Take advantage of the best employee benefits.
KEY TAKEAWAYS
The lowest-cost health insurance plan isn't always your best option.
If eligible, maximize your HSA savings and - ideally - invest it.
Don't dismiss long-term disability coverage.
Important life events coming up? Consider group legal coverage.
With open enrollment season right around the corner, now is the time to start thinking about the benefits you need most. There are many moving pieces to open enrollment, so it’s natural to feel a little confused and stressed.
As with all planning, time is your most valuable asset. Set aside blocks of time throughout your enrollment period to implement a benefits strategy that’s right for you.
Here are some of the best benefits to consider before the window closes.
Health Insurance
Don’t just pick the plan you had this year. Know what your current health plan covers and costs, then compare that to the plan options offered next year.
Remember - choosing the coverage with the lowest monthly premium doesn’t mean you’ll spend less overall. Your monthly premium has an inverse, or opposite, relationship with your deductible and maximum out-of-pocket. If you select the coverage with the lowest monthly premium, then you’ll have higher deductible and maximum out-of-pocket thresholds to meet before insurance benefits kick in.
If you tend to go to the doctor often, plan on having a baby, or have specific
procedures planned, then it might be cheaper to opt for the higher monthly premium in exchange for lower deductible and maximum out-of-pocket costs.
Health Savings Account (HSA)
If you select a high-deductible health insurance plan, then you are eligible for a Health Savings Account (HSA). An HSA is arguably the most powerful savings vehicle because of the triple-tax savings potential.
Tax-deductible contributions (including FICA)
Tax-deferred growth (including interest, investment income, and gains)
Tax-free distributions for qualified health expenses
On top of the tax benefits, some employers will even make a match contribution to your HSA. Because health issues can arise later in life, this is the perfect account for long-term care planning. And, unlike a Flexible Spending Account (FSA), an HSA is a savings account, so your balance stays with you.
Flexible Spending Account (FSA)
Not to be confused with an HSA, a more common and accessible way to save for healthcare expenses is a Flexible Spending Account (FSA). The key distinction between the two is spending vs. savings. While the FSA also offers tax-deductible contributions, you generally must use all of the money in an FSA during the plan year. Because it’s a use-it-or-lose-it scenario with an FSA, you need to plan your qualified expenses to avoid overcontributing and losing those extra funds.
Life Insurance
According to a recent survey by Unum, a staggering 45% of American workers don’t have or don’t know if they have life insurance. Even if your employer provides a life insurance benefit, it usually covers a fraction of what you need to protect your family and it isn’t portable - meaning that you lose coverage if you leave your employer.
Take the time to determine the coverage you need to protect your family. If you need more coverage, then determine whether it’s best to go through your employer’s supplemental insurance program or get your own individual life insurance policy.
Want to talk to an expert who doesn't sell policies? Schedule a free initial consult with FMI to learn how we can help.
Disability Insurance
Often overlooked by employees, this coverage can replace a portion of your paycheck if you get sick or injured and are unable to work. Short-term disability is often covered by employers and typically replaces 70% of your salary.
Long-term disability (LTD), on the other hand, is often not elected because employees pay for it. LTD typically replaces 60% of your salary and starts after three to six months of you being unable to work. LTD coverage is typically very cheap through your employer and worth the investment.
Factors you'll want to consider when evaluating disability insurance are:
Policy's definition of disability (own occupation, modified-own occupation, etc.)
Coverage amount (% of salary that is paid)
Benefit period (length of benefit payments)
Elimination period (time before you start receiving benefits)
Your emergency fund (cash reserves in place you can rely on before benefits begin)
Group Legal Plans
75% of people will need an attorney this year. Buying a home? Adopting a child? Caring for aging parents? Need an estate plan? The average hourly rate for an attorney is $370, but what if $400 bought you a year of attorney time? That's right - $400 for the year. It's possible with a Group Legal Plan.
Here's how it works:
You pay a low, flat fee per paycheck
Choose from a network of attorneys
Get full, unlimited access with no copays, waiting periods
Most employees glaze right over this benefit and miss out on having trusted attorneys help them during some of the most important and stressful times in life.
Retirement Plan
This is also the perfect time to evaluate your 401(k), 403(b), and other retirement plan strategies. Some of SECURE Act 2.0 changes are coming in 2024. With each election you make, you should be able to explain why you’re making that election. If you can’t, then you don’t have a real strategy.
Here are the common mistakes we see employees making with their retirement plans:
Not having beneficiary(s) on file
Making Pre-Tax contributions instead of Roth
Not taking advantage of Mega Back Door Roth 401(k)
Choosing investments based on recent performance
Using the Target Date Fund *and* individual funds
Using multiple Target Date Funds
E.g. Using the 2030 and 2040 funds doesn’t increase diversification
Using too many individual funds
E.g. Large Growth and Large Value vs. just using Large Blend
Want greater confidence in your retirement plan? Schedule a free review of your investment and contribution strategy today.
Conclusion
Open enrollment is an important time of year. Pay close attention to all email communications, attend webinars, visit FAQ pages, and ask your HR partners for direction. Take the time to understand all of your options and the role each benefit would play in your strategy.
Frank Iozzo, CPWA®
President, Private Wealth Advisor
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