Open Enrollment Season – What You Need to Know

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Open enrollment is a critical time for employees to review and make decisions about their benefits for the coming year. Many people mistakenly assume they don’t need to make changes from their previous selections, but every year, new options may be available, and your circumstances may change as well.  Open enrollment is your chance to optimize your benefits package and ensure that you’re making the most of what your employer offers. Here’s a guide to help you navigate this important period.

Health, Dental, and Vision plan options

• Health Insurance: Employees who are given a choice often must decide between a plan with a higher monthly cost and lower deductible and another option that is the other way around, with you paying less each month but required to hit a higher deductible before your coverage begins. If you have the option and are generally healthy you will most likely want to opt for the high-deductible plan with the lower monthly cost. However, if you are anticipating significant medical expenses in the upcoming year, opting for the plan with the higher premium and lower deductible can be the better option.

Employees may find their household size has changed since their last open enrollment period and they can or need to add or subtract someone to/from their plan. Adult children can stay on your plan until age 26, but upon attaining that age, they are removed from your plan and must find their own health insurance. Also, if your spouse has their own health insurance option at work, you’ll want to compare the two plans.  Some companies will add a surcharge to your coverage if you add a spouse who has their own workplace health insurance available to them.

• Dental and Vision plans: The maximum benefits on dental and vision plans offered by an employer are typically not high; however, if you visit the dentist twice a year and the eye doctor once a year, most plans at least pay for themselves.

Life and Disability Insurance

• Life Insurance: In most cases, if you need more life insurance than the amount your employer may offer you for free, it is cheaper to buy term insurance rather than purchase group life insurance through your employer. With group life insurance, there is typically no underwriting, which means that the healthy policyholders are supplementing the unhealthy ones.  In addition, with group life insurance through your employer you will lose your coverage if you leave your job.

If you need life insurance but have significant health challenges, the group life insurance through your employer may be the only coverage you can get, so be sure to accept it and purchase as must as you need or as much as you can get.

• Disability Insurance: If your employer offers disability insurance and you are not near the age at which you plan to retire, you should definitely accept it. Short-term disability coverage is very limited and should be relatively inexpensive (or even completely paid by your employer).  The amount of long-term disability coverage is likely to be capped by your employer, and so you should consider an individual disability policy to supplement your work policy if necessary.  For any long-term disability premiums you are paying through payroll withholding, ask your employer if you can pay these premiums with after-tax dollars rather than pre-tax dollars. If you become disabled and collect on the policy, and you paid the premium with after-tax dollars, the benefits you receive will be tax-free.  Benefits received from a policy paid for with pre-tax dollars will be taxable, significantly reducing the net benefit to you.

Health Savings Accounts and Flexible Spending Accounts

• Health Savings Account (HSA): HSAs are a powerful tool for managing healthcare expenses and saving on taxes. If you are enrolled in a high deductible health plan that makes you eligible to contribute to an HSA, consider contributing it to the maximum amount possible.  HSAs have a triple tax benefit – you get a tax deduction when you put the money in, the money gets to grow tax-free for health care, and you can take it out tax-free for qualifying healthcare expenses.
• Flexible Spending Accounts (FSA): FSAs are another option for managing healthcare costs which also provide a tax deduction however there are some key differences compared to HSAs.  Unlike HSAs, FSAs generally require you to use the funds within the plan year or risk losing them.  Some plans offer a grace period or allow a grace period or allow a small amount to carry over, but it’s essential to check your specific plan details.

Other Potential Benefits offerings

There are several other benefits that might be available to you:

• Employee Stock Purchase Plans (ESPPs): These plans allow you to purchase company stock at a discount. If your company offers an ESPP, it can be a good way to invest in your employer and potentially benefit from stock price appreciation.
• Tuition Reimbursement: Some employers offer tuition reimbursement or education assistance programs. If you’re planning to further your education, this benefit can help offset costs.
• Legal and Financial Counseling: Some companies provide access to legal and financial planning services. These can be valuable for estate planning and other financial matters.   If you need to have estate documents prepared, you could opt into the legal benefit one year, and then, upon getting the documents completed, opt out the following year.  This is one way to make sure you are getting value out of the benefit.
• Accidental Death & Dismemberment (AD&D) insurance: This insurance only pays out if you die or are seriously injured in an accident. In most cases, the risks that this insurance would cover can be managed with life insurance and disability insurance and because those coverages are much broader than AD&D coverage, they tend to be the better option.
• Critical Illness insurance: With this insurance, you’ll get a cash payout if you suffer a serious illness, which is covered under the policy. Similar to AD&D insurance above, in most cases, the very specific risks that this insurance would cover can be managed through other insurance such as health, disability, or life insurance.

Action Steps

1. Review Your Current Benefits: Analyze your current benefits and expenditures to determine if adjustments are needed.
2. Estimate Your Needs: Consider upcoming medical expenses, retirement goals, and other financial needs to guide your benefit selections.
3. Consult Your Plan Documents: Review the details of each benefit plan carefully to understand the rules, limits, and advantages.
4. Seek Professional Advice: If you’re unsure about the best options for your situation, consult with a financial advisor to tailor a strategy that meets your needs.

Open enrollment is more than just choosing a plan—it’s an opportunity to align your benefits with your health needs and financial goals. By carefully reviewing your options and considering your personal situation, you can make the most of the benefits your employer offers. Making informed decisions now can lead to better outcomes and fewer surprises down the road.

Financial Consulate aims to help lessen the worry and burden of wealth management and enhance financial wellness so our clients can pursue relationships and true fulfillment. Choose the professionals at Financial Consulate as your Certified Financial Planners™ (CFP®) to take advantage of our educational, ethical approach to financial planning. Our services are comprehensive, including tax planning, investment planning, retirement planning, estate planning, and more. We operate completely independently and offer fee-only services to keep your vision in line with our recommendations at all times. While we have offices in Hunt Valley, Maryland, Fernandina Beach, Florida, and Gettysburg, Pennsylvania, we serve clients across the nation. To begin your partnership with a trustworthy wealth advisor, please contact Financial Consulate today.