One major advantage of working as a full-time, salaried employee is gaining access to a host of workplace benefits. At the same time, sorting through those benefits can be pretty confusing, especially when it comes to things like health insurance. In fact, nearly a quarter of Americans feel unprepared for the upcoming open enrollment season, according to a United Healthcare survey.
In case you're not familiar with the term, open enrollment is the period during which employees are presented with a selection of benefits to choose from. Whereas things like vacation days generally aren't within your control, if you work for a larger company, there's a good chance you'll have the option to select a particular health plan, as well as dental and vision coverage. Some companies offer additional add-ons such as life insurance, disability insurance, and even pet insurance. Here are some key things you'll need to do during this open enrollment season.
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1. Review your healthcare options
Choosing a health plan is perhaps the most harrowing decision you'll make by the time open enrollment draws to a close. Now if you've already been getting health coverage, you might be tempted to retain the same plan (assuming it's available) and call it a day, but rather than do that, take the time to evaluate your needs for the upcoming year. Not all health plans are created equal, if your employer offers a costlier one with superior coverage, it could make sense to pay up if that'll save you money in the long run.
Say you're looking at two plans, and one comes with a monthly premium that's $100 higher than the other. If that pricier plan covers more in the way of prenatal care, and you're aiming to expand your family, it may be more than worthwhile to pay an extra $1,200 a year in premiums but spend less on non-covered services.
Another factor to consider when choosing a health plan is your deductible. Your deductible represents the amount of money you'll need to pay out of pocket before your insurance company starts paying for the services you use. Generally speaking, higher deductible plans come with lower monthly premiums, and vice versa. If you don't expect to rack up much in the way of medical expenses in the coming year, then a high-deductible plan might pay off, but if you go that route, you should see about funding a health savings account, or HSA, as well.
Now when it comes to dental and vision care, you're less likely to get the same number of choices as with a health plan. Rather, your company will probably offer you the choice of opting into its dental or vision program, or opting out. And in some cases, the former may not be all that worthwhile if you don't tend to have oral health issues, and your plan is expensive. That's because the cost of two standard cleanings a year might come in lower than the total cost of your annual premium. As far as vision care goes, you probably don't need it if your eyes don't require a prescription. Eye health issues, such as infections, are frequently covered under health insurance, so if you don't wear glasses or contacts, you might choose to opt out.
2. Look into long-term disability insurance
If you're injured on the job or are out of work for a limited period of time because of an accident or illness, you can typically fall back on workers' compensation or short-term disability coverage, which most companies provide. But what happens if you're unable to work for an extended time -- say, years? That's where long-term disability insurance comes in handy, and if your employer offers a plan, it pays to look into it.
Long-term disability insurance will typically pay out anywhere from 50% to 70% of your salary during the period in which you're unable to work. In other words, it's a good way to secure some income in the event that you're still out of work once short-term disability runs out. Given that the typical worker has a 30% chance of becoming disabled at some point before age 65, those premiums could end up paying off.
If you are going to purchase long-term disability insurance, make sure you understand what you're signing up for. Some questions to ask include:
- What percentage of my salary will my plan cover if I'm unable to work?
- At what point will my coverage kick in?
- Does my plan exclude specific illnesses or pre-existing conditions?
- Is my plan portable (meaning, can you take it with you if you leave your company)?
Long-term disability insurance can be a smart investment, but be sure to get clarity on these and any other questions you might have. Along these lines, your company might offer a life insurance plan in addition to long-term disability coverage. Though buying a group plan might seem convenient and cost-effective, it often pays to explore outside options when purchasing life insurance.
3. Fund a flexible spending account
Flexible spending accounts, or FSAs, let you use pre-tax dollars to pay for the medical and child care services you're already planning to use. Say you typically spend $2,000 on copayments during the year, and another $2,000 on child care. If you're able to pay for those things via an FSA, and your effective tax rate is 25%, you'll shave $1,000 off your IRS bill.
Now there are some caveats. First, both medical and dependent care FSAs come with annual limits. Last year, these topped out at $2,600 and $5,000, respectively. As of now, there's no indication that these thresholds will change going into 2018 -- but that doesn't mean you should max out to get the most tax savings. FSAs work on a use-it-or-lose-it basis, which means that if you overfund either type of account and don't rack up enough eligible expenses to deplete your balance, you'll forfeit that money. Furthermore, once you decide how much to put into your FSA, you can't go back and change it unless you experience a qualifying life event, such as marriage, divorce, or the birth of a child. Your best bet is to review your spending from the previous year, weigh that against your anticipated costs, and see how much money it makes sense to allocate.
4. Decide whether to sign up for additional benefits your company offers
Though not all companies offer these additional benefits, a growing number of employers are now offering workers the option to buy pet insurance and opt into a legal plan. The former works just like health insurance for humans -- you pay a premium, and your furry friend's medical services are covered to a certain degree. Whether or not pet insurance makes sense depends on the specifics of your plan, so do your research before signing up.
Legal plans, meanwhile, can save you hundreds or thousands of dollars in attorney fees depending on your circumstances. If you sign up for a legal plan, you'll typically pay a premium that grants you access to a limited network of professionals who will cover basic services such as wills and real estate closings. If you're planning to buy a home in the coming year, or have yet to create a will, then the cost of that plan could be significantly lower than the going rate for these services, especially since the average rate for attorney fees is anywhere from $200 to $520 an hour. Just keep in mind that you won't necessarily be getting the most seasoned lawyer under your company's plan, and that many legal services aren't covered.
Open enrollment can be a stressful time for workers, but it doesn't have to be. Take the time to review your choices, and with any luck, you'll make the best decisions going into 2018.
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