Demystifying Employee Benefits Enrollment: A Guided Approach

Employee benefits enrollment can be a complex undertaking, like solving a puzzle. However, it’s a crucial part of the work experience. In this guide, we’ll explore different types of employee benefits and the steps you should keep in mind for a smooth enrollment process.

Health Insurance: A Big Deal
Health insurance is a significant benefit. When you’re comparing different health, dental and vision insurance options, it’s important to consider a few factors:

• Check out the Coverage and Costs: First, review the details like coverage, premiums, deductibles, copayments, and out-of-pocket maximums. And don’t forget to pay extra attention to prescription medication coverage, especially if you’re currently taking expensive meds.
• Low Premiums Don’t Always Mean Savings: Don’t be fooled into thinking that low health insurance premiums always translate to savings. It’s important to consider your typical medical expenses. If you can pay out of pocket for your expenses, a high-deductible plan with the benefits of an HSA, which we’ll talk about below, may be the right fit for you.
• In-Network Providers: Consider the importance of having your preferred healthcare providers in-network. If that’s a must for you, you might decide to go with a pricier plan that includes your preferred caregivers.
• Spouse’s Insurance Options: Don’t automatically assume that you should be covered by your insurance and your spouse by theirs. If your spouse’s healthcare plan offers more favorable terms and doesn’t restrict your coverage due to your employer’s plan, it may be advantageous to decline coverage from your employer. If you have dependents, it might be more practical for one spouse to cover the children while the other remains solely on their company’s insurance plan or for the entire family to be on one plan.

Health Savings Accounts (HSAs): Medical Savings Now and in the Future HSAs are like secret weapons for managing medical costs both now and in the future. Here’s what you should know about HSAs:

• Triple Tax-Free Benefits: HSAs offer a unique triple tax-free aspect. Your contributions are tax-deductible, reducing your taxable income now. Any interest or investment gains in your HSA are tax-free, and when you use that money for qualified medical expenses, it’s tax-free too!
• Investing for the Long Haul: Many HSA providers offer investment options, so your HSA can grow over time. It’s a fantastic tool for saving up for healthcare in the long run, thanks to those triple tax-free perks. If you can pay for your healthcare expenses out of pocket and let your HSA grow, it is an excellent investment for your future.
• Contributions: The IRS sets limits on how much you can contribute to your HSA each year, which varies depending on whether it is an individual or family plan. If you’re 55 and over, you can contribute even more. Plus, here’s the cherry on top – many employers pitch in for their employees’ HSAs, which is basically free money!
• Portability: Unlike the FSAs we’ll talk about below, HSAs are portable. If you switch jobs, no worries – you can take your HSA with you.
• Qualified Medical Expenses: You can use your HSA funds to pay for a wide range of qualified medical expenses. Here’s a perk: unlike the FSA, you can hang on to those receipts for medical expenses and submit them later down the road. No need to rush to submit them by the end of the year.

Flexible Spending Accounts (FSAs): Savings for your Health and Family FSAs offer a mechanism for managing healthcare and dependent care costs. Here are the essentials of the FSA:

• FSA and HSA: Note that you cannot have both a traditional FSA and an HSA. If you have an HSA, you can only have a limited purpose FSA, to cover vision and dental expenses.

• Use-it-or-lose it rule: Be aware of the “use-it-or-lose-it” rule for FSAs. This rule stipulates that you must spend the funds you contribute within the plan year or a grace period, or you may forfeit unspent funds.
• Contributions: Contributions to FSAs are made with pre-tax dollars, reducing your taxable income. The IRS sets annual contribution limits for FSAs, and these limits may change from year to year.
• Qualified Medical and Dependent Care Expenses: FSAs cover a wide range of eligible medical expenses. You can use the funds to cover eligible dependent care expenses for qualifying dependents, such as children under the age of 13 or disabled adults who need care to allow you (and your spouse) to work or attend school full-time.

Retirement Benefits: Looking Ahead It’s never too early to start thinking about retirement. While a wide variety of retirement benefits exist, in this guide, we’ll concentrate on 401(k) plans.

• Optimize Contributions: A smart move is to contribute the maximum amount possible, ideally targeting the IRS annual limit, which can shift from year to year. Keep in mind that if you reached the maximum contribution this year, you might need to adjust for the next year, especially if the IRS raises the limit. Plus, if you’re turning 50 next year, remember you can contribute even more.

