Fall is open enrollment season. For employees, this is a timely reminder to check that you have selected the right benefits from your employer.
The options can be dizzying, but don’t ignore the HR emails. Here are points to consider when reviewing your benefit plans.
1. Review health coverage and savings accounts
Your choice of a medical plan is more than comparing premiums. Your medical conditions and expected medical needs should be kept in mind. If you have more health issues than a year ago, or expect more medical needs next year, you may not want to select the plan with the highest deductible. And vice versa, a healthy employee may want to select a high-deductible plan to be eligible for a Health Savings Account (HSA). The HSA remains one of the most powerful savings tools available. Contributions are made pre-tax, funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. Those eligible should contribute the maximum each year and check whether their employer makes additional contributions, as those dollars provide an immediate boost to long-term savings.
For plans not eligible for an HSA, evaluate your expected medical costs to determine if you should enroll in a Flexible Spending Account (FSA). FSAs can include dependent care. Just keep in mind they are “use it or lose it” programs and should be spent down before year-end.
Finally, compare coverage options for spouses and dependents. If each spouse is eligible for employer benefits at their respective employer, is it more cost-effective for everyone to be on one plan or split coverage between spouses?
2. Maximize retirement plan opportunities
Employer retirement plans are often the largest investment savings for employees, yet many fail to take full advantage of them.
Start by confirming your participation in the company’s 401(k), 403(b), or 457 plan and that you are contributing at least enough to capture the full employer match or ideally the maximum amount. Also explore whether the plan offers Roth or after-tax contribution options. Roth 401(k)s allow after-tax contributions that grow and withdraw tax-free, providing a hedge against future tax increases. Some plans also allow after-tax contributions beyond the annual deferral limit.
Don’t overlook catch-up contributions. If you are over 50 you can add an extra amount per year, and those ages 60–63 can add even more. Individuals earning over a certain amount in the prior year from one employer must make all catch-up contributions to the Roth portion of the plan under SECURE Act 2.0.
3. Review life and disability insurance coverage
While employer-provided insurance coverage is affordable and convenient, it is usually capped and not enough to meet a family’s needs. Compare supplemental employer coverage to private individual-owned coverage, which may offer better value. Private coverage continues if employment ends and is not subject to additional taxable income from employer coverage.
Confirm that both short-term and long-term disability policies are in place and examine the definition of disability. Policies that define disability as “own occupation” offer stronger protection than those using an “any occupation” standard.
Also, if an option, avoid paying premiums as a pre-tax deduction and instead pay with after-tax dollars. This way, benefits will not be taxable if you make a claim.
4. Review other benefits
Don’t overlook smaller but meaningful benefits. Many employers now match charitable donations, providing an easy way for clients to amplify their giving. Review flexible savings accounts, wellness stipends, parental leave, mental health resources, fertility assistance, and legal assistance programs as part of the total compensation package.
A valuable planning opportunity
A thorough benefits review can help you make smarter, stronger financial decisions. The benefits of this include not only tax-advantaged savings but closing coverage gaps. Coordinating benefits with financial planning is part of SageVest’s comprehensive wealth management approach. Please contact us to learn more.
