Open enrollment for employee benefits begins on November 1st, offering a limited window to review and select your benefits for the coming year. Given the rising healthcare costs and the ongoing effects of recent global events, it’s crucial to take a comprehensive look at your options to ensure that you’re maximizing the value of your benefits. Below, we expand on key areas to consider during this period:
Medical Coverage
Medical coverage is often the most significant part of your benefits package, and even if you’ve been satisfied with your plan in previous years, it’s wise to reassess annually. This is especially true when choosing between High-Deductible Health Plans (HDHPs) and traditional health plans:
- High-Deductible Health Plans (HDHPs): These plans typically offer lower premiums but require you to pay a higher deductible before the insurance kicks in. HDHPs are often paired with Health Savings Accounts (HSAs), which allow you to set aside pre-tax dollars for medical expenses. This option can provide significant savings if you and your family are generally healthy and do not expect high medical costs.
- Traditional Health Plans: These plans usually come with higher premiums but lower deductibles and out-of-pocket maximums, making them suitable for individuals who anticipate frequent doctor visits, require ongoing medication, or expect significant healthcare needs.
- Spousal Coordination: Explore whether your spouse’s employer offers a more favorable plan. Coordinating benefits between spouses can sometimes provide better coverage or reduce costs. Many employers provide improved plan descriptions that clearly outline coverage options and costs, helping you make an informed decision. Take advantage of the resources offered, whether online or through in-person consultations.
Dental Insurance
Dental coverage is often perceived as less critical, but it plays an important role in your overall health and financial planning:
- Coverage Overview: Typically, dental insurance includes preventive care like cleanings, exams, and x-rays, as well as basic procedures such as fillings. Some plans may also cover major procedures like crowns, root canals, or orthodontics, although these benefits can vary widely.
- Why It Matters: Regular dental care can help prevent more serious (and costly) dental issues down the line. Even if you have no current dental concerns, maintaining coverage ensures access to preventive services that can keep your teeth healthy in the long term. If your plan requires a small premium contribution, it’s usually a worthwhile investment, even for those who are young and healthy.
Vision Coverage
Vision insurance provides value beyond just covering the cost of glasses or contacts:
- Routine Eye Exams: Regular eye exams can detect vision issues and identify early signs of other health conditions, such as diabetes or high blood pressure. This coverage is particularly beneficial for those who rely on corrective lenses or expect changes in their vision.
- Coverage Choices: Plans often cover an annual eye exam and provide allowances or discounts on glasses or contact lenses. If you have perfect vision and do not anticipate needing corrective eyewear, you may opt out, but for many, the small additional premium is a good investment in maintaining eye health.
Life Insurance
Life insurance through your employer is a key component of financial protection, but it’s important to assess whether the coverage level meets your needs:
- Basic Coverage: Most employers offer life insurance coverage as a standard benefit, often at one to two times your annual salary. While this can provide a basic safety net, it may be insufficient for those with dependents, significant debts, or long-term financial obligations.
- Supplemental Coverage: Consider purchasing additional life insurance through your employer, if available, as group rates can be more affordable than individual policies. Alternatively, consider a term life policy from an independent provider to supplement your employer’s coverage. Remember that employer-provided life insurance typically ends when you leave the company, so having an independent policy ensures continued coverage.
Long-Term Disability Insurance
Long-term disability (LTD) insurance is often overlooked, yet it provides crucial income protection if you’re unable to work due to illness or injury:
- Standard Coverage: LTD insurance generally replaces 60% to 66% of your income, up to a certain cap. For high earners, this cap might mean that the benefit falls short of your actual needs.
- Supplemental Coverage: Evaluate the adequacy of your LTD coverage by considering your essential living expenses. You may want to purchase additional coverage if your standard coverage does not provide enough to maintain your lifestyle. This insurance can be particularly valuable, as the risk of disability is often higher than many anticipate, and the financial impact can be significant.
Long-Term Care Insurance
Long-term care insurance (LTCI) covers expenses for care in settings such as nursing homes, assisted living facilities, or in-home care, which are not typically covered by health insurance:
- Why It’s Important: As lifespans increase, the likelihood of needing long-term care also rises. LTCI helps protect your assets from being depleted by these expenses, which can otherwise be substantial.
- Employer Options: If your employer offers LTCI at a group rate, it may be more cost-effective than purchasing it independently. Financial advisors often recommend considering LTCI around age 50 but enrolling through your employer can be a smart move at any age if the rates are favorable.
Flexible Spending Accounts (FSAs)
FSAs offer a tax-advantaged way to pay for eligible healthcare expenses:
- Medical FSA: This account allows you to contribute pre-tax dollars for co-pays, prescriptions, and other qualified medical expenses. The maximum contribution limit is $3,550 for individuals and $7,100 for families. However, if you are enrolled in an HDHP and have an HSA, your FSA contributions may be limited to specific expenses such as vision and dental care.
- Dependent Care FSA: If you pay for childcare or elder care, a Dependent Care FSA allows you to set aside up to $5,000 pre-tax per year to cover these costs. This can result in significant tax savings for working families.
Life Planning Resources
Many employers are expanding their benefits offerings to include resources that support overall life planning:
- Legal and Financial Services: Some companies provide access to legal services for creating essential documents like wills and powers of attorney. Others may offer financial planning resources, including retirement planning, debt management, or investment advice.
- Wellness Programs: Benefits such as mental health support, wellness programs, and even gym memberships are becoming more common. Engaging with these resources can enhance your well-being and provide additional support for managing life’s complexities.
Consult With Your Financial Advisor Regarding Benefits
While your employer provides resources to guide your benefit selections, your financial advisor can offer a broader perspective that aligns these choices with your financial goals. They can help you evaluate how your benefits fit into your long-term financial plan, providing insights that go beyond the options presented by your employer. Leveraging the expertise of your financial advisor ensures that you’re making choices that support your immediate needs and future aspirations.
Taking the time to review and select your employee benefits thoroughly can yield significant financial advantages and provide peace of mind. As you navigate this year’s open enrollment, consider each option carefully to optimize your benefits and support your overall financial well-being.
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or connect@lptrust.com.
This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.
