1-Minute Read: Maximizing Employer Benefits
Friends – Truly holistic financial planning means looking at your ENTIRE financial picture. One area that often does not get enough attention, and where we spend a lot of time with our clients, is in optimizing employer benefits. This comes into particular focus each year during annual open enrollment periods. The amount of information shared during these times can be overwhelming, and often inertia sets in and the same benefits are elected year after year and important options go overlooked.
With the rising cost of health insurance, and the proliferation of new benefit options, we always encourage taking time to really understand the options available to you through your employer. Regardless of your situation, we firmly believe that smart decisions in this area can have a meaningful impact to your overall financial plan over the course of a long career. Below I’ve outlined some of the primary benefit options and considerations for each.
- Health, Dental & Vision Insurance - Given the ever-increasing cost of healthcare, quality insurance is often a top priority for employees. Many employers offer multiple plans to choose from with varying premiums, deductibles, networks of physicians, etc.. Finding the right plan for you can depend on a number of factors including your health history, anticipated expenses (i.e. the birth of a child), family make up, etc. Most employers offer decision support tools that can guide you toward the right selection for you and your family. Plans are also increasingly offering various telehealth options that can provide an additional level of convenience and cost savings.
- 401(k)s and Other Savings Plans - Saving for retirement is essential to nearly everyone’s future financial security, and often employers will offer plans to support you in doing so. Understanding options available, any associated tax advantages, matching contributions available, investment options, eligibility, etc. is critical.
- Employee Stock Purchase Plans - Many employers offer their employees the ability to purchase shares of stock in the company, often at up to a 15% discount. This can provide an attractive long-term investment opportunity that should not be overlooked. Of course it is important to understand the outlook for your company’s stock, any restrictions or tax implications related to purchases and your total concentration in their stock as a part of your overall portfolio and net worth.
- Tax-Advantaged Spending Accounts - Various tax-advantaged accounts are also available for different expenses employees incur throughout each year. The ability to put money into these accounts pre-tax and withdraw from them tax free can provide a significant savings. It is important to understand your eligibility to contribute to each of these account types, which expenses are eligible for tax-free reimbursement, contribution limits and each’s specific rules regarding rolling over unused funds from year to year. A few of the most common include:
- Health Savings Accounts - HSAs remain one of the best saving and investment options available. I detailed the benefits of these accounts in a recent blog post: 7 More Things to Know About Health Savings Accounts.
- Limited Purpose FSAs - Another option that even fewer people know about is an account called a limited purpose FSA that more and more employers are offering in tandem with an HSA. Essentially, this is an account that can be contributed to IN ADDITION to an HSA and used for vision and dental expenses.
- Dependent Care FSAs - For parents with young children, the ability to contribute up to $5,000 pre-tax for use on things such as daycare, camps, etc. can provide substantial tax savings.
- Commuter Spending Accounts - Similar to the accounts above, many employers offer commuter spending accounts that can provide tax savings when used for things like parking and mass transit expenses.
- Life Insurance - Group life insurance offered through employers is often the default choice for many employees. This type of coverage is often inexpensive and very convenient. But there can be drawbacks depending on your situation. I covered these in more detail in another previous blog post: Pros and Cons of Group Life Insurance.
- Long-Term Disability Insurance - If you have the option, please consider electing this coverage. Statistically you are more likely to become disabled than to die, and for most workers, future earnings represent their most significant asset by far. The same way you insure your house, your car or even your life, please don’t forgo insuring your ability to make a living. I’ve unfortunately seen numerous examples where workers were injured or became sick and unable to work and did not have this coverage in place. If you have a choice to pay for coverage with pre-tax or post-tax dollars, we typically recommend you choose post-tax. This way, should you need it, your disability payments will not be taxed.
- Tuition Reimbursement - Many employers offer tuition reimbursement for various certifications or degrees. Being aware what’s available to you can provide substantial savings as you pursue a degree, certification or other professional development programs.
- Other Benefits - Myriad other benefits are often available through employers such as parental leave, fertility solutions, adoption reimbursement, mental health resources, critical illness insurance, long-term care insurance, pet insurance, legal assistance, etc. Depending on your particular circumstances, many of these can provide meaningful value, making it important to fully review your employer’s entire benefits package.
If you have any questions about the benefits available through your employer and which options are right for you given your particular circumstances, or even if you’d just like a second opinion before making your elections, please don’t hesitate to reach out. We’re always happy to help.
Best,
CAMERON DIEHL, CFP®, CPWA®
Private Wealth Advisor
