In this post we help youReduce the risk of missing out—and losing money—on employee benefits
It’s that time of the year again—the leaves are starting to change, the kids are back in school, and everyone keeps saying "pumpkin spice" to each other. Yes, fall has officially arrived, and that means one thing: your employer is about to kick off the annual open enrollment period, where you can review your benefit options and make adjustments for the year to come.
If you think that sounds like fun, you’re in a tiny minority. The 2016 Aflac WorkForces Report found that 57% of employees spent less than 30 minutes making their open enrollment choices.
The low participation isn’t surprising to anyone who’s gone through it. You’re being asked to make important decisions about insurance and investing, two categories infamous for being absurdly complicated. Employers have gotten better at providing support, but the sheer number of decisions you’re asked to make over a short period of time can be overwhelming.
As a result, a whopping 90 percent of us don’t make adjustments to our benefits package year after year, even when the benefits themselves have changed, and sometimes significantly. It’s popular these days to talk about "leaving money on the table," but you’re doing more than that when you ignore open enrollment. Employers are increasingly shifting benefit costs to employees, and insurers often reduce policy benefits to avoid raising premiums. If you’re still working with benefit decisions you made a couple of years ago, odds are you’re actually losing money.
The Problem: You’re not going to spend as much time as you should on open enrollment
The Solution: Use this checklist to make the most of the time you do spend on it
There’s no sense in throwing more time at a problem if you don't have a good strategy to begin with. It's smarter, and less painful, to focus on the time you're already devoting to your enrollment period, and see how you can make it more productive.
To make the most of your 30-60 minutes (let's assume you're at least in that range of employees), follow this 6-step checklist. It covers the most important activities you need to get through, and provides a roadmap so you can stay sane through the tsunami of print-outs, brochures, and web portals.
Prep work (collecting your personal info)
FSA/HSA: savings accounts and other perks
Other insurance (e.g., life and disability)
Wrapping things up
1. Prep work (collecting your personal info)
Step 1 is easy because it’s all back-of-the-envelope data collection, and most of it can be pulled from your memory.
Add up your health related expenses over the past year. Don’t worry about exact figures—you just want a rough estimate of what you spent. Be sure to include anything you know is coming up before the end of the year.
Now add up the health related expenses you think you’re likely to incur in the coming year, especially if you anticipate any new costs (from a specific upcoming procedure, for example). Also make a note of any vision or dental expenses you think are probable.
If you have children who will be under age 13 for at least part of 2015, estimate the amount you expect to spend on child care while they’re still under age 13.
Use our free life insurance tool to figure out how much life insurance you really need. This isn't just a self-promotional blurb; this info will come in handy later when you’re looking over your insurance options.
Once you get this information collected, fist bump someone in your office (but ask them first, because you know, HR) and celebrate how easily you completed Step 1. Now you’re ready to dive into the more important stuff.
2. Health insurance
There are three questions about your health insurance coverage that you’ll need to answer to complete this step.
Has the provider network been changed in a way that affects you (for instance, because you see a certain specialist)?
Have the drug benefits changed in a way that affects you?
If the answer is yes to any of those questions, then take a moment to figure out how much more you’re going to have to pay in health care costs next year. In the next step you’ll look at whether you can use an HSA or FSA to help cover the added costs.
**Q: "What do I do if the health offering no longer works for me?"**A: If your health insurance changes so that it’s no longer a viable option, then you can shop for your own policy on your state's health insurance marketplace. You might qualify for a premium subsidy if you can prove that the best health insurance policy your employer offers covers less than 60% of the average person’s medical expenses. Have your employer fill out a Employer Coverage Tool form, then visit your health insurance marketplace to find out your subsidy eligibility status. (If you're not eligible for a subsidy, you can still buy a policy. You just won't get the subsidy.)
Next up are the "extras" that many employers offer with health insurance:
Is there a vision plan, and is it worth the cost?
Is there a dental plan, and is it worth the cost?
The simple rule of thumb here is that if the added monthly costs are trivial for you, go ahead and get them. For dental care in particular, we found earlier this year that it’s smarter to go with insurance or a dental discount plan rather than paying cash.
3. FSAs and HSAs
Most employers offer Health Savings Accounts or Flexible Spending Accounts (or both), where you can store some of your pre-tax income to spend later on health-related expenses. Here’s a summary of how they work.
A Health Savings Account (HSA) is available if you have a high-deductible health insurance plan. It’s more flexible than an FSA because you can roll over the savings each year, but you’ll need a health insurance policy with an individual deductible of at least $1,300 to use one. The 2015 contribution maximum is $3,350 for an individual and $6,650 for a family.
