What Benefits Should I Select During Open Enrollment? And Other Important Questions
By AJ Ayers, CFP®, EA, CEP and John Owens, CFP®, EA, ECA, CPWA®
In season 4, episode 18 of Sex and the City, Carrie Bradshaw perfectly describes this time of year, “There is a time of year in New York when, even before the first leaf falls, you can feel the seasons click. The air is crisp, the summer is gone. And for the first night in a long time, you need a blanket on your bed.” She is of course describing the changing of the seasons but I like to think she’s describing another important change that happens this time of year: OPEN ENROLLMENT!
It’s your ONLY chance this year to change health insurance plans, get long-term disability coverage, sign up for an HSA or FSA, and so much more. Your employer offers these benefits to make life easier for you so take advantage.
When it comes to employer-provided benefits, the big-ticket items are usually:
In our opinion, the most valuable benefit offered by an employer is actually the 401(k) plan. This tax-advantaged saving tool is available ALL YEAR ROUND so you don’t need to wait till open enrollment to sign up for the 401(k). You can also change your contribution anytime.
Health insurance - your employer provides access to a group health plan which often means your out-of-pocket cost is much lower than it would be if you got an individual plan. Some employers cover the entire cost of the health plan for the employee. If you have dependents, expect to pay a bit more to add them to your plan.
An HSA - A Health Savings Account is a tax-preferred account specifically for medical expenses. If you participate in a High Deductible Health Plan (HDHP), then you are able to contribute to an HSA. HSAs are the most tax-efficient vehicle created by Congress. Contributions you make are deducted from income pre-tax, growth is tax-deferred, and withdrawals for qualified medical expenses are tax-free.
An FSA - An FSA for Healthcare allows you to contribute pre-tax to an account for out-of-pocket medical expenses throughout the year. FSA funds are ‘use it or lose it’ and typically must be spent by March 15th of the year following your contribution. For example, 2021 contributions must be spent by March 15th, 2022 or they’ll be forfeited to your employer.
Group term life insurance - Life Insurance is often provided by employers - either as a flat amount or a multiple of your salary. Supplemental coverage for you, your spouse, and your dependents is often available for an additional cost. Life Insurance can help replace lost income in the event you pass away unexpectedly.
Disability insurance - we’re talking here about LONG TERM disability. This misunderstood and extremely valuable benefit is often overlooked. Disability Insurance provides you with income if sickness or injury causes you to be unable to work. Imagine a ski accident that prevents you from doing your job, long term disability insurance would pay you a percentage of your salary until other government benefits kick in around age 65- that’s huge.
Watch this delightful webinar where we break down all the benefits. If your head is spinning between HMOs and PPOs, this one is for you!
The less talked about, but still valuable benefits are usually:
Dependent Care FSAs - save dollars tax-free to pay for childcare.
Legal Insurance Plans - get low-cost lawyers to help with real estate transactions.
Pet Insurance + Accident Insurance - Can be helpful but not always a hell yes.
Charitable Matching - some employers will match your charitable contributions dollar for dollar.
Brooklyn FI tips for selecting the right benefits for you and your family:
Go to the lame presentation and meet with any representatives. They’ve got all the info and can help you select the right plan amongst the confusing jargon.
Play with Brooklyn FI’s health insurance cost calculator. This dynamic spreadsheet will break down the different types of plans and allow you to comparison shop between the plans provided by your employer.