People often view open enrollment season at their office as a time where they need to check a box that basically ensures that they continue to get the coverage they’ve always had. People are creatures of habit, and the idea of reviewing your coverage and making changes can be both overwhelming and unsettling. Not to mention that, in most workplaces, employees are busy enough as it is. Adding the extra “to do” to their list often doesn’t feel like it’s going to bring them very much return.
This couldn’t be further from the truth.
Open enrollment is the one time of year that you can lock in employee benefits that could save you hundreds (or sometimes thousands) of dollars in the coming year. Take an hour or less out of your day to review the following benefits and determine whether they’re right for you.
Review Your Health Insurance
This is probably the most intimidating benefit that employees fail to review year after year. Your current coverage seems fine – why fix what’s not broken, right? Wrong. In many cases, Americans go years being over or underinsured, and they only realize it when it’s negatively impacting their wallet in a big way.
Being underinsured might mean that your copays are outrageously high, or that your deductible is so big that it’s near impossible to meet. The last thing you want is to have your entire savings wiped out due to a medical emergency, or even a trip to the hospital for something relatively minor. Even more concerning is the statistic that 60% of people who have medical bills go through most of their savings, and 1 in 10 Americans end up delaying medical care because they’re worried about affording it. Having the right amount of coverage can help you to mitigate the cost of a medical emergency.
As much as being underinsured is financially risky, being overinsured can be equally detrimental. If you’re paying for coverage you don’t need, you’re consistently sending money out the door every month for services that you may never use or need. It’s important to weigh the cost and benefits of having specific health care coverage, even if you’re only working with hypothetical information. For example, if you’re a young attorney living in the Chicago area who doesn’t commute by car, rarely travels, and is single – you likely don’t need the same amount of health insurance that a family with two young, tree-climbing, sports-playing kids might need.
Is An HSA Right For You?
Often times, the best way to balance insurance premiums with the expense of potential medical emergencies is to select High Deductible Health Plan (HDHP) coverage. Although this coverage isn’t perfect (copays may be a bit more expensive than other plans, and deductibles are high), this insurance coverage type frees you up to open a Health Savings Account (HSA).
HSAs are savings accounts that can only be tied to an HDHP insurance plan. They’re owned by you, not your business or insurance company, and can be used for qualifying medical expenses. The best part is that you can start contributing to your HSA, and every dollar you contribute is pre-tax.
This means you can lower your annual taxable income while still saving for upcoming medical expenses like copays for routine doctor’s office visits, potential emergency room trips, or even prescription glasses. All contributions made to your HSA roll over from year to year, and there’s a $3,450 for a single individual and $6,900 for families in 2018.
In addition to getting a tax-deduction now and paying for out-of-pocket medical expenses pre-tax, you may even be able to invest your HSA dollars to grow for future medical costs or retirement. This only makes sense once you’ve built up a balance in your HSA, but it’s something to consider as you plan for both the upcoming year and longer term.
How About an FSA?
If HDHP coverage isn’t a good fit for you and your family, you can still put money aside for medical expenses using a Flexible Spending Account (FSA). FSAs, unlike HSAs, are owned by your employer, and contributions don’t usually roll over from year to year. Although some employers will allow you to take a portion of your FSA savings into the new year, they’re typically funded with a “use it or lose it” mentality.
FSAs are also funded with pre-tax dollars, which helps to lower your taxable income and save you money immediately. You can only use them for qualifying medical expenses, and you can contribute up to $2,650 (2018). FSAs are best used when you know what your upcoming medical expenses might be in a given year. For example, taking the time to estimate copays for annual check-up’s, the cost of glasses or new contact lenses, etc. can go a long way in knowing how much to contribute to this account.
Are You Maximizing Retirement Plan Contributions?
Another money-saving workplace benefit that many people overlook when reviewing their benefits is their retirement plan contribution. Often, employees choose to contribute up to their employer’s match (which is a good move to avoid leaving money on the table). But beyond that? They often leave their contribution limit untouched even as they move through promotions, salary increases, or set retirement goals for themselves.
During 2019, employees are able to contribute up to $19,000 to their 401(k). For high-income earners, this is an excellent way to save toward retirement while reducing your total taxable income. 401(k)s are funded with pre-tax money, and your employer often has a program in place to “match” your contribution up to 6%. Taking the time to estimate how much you should be saving given your retirement lifestyle goals, and adjusting your contribution limits accordingly can help to put you on track to live the retirement you’ve always dreamed of while still saving money on income taxes now.
Talk to HR
Health insurance and retirement savings aren’t the only two places you can save money this benefits enrollment season. Many companies have programs for subsidized life insurance, identity theft protection, adoption funding and counseling services, free gym memberships, childcare savings options, and more. If you’re not sure what types of benefits are available to you, use this season to speak with your human resources representative and ask for the written Summary Plan Description (SPD). They’ll be able to walk you through the wide range of benefits you can participate in, and you’ll be able to pick and choose which ones will financially benefit you