For the rest of us, there’s the Flexible Spending Account (FSA). It’s another good way to save pre-tax money for health related costs, but be careful, because it’s possible you could lose any cash you haven’t spent by the end of the year. (Some employers may offer a $500 rollover limit or extend the reimbursement claim deadline two months into the next year, so be sure to check.) The maximum individual contribution for 2014 is $2,500, although it may go up by $50 for 2015.
If you have kids who will be under age 13 for at least part of 2015, check whether your employer offers an FSA for dependents. It can be a good way to save extra pre-tax money for expenses you know are coming, but make sure you understand the rules. Not every type of expense is covered, you can’t move funds between your FSA and the dependent FSA, and if your child turns 13 during the calendar year, the FSA will only cover expenses before that date.
This is where your estimate of last year’s expenses comes in handy. Compare it to the amount you put into your savings account in 2014, and adjust your monthly contribution if necessary. If you had an FSA and found yourself doing a mad dash to spend your unused money on contact lenses or dental work in December, you may want to switch to an HSA (if you’re eligible for one) or adjust your FSA contributions down.
You can see what kind of expenses the IRS says are covered by these pre-tax savings accounts here—or ask your HR rep.
TO DO ITEM! Open your calendar and add next year’s claim expiration dates, so you won’t be caught off guard and risk losing some of your account savings.
You’re more than halfway done! Now that you’ve gotten through the hardest part of open enrollment, we’ll acknowledge that this checklist may take more than 60 minutes. We tricked you, sorry. However, if we’ve done our job then you should be moving quickly enough through the checklist items that it doesn’t even matter.
Now let’s wrap things up.
4. Other insurance (mainly life and disability)
Your employer might offer life insurance or short term disability insurance (or both), and generally speaking, you should take advantage of these opportunities. Although they probably won’t meet all of your protection needs, they’re cheap, and they don’t require any medical exams.
What you need to determine now is whether you need to supplement them with any insurance you buy yourself.
If your employer offers life insurance, answer these questions:
How much does it cost?
How much coverage is provided? (Tip: Generally, employer-provided group life insurance coverage is 1-2 times your salary, up to a cap).
Can you convert it to private insurance if you leave the company? (Ask your HR person or the rep your company has provided; if you can’t get a quick, clear answer, just move on.)
Use the info you got from our PolicyGenius life insurance quoting tool (see, we told you it would come in handy) to compare the benefit to your estimated needs, so that you can answer the next question.
- Is this enough life insurance for me? If the answer is no, add the following to your To Do list:
TO DO ITEM! Come back to PolicyGenius and do some quick shopping for a life insurance policy to make up the difference. Don’t put this off for too long, though, because it only works if you buy it before you’re dead (true story).
If you have access to disability coverage, the only real question to answer is this:
- Have you signed up for the disability coverage?
If you haven’t, you definitely should. Disability is a major protection gap for most people, and enrolling in employer-provided coverage is a cost-effective way to protect yourself.
TO DO ITEM! Group disability insurance is often capped at a low benefit amount, and has more coverage restrictions than an individual policy. If you earn over $100,000 per year, it’s a good idea to have a supplemental individual policy to fill in the gaps and have with you throughout your career. Come back to PolicyGenius to see what your individual disability policy options are.
If your employer offers long-term care or critical illness insurance at no extra cost, by all means take advantage of it. Otherwise consider these two types after you've sorted out life and disability.
5. Retirement savings
The details of how you allocate your investment dollars is beyond this checklist, but before you dive that deeply, make sure these basics are covered.
What’s the maximum contribution match your employer offers? That’s free money you’ll definitely want to collect, no excuses.
What are your general financial needs for the near future? The idea here is to approach your retirement strategy from a life needs point of view, because your near future needs are as important as your risk tolerance. In the next year, do you need to save for a down payment on a new home, or because of a new baby? Or can you spare to increase your contribution for at least the next year?
Remember, the more you can save through a 401(k) or IRA, the more you’ll save on taxes. Make sure you’re contributing the maximum amount allowed, or as close to that as you can afford.
6. Wrapping things up
Make a note of any wellness benefits or other programs from Stage 3 above, so you won’t forget to take advantage of them next year.
Turn your medical expense notes into a document you can keep coming back to in the coming months, so you can make sure to build a more accurate estimate of expenses to refer to during next year’s enrollment period.
Congratulations, you're done! Now you can go back to planning your vacation, which is what the Aflac survey says all of your coworkers are doing right now. The difference is that unlike them, you’ll be able to plan knowing that you’ve made smart enrollment choices for the coming year.
Photo credit: Daniel Novta