Open Enrollment Season: Maximizing Your Employee Benefits

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maxbenAs open enrollment season is around the corner, Morningstar offered up an 10-minute video interview with Christine Benz discussing tips on maximizing your employee benefits. (Is it just me, or does open enrollment too often seem to be a game of “Guess What Benefits We Trimmed This Year?”)

Here are the five topics that were discussed:

  • Health Savings Accounts (HSAs). The tax advantages can be better than a Traditional or Roth IRA. Contributions are effectively tax-deductible (you put in pre-tax money), the money can compound for decades tax-free, and even your withdrawals are tax-free when put towards qualified healthcare expenses. However, you have to be enrolled in a qualified high-deductible health plan, which means this works best if you are “healthy and wealthy” meaning you don’t really have big healthcare expenses and you have enough cash that you don’t need to use your HSA money now.
  • Free and/or discounted investment advice with your 401(k) plan. You may be eligible for customized investment advice, or at the very least you should compare your personal rate of return with the performance of your target date mutual fund option.
  • Employer-sponsored disability insurance. It may be both easier to qualify for and cheaper to buy disability insurance through your employer rather than with your own individual insurance plan.
  • Tax-savings perks like commuter benefit programs or dependent-care programs. There are often smaller side-programs that can be helpful.
  • Student loan repayment assistance programs. These are not very common, but are growing in popularity.

These five areas are fine suggestions, although you may prefer to buy your own portable disability insurance. First of all, it may not be cheaper to go with your broad employer plan. In addition, if you switch jobs for any reason, you might lose your disability insurance at the same time. Finally, specialized workers can purchase riders that will pay out as long as you can no longer perform your specific occupation (as opposed to any lower-paying job). However, in my experience it is easy to put this off, so getting some employer-sponsored disability insurance can be a good first step.

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  1. Jonathan if you don’t mind me asking could you please cover a transportation topi aka purchasing a car, probably used and how much used? Would you share hwat do you drive?

  2. It’s hard to believe that this is coming up so soon. For us, we’ll probably get our detail in about six weeks and the enrollment will start in two months or so. We’ve been in the same plan for two years and last year they locked in the costs to stay the same. It’d be really sweet if they did that for a third year.

  3. I’d note that HSA’s also work very well if your wealthy and not healthy–ie. know you’ll spend a good bit past the 3k or 6k deductible. Healthy’s not really the right word either, a great time to do this is if you plan on getting lasic in the upcoming year

  4. Also, with HSAs, don’t assume a high deductible insurance option costs more than a low deductible option. For our options, the high deductible premium + deductible is almost exactly the same as the low deductible *premium* for the year. Once you factor in the out of pocket maximums for the two plans, we end up being about the same for either plan. The high deductible plan actually offers a little bit better coverage overall, as well.

    Then when you factor in the taxes saved from the reduction in taxable income (with full HSA contribution) and (if available) the employer contribution to an HRA or HSA with the high deductible plan, and the IRA like qualities of the HSA after retirement age, the high deductible plan for our family for the past few years has been an overall better choice – even when healthcare costs exceed the deductible.

    People get scared by high deductible, but it’s really only *guaranteed* to be a bad option for people who aren’t in a place where budgeting for the deductible is an option.

  5. Employer-sponsored disability insurance is a huge benefit in my mind. It’s a situation that some don’t like to think about, but becoming partially or fully disabled (long term care costs; loss of wages) would be significantly harder on my family than my outright death (life insurance pays out; no extended costs). Even a ‘simple’ injury like losing a hand (looking at you demon sidewalk edger) would severely impact my ability to earn for my family. By having (CHEAP) disability insurance from work, I’m at least partially protected (Long term disability $20.50 per month for 50% of salary tax-free ; Accidental Death or Dismemberment $2.00 per month for $200k protection).

    Did You Know? (from my work brochure)
    Just over one in four of today’s
    20-year-olds will become disabled before
    he or she retires. In addition, accidents
    are not usually the cause of a long-term
    disability — back injuries, cancer, heart
    disease and other illnesses are usually
    the reasons for most long-term absences.
    Do you have enough money saved to last
    34.6 months, which is the average length
    of a long-term disability claim?†

    • Can anyone say if you can pay your medical bills with good cash back credit card and then refund yourself from the HSA and still be reported as a qualified medical expense? Also, how the bank reports the qualified distribution 1099SA and which line of the form 8889 shows the Qualified Distribution on the tax return.

      Jonathan, if you have written about this before can you please refer me to the article.
      Thank you.

      • yes, paying out of pocket (which includes credit cards) and then transferring the money out of your HSA account into a personal account to reimburse yourself is fine. Its actually much easier then carrying a separate card everywhere

  6. Is there a BETTER or more PREFERRED health plan for diabetics? My Aetna Military workers plan only covers roughly 75-80% of my expenses. Gets very expensive when I buy insulin. Wondering if there’s a better coverage plan out there.

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