I know that open enrollment is the time to make decisions
about my group health coverage, but my employer is also offering
to let me buy other kinds of insurance and sign up for other
benefits that include some tax breaks. Should I consider these
Upgrade Your Benefits During Open Enrollment
Yes. Open enrollment not only gives you the opportunity to
choose your health insurance plan for next year (see
Make the Most of Health Insurance Changes in
) but also offers you a chance to buy other insurance at group
discounts or set aside pretax money in accounts that can help with
your medical, child-care and commuting expenses. Here are six
benefits for which you may be eligible during open-enrollment
season this fall.
Tax-free money for medical expenses.
If your employer offers a medical flexible spending account, take
advantage of it. A medical FSA lets you set aside tax-free cash to
use for out-of-pocket medical expenses, such as copayments and
deductibles (but not premiums) for you, your spouse and eligible
dependents. Most plans even let you use the money for children
through the year they turn age 26, whether or not they are covered
under your health insurance or considered to be dependents for tax
purposes. For 2013, you can contribute up to $2,500 per person to
the account (the limit is down from previous years, owing to recent
legislation). See our
How Much Should I Put in My Flexible Spending
calculator for help deciding how much money to contribute, and see
7 Smart Uses for Your Flex-Account Money
for more information about how you can spend the money.
Tax-free money for child care or elder care.
Many employers let you set aside up to $5,000, before taxes, in a
dependent-care FSA (the limit is per family) to pay for care for a
child who is younger than 13 so that you and your spouse can work
or look for work. You may also be able to use money in the account
to pay for care while you work if an elderly parent who lives with
you is physically or mentally incapable of caring for himself or
herself (ask your employer about its rules). See
Tax Break for Elder Care
for more information. Tax breaks from the dependent-care FSA are
usually more valuable than the dependent-care tax credit, unless
you have very low income. See
FSA or Child-Care Credit?
for more information.
Tax breaks for commuting.
You may also be able to set aside pretax money to help fund your
commute. You can contribute up to $125 a month for
public-transportation passes or van-pool costs, and up to $240 a
month for qualified parking expenses. For more information, see the
page at SaveSmartSpendHealthy.com.
Extra help protecting your income.
Many employers let you buy extra disability insurance, which you
pay for yourself and may keep after you leave your job. People tend
to overlook this coverage if they already receive some basic
disability insurance as a free employee benefit. Employer-paid
policies are a good start, but they are taxable and generally cover
just 60% of your base pay (not counting any bonuses); your pretax
monthly benefit may be capped at $5,000 to $10,000. If that isn't
enough money to pay your bills, consider buying extra coverage
through your employer. These voluntary policies generally offer
benefits that supplement the free coverage offered by the employer.
Also, when you pay the premiums yourself, you won't have to pay
taxes on the benefits. For more information about disability
Better Deals on Disability Insurance
. Also see the Council for Disability Awareness's interactive Web
Defend Your Income
, for more information about disability risks and insurance, and
for help calculating whether you have enough coverage.
Long-term care at group discounts.
In past years, many employers offered long-term-care insurance
policies to employees at a group discount of 5% to 10% compared
with individual coverage. The policies typically have many of the
same benefits as individual coverage, and you may keep them after
you leave your employer. But low interest rates and
higher-than-expected claims are causing some major insurers to
leave the business. If your employer still offers this coverage,
compare the benefits and prices with those of individual
long-term-care policies. For more information about long-term-care
Navigate a Course for Long-Term Care
A chance to buy extra life insurance.
Your employer may also give you the opportunity to buy extra life
insurance to supplement any free coverage you receive through work.
If you're healthy, however, you'll likely get a better deal by
buying a policy on your own. Insurers that offer group policies
often assume that mostly people in poor health will apply, so rates
are usually higher than they are for preferred-rate individual
policies, and the rates typically go up every five years instead of
staying fixed for 20 or 30 years.