Most employers that offer a menu of employee benefits have an annual open enrollment period - typically several weeks in the fall or early winter. During open enrollment, employees can enroll in benefits for the first time, change their current benefit choices or coverage amounts, or completely opt-out of their employer’s benefit program.
Employee benefit decisions impact your family’s overall financial strategy, so taking the time to do more than simply confirm the benefits you already have in place can be beneficial. It’s important to weigh your options carefully, consider your choices in the context of your overall financial situation and weigh the risks and rewards that come with transitioning to more or less coverage.
What to Consider
As you review your employee benefits, make sure that your:
- Health and dental plans still meet your needs. Companies regularly change plans and premiums. Selecting plans that provide the protection you need, while minimizing the coverage you don’t, may help you save money. Also, if you are married, look at the coverage options that your spouse’s employer provides. Just because your employer’s plan was the best fit last year doesn’t mean that it will be the best choice this year. Compare deductibles, co-pays and premium contributions and make sure you are fully aware of any changes to your plan before you finalize your choices.
- Life and disability income insurance are sufficient to meet your needs. Do some research and consider consulting with a financial professional if you need help determining what kinds of insurance – and how much – you need to protect your lifestyle and your family given your goals and financial situation. This will enable you to make the most of your employer-sponsored coverage and to determine whether you need any supplemental coverage.
- Beneficiary designations are up-to-date. Stating something in your will isn’t enough. Your beneficiary designations on a life insurance policy, annuity or retirement account — such as a 401(k) or an IRA — override what’s stated in your will or trust. So if you have experienced a life-changing event like a marriage, divorce, birth, adoption or death in your family, make sure that your beneficiary designations reflect your current wishes.
- Retirement savings plan is still appropriately diversified. Start contributing to your employer-sponsored retirement plan now if you haven’t yet. Many companies offer a match, so make sure you’re getting the maximum amount of “free” money you can. If your familiarity and skill level with investing is more advanced than average, you may consider rebalancing your retirement 401(k) on your own, but for many people, an automatic rebalancing plan where the investment accounts are managed by professionals is easier. Other plans leave the investment choices and rebalancing up to you. In this case, consider consulting with a financial professional for help in choosing the investments best suited to your objectives.
- Tax withholding amount is on target. If you always receive a large refund from the Internal Revenue Service (IRS) or find that you owe the IRS money every April, you may be having too much or not enough withheld. To help avoid either extreme, consult with a tax professional to determine the best withholding amount.
The Affordable Health Care Act introduced health insurance reforms that will roll out during the next few years. Two of the reforms that will have the most impact on your employee benefits options are:
- Coverage for young adult dependents. Previously, young people would not be included as an eligible dependent unless they were a full-time student, but now that this provision is in effect, young adults can stay on their parents’ group health plan until age 26 if they don’t have access to health insurance through a spouse or employer. Though parents with an adult child on their health plan may have to budget for higher insurance costs, it may help more young people save some cash over purchasing an individual plan.
- Flexible Spending Accounts (FSAs) — FSAs allow you to save pre-tax dollars in an account designed to reimburse you for out-of-pocket medical expenses. (As of 2012, over-the-counter medications are no longer included unless your physician prescribes them.) Beginning in 2013, the maximum amount that you can set aside in an FSA will be $2,500 a year. Keep in mind that accurate planning is critical, because any money leftover in your FSA at the end of the plan year is lost.
To better understand all of the employer-sponsored benefits available to you, consult with your company’s benefits coordinator or other human resources professional. Now is also a good time to meet with your financial advisor and tax or legal professionals. They can help you evaluate your choices and ensure your medical, dental, other insurance and retirement savings benefits, — such as your 401(k) and pension — are aligned with your needs and integrated with your short- and long-term plans in the most efficient and effective ways.
Gregory Younger, CRPC is a Financial Advisor with Ameriprise Financial Services, Inc. in St. Peters, Missouri. He specializes in fee-based financial planning and asset management strategies and has been in practice for 11 years. To contact him, http://www.ameripriseadvisors.com/gregory.d.younger/ or 300 First Executive Avenue, Ste. D, St. Peters, MO 63376; (w) 636-405-5004, (c) 636-233-2099.
Advisor is licensed/registered to do business with U.S. residents only in the states of MO, NV, CA, IN, GA, WA, IL, KS, AL, AR, FL, TN.
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