Open enrollment for marketplace health insurance is underway until December 15. At the same time, many employer plans are also in their open enrollment period, allowing you to modify your benefits selections. This is an opportunity to take a fresh look at your employer-sponsored benefits each year to assess whether to add or drop any for the coming year.
Your employer-provided benefits are more than just a reward for your hard work. From a broader perspective, these benefits provide an important way to identify and cover risk in your financial plan, as well as receive certain monetary or tax benefits for you and your family.
The monetary aspects of each employer-provided benefit are usually the most obvious, such as lower health care premiums or employer-provided life and disability insurance. A bit subtler are the tax savings provided by certain benefits. For instance, you can derive financial benefits by participating in retirement plans that allow you to save pretax dollars or pay for expenses with pretax cash flow. Some examples include:
Let’s turn our attention to the less obvious benefits of your employee benefits plan — to help you manage a variety of risks to your long-term financial plan.
In our article, 5 Steps to Maximize the Value of your Health Care Plan, we provided ideas to help you maximize your insurance plan, whether it’s through your employer or purchased by you through the exchange.
You may want to schedule any elective procedures early in the year. You can begin thinking about things you want to handle in January or February to increase the chance of meeting your deductibles during the year. We also suggest you take the time to audit all your medical bills.
Finally, consider whether circumstances may change during the upcoming year and begin to plan accordingly. The birth of a child, retirement, a divorce or other family change will have implications, and the sooner you consider options, the better you’ll be able to handle the transition.
If you’re the sole breadwinner, and especially if you have children, consider adding life insurance either through a term policy, or buy the coverage you need through your employer plan.
Two advantages of employer-provided plans are that costs are often lower than an individual policy, and oftentimes, underwriting requirements are less stringent in a group plan. So, if you have a medical history that either prevents you from getting coverage or makes it very expensive, an employer-provided group plan could be your best or only option.
Related to health risks is the risk of disability, which could cause you to lose earnings during a time that health care costs and support services may be increasing.
Some employers provide a base level of disability insurance coverage and often allow you to purchase additional levels of coverage that would increase the income you receive should you become disabled. This type of insurance is very important for primary breadwinners or if you are single. This is one of the first insurance coverages I look at when working with divorcees or individuals who suddenly become the primary breadwinner for their family.
While we think of 401(k) and other retirement plans as a way to support our spending in retirement, we often miss the importance these plans have in maintaining our future purchasing power.
This assumes that you are investing your 401(k) in equities and other investments whose growth outpaces inflation. While recent market volatility may cause some people to feel uneasy and sideline some of their retirement savings in a money market option inside their plan, chances are the low interest that money fund is paying won’t outpace inflation over the long-term.
Unless you’re within five years of retiring or needing the funds, you should consider these accounts as longer-term investments that are designed to tolerate short-term market fluctuations.
Whether you own your own business or are an employee, now is a good time to review all of your benefits. Ask yourself two simple questions:
There’s a small time frame during which you can change your benefit selections, so stay aware of those deadlines and budget time to review your options. That’s the only way you’ll identify ways to address risk in your financial plan while also confirming you’re taking advantage of potential tax benefits for you and your family.
Consider this your training manual to get and stay financially fit for life!