Credit: Shutterstock photoFall is traditionally open enrollment season for many companies. Too often, people simply let their benefits ride without changes. Bad idea. You need to reexamine your needs and adjust them as warranted.
In our house I'm self-employed and my wife works for a major corporation with a full array of employee benefits. As you might suspect, she hands me any information about her benefits with the implicit instructions: "Deal with this."
It has never been a good practice to just check the box and to automatically go with the same benefit choices year-to-year. This is an especially risky practice as you enroll in your 2014 benefits this open enrollment season.
All of the hoopla over Obamacare and its impact on health insurance, for those without coverage and for those with employer provided plans, is front and center in the news media. The general trend across all employee benefit options is for companies to seek ways to reduce costs, which often translates to reduced benefits.
Health insurance. Clearly the trend here is less coverage for more money. Beyond this, some companies are making some major changes in their coverage. As an example one major Chicago-area company is setting up a private exchange for their employees. Another major corporation eliminated the option of spousal coverage for employees whose spouses have access to coverage elsewhere.
Even in our case, if I had access to outside coverage and still wanted to be covered under my wife's plan, there would have been a monthly surcharge. The bottom line with health coverage is that you need to take a fresh look at the options offered for 2014, and align those with your family's needs and usage to determine the best option for you at the best price. For example, you might consider a high deductible plan with an HSA to save on premium costs.
HSA/FSA. You may have the option to fund a Flexible Spending Account or a Health Savings Account . Both allow for the payment of medical expenses with pre-tax dollars. The FSA is a use-it-or-lose-it proposition, and the HSA is not. Take a look at your spending patterns for health care and also look at your out-of-pocket expenditures from past years.
Both accounts have their pros and cons so read up, ask your benefits people and decide if either of these options (if offered) are right for your situation. The HSA is typically only an option in conjunction with a high deductible health insurance plan.
Company life insurance. Employer-provided life insurance often can be competitive in terms of price and the death benefits offered, but this is not always the case. If you have a health condition that precludes you from buying a life policy outside the company, this coverage can be crucial. I often suggest to clients to look beyond the workplace for coverage while they are in good health. That's so that they have the death benefit they need should they leave their current employer, regardless of any change in their future health status.
Many plans offer some amount of life insurance (such as one times your salary) for free; additional coverage may carry a charge. If you have health issues that might make it difficult or impossible to obtain an outside policy, check out the conversion rules on this coverage, should you leave the company.
Disability coverage. I generally suggest that you take advantage of any disability coverage offered and that you buy any extra benefit available to you. Disability coverage is lifestyle insurance. There is usually a short-term component and a long-term component.
The long-term portion usually covers 60% of your base salary, though coverage can vary. If you receive a substantial bonus or pay, or other compensation beyond your base salary, consider looking into a supplemental disability policy from an outside insurance carrier. This compensation might not be covered under the disability insurance offered via your employer.
Your 401(k) plan. Enrollment in your company's 401(k) plan is typically not limited to the annual open enrollment period, but this is often the time that companies announce changes to their plan. These changes might include new investment options and a change in the matching formula. This is a good time for you to look at increasing your salary deferral, if you are not already contributing the maximum, and to take a look at your investment allocation.
Other coverage and benefits. We generally take dental and vision insurance. Beyond that, you really need to look carefully at benefits offered such as accidental death and dismemberment insurance (AD&D), cancer insurance and other supplemental coverage.
A heath insurance agent put it quite well, saying to me that policies with low premiums generally indicate a low probability of loss. For example, AD&D requires injury or death under specific instances that many people will not encounter, hence the low cost. The chances of your dying in an accident are much lower than death from an illness. Your choices should be based upon your situation and the type of job you perform. If you are a long-haul trucker, AD&D might make some sense.
Depending upon your employer, you might also have access to benefits for transportation, parking, childcare, deferred compensation (if you are at a high enough level in the organization) and many others. These are all potentially valuable options depending upon your needs.
If you and your spouse both work, look at both benefits packages and coordinate the best options between the two plans.
Your employee benefits can add up to a significant percentage of your overall compensation. These benefits are potentially quite valuable to you and your family. Take the time to review your available options to make the best choices. Especially in this year of drastic upheaval in health insurance and across the employee benefits landscape, don't just let your selections default to your existing choices.
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Roger Wohlner, CFP, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, IL where he provides financial planning andinvestment adviceto individual clients, 401(k) plan sponsors and participants, foundations, and endowments.Please feel free tocontact him with your investing and financial planning questions. Check out his Financial Planning and Investment Advice for Individuals page to learn more about his firm's services. Roger is active on both Twitter and LinkedIn. Check out Roger's popular blog The Chicago Financial Planner where he writes about issues concerning financial planning, investments, and retirement plans. He is also a regular contributor to the US News Smarter Investor Blog and has been quoted extensively in the financial press including the Wall Street Journal, Forbes and Smart Money. Roger is a member of NAPFA, the largest professional organization for fee-only financial advisors in the country. All NAPFA Registered Advisors sign a fiduciary oath promising to act in the best interests of their clients.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
