Understanding Your Employee Benefits: How to Get the Most From Open Enrollment

Open enrollment can feel like a pile of confusing forms and unfamiliar terms. It’s tempting to simply roll over last year’s choices and move on. But your employee benefits can be worth thousands of dollars a year, and the right choices can save you money, protect your family and help you build wealth. A little time spent reviewing your options can pay off significantly.

Health insurance: look at the total cost

Health insurance is often the most important and complex benefit to choose. Many employers offer several plans, such as a traditional plan with higher premiums and lower deductibles, and a high-deductible health plan with lower premiums.

The key is comparing plans by estimating your total yearly cost, not just the premium. Total cost includes your premiums for the year plus your expected out-of-pocket costs, such as deductibles, copays and coinsurance, up to the plan’s out-of-pocket maximum.

A low-premium plan can end up costing more if you use a lot of medical care, because you’ll pay more out of pocket before insurance covers costs. A higher-premium plan may be cheaper overall if you expect frequent doctor visits, ongoing prescriptions or a planned procedure. Think about your health care use last year and what you expect this year.

Check that your doctors, hospitals and prescriptions are covered under each plan’s network and drug list. Out-of-network care can be far more expensive.

HSAs and FSAs

A health savings account, or HSA, is available if you enroll in an HSA-eligible high-deductible health plan. HSAs offer unique tax advantages: contributions go in tax-free, can grow through investment and come out tax-free when used for qualified medical expenses. Unused money rolls over year to year, and the account belongs to you even if you change jobs. Some employers contribute to employees’ HSAs. Contribution limits are set annually by the IRS.

Because of these advantages, some people use HSAs as an additional retirement savings tool, paying current medical costs out of pocket and letting their HSA grow for future health care expenses.

A flexible spending account, or FSA, lets you set aside pre-tax money for eligible medical expenses or, through a dependent care FSA, for child or dependent care costs. FSAs can save money on taxes, but much of the money may need to be used within the plan year. Some plans offer a short grace period or let you carry over a limited amount, but unused funds beyond that may be forfeited. Estimate your expenses carefully before deciding how much to contribute.

Retirement benefits

If your employer offers a retirement plan such as a 401(k) or 403(b), contributing is one of the most valuable things you can do for your future. At a minimum, contribute enough to get your employer’s full matching contribution, if offered. An employer match is essentially free money, and not contributing enough to get it means leaving part of your compensation on the table.

Check the vesting schedule, which determines when employer contributions become fully yours. Some plans vest immediately, while others vest over several years. If you leave before you’re fully vested, you may lose some employer contributions.

Review your investment choices too. Many plans offer target-date funds that automatically adjust their mix of investments as you approach retirement. Pay attention to fees, which can reduce your returns over time. Consider using any automatic increase feature to raise your contribution rate gradually each year.

Other benefits worth checking

Life insurance through your employer is often provided at low or no cost, with options to buy additional coverage. Compare the cost of supplemental coverage with individual policies, since employer coverage may not follow you if you leave.

Disability insurance replaces part of your income if you can’t work due to illness or injury. Short-term and long-term disability coverage can be an important safety net, since your ability to earn income is one of your most valuable assets.

Dental and vision coverage can help with routine checkups and glasses or contacts. Commuter benefits may let you pay for transit or parking with pre-tax dollars.

Employee assistance programs often offer free, confidential counseling, legal consultations, financial guidance and other support services. Many employees don’t realize these resources exist.

Tuition assistance can help you build skills and advance your career. Employee discounts on products, services, gym memberships and more can also add value.

Update your choices when life changes

Open enrollment typically happens once a year, but certain life events, such as marriage, divorce, the birth or adoption of a child or losing other health coverage, may allow you to change your benefits outside open enrollment through a special enrollment period. There’s usually a limited window to make changes after the event, often 30 days.

Review your beneficiaries every year on life insurance and retirement accounts. Beneficiary designations generally override your will, so keeping them current ensures your assets go to the right people.

Ask questions

Your human resources team can explain your options and answer questions. It’s their job, so don’t hesitate to ask. Many employers also provide benefits guides, comparison tools and information sessions during open enrollment. Taking the time to understand your benefits helps you make choices that protect your health, your family and your financial future.