Last Updated: October 25, 2010
For many workers, it's open enrollment season, that special time of the year when you get to change certain employee benefits that you may have — your health insurance and the like.
Sadly, however, some one-in-four workers report that they don't pay attention to benefit changes. According to a 2009 CareerBuilder.com survey, they apparently figure the same benefits would roll over from the previous year or perhaps they feel that the whole process is too confusing. But that would be a mistake this year. Why? According to that report, one in five employers say that missing open enrollment costs workers more than $1,000 in out-of-pocket expenses.
According to CareerBuilder's survey, one reason why workers fail to take advantage of the employee benefits is that they are simply unaware of certain offerings. When asked to identify which benefits employees typically don't realize that their companies provide, human resource managers pointed to the following:
- Flexible healthcare spending — 43 percent
- Wellness benefits — 45 percent
- Tuition reimbursement — 38 percent
- Banking programs — 25 percent
- Discounts on personal entertainment — 24 percent
- Discounts on technology for personal use — 22 percent
- Discounts on travel for personal use (rental cars, airplane tickets) — 20 percent
- Transit programs — 10 percent
So what should you do if faced with decisions about your employee benefits?
FPA member Jeffrey N. Tomaneng, CFP®, CLU, ChFC, of Lincoln Investment Planning offered the following: "When I discuss employee benefits with individual clients, I approach it from a financial and life planning perspective, looking at budget, cash flow, insurance and risk management, investments, taxes, retirement and estate planning. I ask, Are there ways to address [strengths] and weaknesses in the financial plan through the use of employee benefits? Are there benefits available to the employee that can make their lives easier and/or save them money? Have any life changing events taken place that bring into play benefits that wouldn't have been considered previously — marriage, birth, death, adoption, illness, etc."
Here's Tomaneng's checklist to follow when contemplating your employee benefits:
- Budget and Cash Flow: Flexible Spending Accounts — Is elective surgery being considered? Will someone need new contacts, glasses, dentures? What are the different product and service providers that offer discounts?
- Insurance and Risk Management: Review your family's health and dental insurance needs and coverage. Do you have sufficient disability income protection? Does it make sense to take advantage of the employer's supplementary disability insurance coverage? The same goes for life insurance. For disability and life insurance, are there health or family history issues that could affect insurance coverage outside of the employer's plan?
- Investments: It's a good time to review the different investment options made available by your employer. Investment options may have changed. Ditto for your risk tolerance, time frame and goals. Is there a 529 college savings plan available?
- Taxes: Are you withholding too much or too little in taxes? Is there any 1099 self-employment income within your household from which taxes are not being withheld? If so, this presents a good opportunity to withhold more to make up for the lack of taxes withheld on the 1099 self-employment income.
- Retirement: Consider increasing retirement plan contributions, especially if it will help you reach your goals. Make sure to balance this with other budget issues. Is there a Roth 401(k) option available? If so, does it make sense? If you're close to retiring, consider the different pension or retirement plan distribution options. Are there retiree medical and dental plan options available from your employer? Weigh those options vs. individual medical and dental plans. Will COBRA be necessary to bridge the gap until you secure Medicare or other coverage? Do you have stock options? What are the possible issues with those options when you retire?
- Estate Planning: Does the employer offer a legal services plan? If so, does it make sense to take advantage of the plan to review/execute your estate planning or any other legal documents?