with your family’s needs and usage to determine the best option for you at the best price. For example you might consider a high deductible plan with an HSA to save on premium costs.
You may have the option to fund a Flexible Spending Account or a Health Savings Account. Both allow for the payment of medical expenses with pre-tax dollars. The FSA is a “use it or lose it” proposition, the HSA is 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. The HSA is typically only an option in conjunction with a high deductible health insurance plan.
Company Life Insurance
Company life insurance often can be competitive in terms of price and the death benefits offered, but this is not always the case. If you have a health condition that might preclude you from buying life insurance outside the company this coverage can be crucial. I often suggest to clients to look outside the company for coverage while they are in good health so that they will have the death benefit they need should they leave their current employer, regardless of any change in their future health status. Many plans offer some amount of life insurance (such as 1 times your salary) for free; additional coverage may carry a charge. If you have health issues that might make it difficult or impossible to obtain an outside policy you will want to check out the conversion rules on this coverage should you leave the company at some point in the future.
I generally suggest that you take advantage of any disability coverage offered and that you buy any extra benefit that is available to you. Disability coverage is “lifestyle” insurance. There is usually a short-term component and a long-term component. The long-term portion generally covers 60 percent of your base salary, though coverage can vary. If you receive a substantial bonus or compensation or other sorts of compensation beyond your base salary you might want to consider looking into a supplemental disability policy from an outside insurance carrier as this compensation might not be covered under the disability insurance offered via your employer.
Your 401(k) plan
Enrollment in your company’s 401(k) plan is generally not limited to the annual open enrollment period, but this is often the time that companies will announce changes to their plan. These changes might include new investment options, a change in the matching formula, and others. This is a good time for you to look at increasing your salary deferral if you are not already contributing the maximum and to take a look at your investment allocation.
Other coverage and benefits
We generally take dental and vision insurance. Beyond that you really need to look carefully at benefits offered such as accidental death and dismemberment insurance (AD&D), cancer insurance, and other supplemental coverages. A heath insurance agent put it quite well in saying to me that coverages with low premiums generally indicate a low probability of loss. For example AD&D requires injury or death under specific parameters that many people will not incur, hence the low cost. You choices should be based upon your situation and the type of job you perform.
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.
Your employee benefits can add up to a significant percentage of your overall compensation. These benefits are potentially quite valuable to you and your family, take the time to review your available options in order to make the best choices for you and family. Especially in this year of drastic upheaval in health insurance and across the employee benefits landscape, don’t just let your selections default to your existing choices.
Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss your open enrollment options and to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.
Photo Credit: Flickr