• Company Matching: Here’s a great perk – lots of employers pitch in some money when you contribute to your 401(k). It’s like a bonus for your savings! Aim to put in at least enough to get the full company match – don’t leave that free money on the table!

• Traditional 401(k) Contributions: When you contribute to a traditional 401(k), you reduce your current taxable income, providing a tax break. However, you’ll pay income tax on withdrawals and gains during retirement.
• Roth 401(k) Contributions: With a Roth 401(k), you use after-tax money, so it doesn’t lower your current taxable income. In return, all withdrawals, including earnings, are tax-free in retirement. There are a lot of factors in play when deciding between traditional and Roth contributions, including looking at your current and expected future tax situations.
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• After-Tax Contributions: There may be an additional option to pre-tax and Roth contributions called after-tax contributions. These are not synonymous with Roth contributions. For some, using after-tax contributions for a mega backdoor Roth conversion strategy can be very powerful. Check out our article on this strategy: https://www.bluerockwealth.com/blogs/perspectives/mega-backdoor-roth-contributions-sounds-like-a-special-super-power-is-it

Life Insurance: Secure Your Family’s Future Just like your retirement planning, employer life insurance is a key part of building a better tomorrow for you and your loved ones. Here are factors to consider:

• Coverage Amount: Start by figuring out how much coverage you need to protect your family’s financial well-being. Consider things like your mortgage, outstanding debts, education expenses, and future income replacement.
• Additional Coverage Options: Your employer might offer a basic coverage amount at no cost to you, but if you need more coverage, you might have to pay for it. This is particularly crucial for individuals who might be unable to obtain an external policy, although securing additional coverage could entail medical exams or health-related inquiries.
• Compare with External Policies: It’s a good idea to compare your employer’s life insurance offering with external policies. External policies may offer more customization options and potentially better rates, but the best part is you get to keep them, no matter where you work. Ensuring your financial security even if you switch jobs is essential because you do not know what the future holds for your health.
• Portability: Find out if the life insurance policy is portable, meaning you can take it with you when you change jobs. Portable policies give you the peace of mind that your coverage continues without the need for reapplication, even if your health situation changes. This is a valuable benefit, especially if you encounter difficulties in getting new insurance later.
• Beneficiary Designation: Make it a habit to review and update your beneficiaries during your annual enrollment. Life circumstances change, so ensuring your life insurance reflects your current wishes is important.

Long-Term Disability (LTD) Insurance: Protecting Your Income Disabilities can happen to anyone. According to the Social Security Administration, about 1 in 4 of today’s 20-year-olds will become disabled before they reach retirement age. That’s where LTD insurance comes into play. Think of it as your financial safety net.

• Fills the Gaps: LTD insurance steps in when short-term disability insurance or workers’ compensation might not cover all the bases. It’s financial support if you become unable to work for an extended period. Typically, it’ll cover about 50-60% of your income, helping you keep up with the bills and maintaining your lifestyle.
• Going the Extra Mile with Supplemental LTD: Some employers offer supplemental LTD. This will allow you to receive a higher percentage of your pre-disability income as it is an additional percentage over the 50-60% coverage. Plus, many times these policies are portable – you can take them with you when you change jobs.

Beyond the Basics: A Holistic Approach Many companies today are going the extra mile, focusing on your overall well-being. Don’t forget to explore all your employer has to offer:

• Student Loan Assistance Not only does this provide relief on your loan balance, but it also saves you from shelling out your hard-earned money on high-interest payments.
• Tuition Assistance Thinking about leveling up your skills? Your workplace might chip in for your education.
• Pet Insurance Our furry friends are part of the family, right? Some companies offer pet insurance to help with those unexpected vet bills.
• Employee Assistance Programs (EAP) Whether it’s a personal challenge or something work-related, EAP is there to lend a hand.
• Wellness programs Your employers may provide programs like gym memberships, fitness classes, or initiatives to keep you in the best shape, both physically and mentally.
• Charitable Matching Sometimes, your employer is ready to double the impact of your good deeds by matching your charitable contributions.

Now that you have a roadmap to follow, don’t delay. We’re here to support you every step of the way.