Maximizing Your Employee Benefits: Essential Areas to Review During Your First Enrollment
Open enrollment may only come once a year, but its impact can last much longer. It is your opportunity to ensure your employee benefits reflect your current health needs, financial goals, and family situation. Whether you are anticipating major life changes or simply have not revisited your options in a while. Here are the critical areas to evaluate before making your benefit elections.
Health Insurance Coverage: Match Plan Features to Your Real-Life Needs
Health plans can vary widely in cost, coverage, and flexibility. Take time to review your options carefully.
- Compare Plan Types:
- PPOs (Preferred Provider Organizations) allow more flexibility with out-of-network care but usually come with higher premiums.
- HMOs (Health Maintenance Organizations) require you to stay in-network and get referrals, but premiums and out-of-pocket costs may be lower.
- HDHPs (High-Deductible Health Plans) have lower premiums and higher deductibles but pair well with HSAs for tax savings.
- Review Total Cost of Care: Go beyond the monthly premium. Factor in deductibles, copayments, coinsurance, and out-of-pocket maximums. Think about your past year’s medical usage and any upcoming needs (e.g., planned surgeries, chronic conditions).
- Check Provider Networks: Confirm that your doctors, preferred hospitals, and specialists are in-network under the new year’s plan to avoid surprise bills.
- Prescription Coverage: Review the plans to ensure your medications are covered at a reasonable cost.
HSA and FSA Accounts: Tax-Advantaged Spending for Health and Beyond
Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are powerful tools to reduce your taxable income while covering expected expenses.
- Health Savings Account (HSA):
- Only available with an HDHP.
- Contributions are tax-deductible, growth is tax-free, and qualified withdrawals are also tax-free.
- Unused funds roll over year to year and are yours even if you leave your job.
- It can be invested and used to supplement medical expenses in retirement.
- Flexible Spending Account (FSA):
- Available regardless of health plan type.
- Funds must be used by year-end (or grace period), though some plans allow a small carry over year to year.
- It can be used for eligible medical, dental, and vision expenses.
- Dependent Care FSA:
- Used to pay for eligible child or elder care expenses with pre-tax dollars.
- Can cover daycare, preschool, summer day camps, or care for a disabled spouse or parent.
Make sure to estimate your expenses realistically so you do not over-contribute to accounts with “use-it-or-lose-it” rules.
Life and Disability Insurance: Protect Your Income and Family
While many employers offer group life and disability coverage at no cost, this is often insufficient if you have dependents or significant financial obligations.
- Group Life Insurance:
- Typically, the starting coverage amount is 1x–2x salary. However, this may not be enough for families with children, a mortgage, or long-term financial goals.
- Additional (voluntary) coverage through your employer is convenient and affordable, but consider whether a portable, private policy is better for long-term needs.
- Disability Insurance:
- Short-Term Disability replaces a portion of your income for a few weeks or months if you are temporarily unable to work.
- Long-Term Disability kicks in after short-term benefits expire, potentially covering you for years.
- Review the benefit amount (e.g., 60% of salary), the elimination period (waiting time before benefits begin), and how the policy defines “disability.”
This benefit can provide meaningful protection in the event of an illness or injury.
Retirement Plan Contributions: Take Advantage of Tax-Deferred Growth
Your workplace retirement plan such as 401(k), 403(b), or TSP is a cornerstone of your long-term financial security.
- Review Your Contribution Amount:
- Are you contributing enough to get the full employer match? This is free money.
- Can you increase your contribution by even 1% this year?
- For 2025, the elective deferral limit is $23,000, with an additional $7,500 catch-up for those age 50+.
- Due to the Secure Act 2.0, there is an additional catch-up amount for those between the ages of 60-63 of $3,750.
- Traditional vs. Roth Contributions:
- Traditional contributions lower your taxable income now, but withdrawals are taxable.
- Roth contributions do not reduce current taxes but grow tax-free and withdrawals are tax-free after age 59.5.
- Consider your current and expected future tax brackets when deciding which to prioritize.
- Investment Allocation:
- Revisit your asset mix (stocks, bonds, etc.) and adjust based on your age, risk tolerance, and time horizon.
Voluntary Benefits: Evaluate Add-ons for Real Value
Many employers offer optional or “voluntary” benefits. These can be worthwhile if they match your specific needs but are not always cost-effective.
- Legal Plans: Prepaid legal services can help with wills, estate planning, or family law needs.
- Identity Theft Protection: May offer credit monitoring, fraud alerts, and resolution services.
- Pet Insurance: Useful if you have pets with ongoing medical needs but check deductibles and exclusions.
- Accident, Critical Illness, or Hospital Indemnity Insurance: May provide extra cash if you are hospitalized or diagnosed with a serious condition. It can help fill gaps in high-deductible health plans.
- Student Loan Forgiveness: Employers may offer programs to pay off your existing student debt.
These are just a few common add-ons. Available benefits are unique to each employer. Do not select these benefits just because they are offered—assess whether the cost is justified based on your risk and usage.
Dependent and Spousal Coverage: Coordination Is Key
If your spouse or partner also has access to employer-sponsored coverage, compare both sets of benefits.
- Premiums and Out-of-Pocket Costs: Look at the total cost to cover dependents under each plan, including deductibles, copays, and coinsurance.
- Benefit Design: One plan may offer better mental health, fertility, or preventive care benefits.
- Dual Coverage: In some cases, having both spouses covered under their respective plans can be beneficial, but it depends on the coordination of benefits rules.
Make sure to update your benefits to reflect any recent life changes such as birth, adoption, marriage, divorce, or a child aging out of coverage.
Final Thoughts: Do not Leave Money or Protection on the Table
Open enrollment is a powerful opportunity to fine-tune your benefits to better support your health, wealth, and family. By reviewing each area thoughtfully, you can:
- Lower your tax bill
- Save more for the future
- Protect your income and loved ones
- Avoid costly coverage gaps
Looking for more personalized guidance? Reach out to us directly to schedule a meeting or to ask a question here: https://www.ritterdaniher.com/contact