It’s that time of year: open enrollment. And as consumers are rethinking their medical, dental and vision plans, there are new and expanded options available that could efficiently and cost effectively address your overall financial planning needs.
I connected with Faron Daugs, CFP, founder and CEO of Harrison Wallace Financial Group to learn his best tips and considerations consumers should be aware of for their financial plans during 2022 open enrollment. We also cover other voluntary benefits that are being added by employers that are worth taking into consideration.
Medical (including dental and vision) is usually the most reviewed benefit. Based on your family if you are married or your current health may dictate which type of deductible which type of co-pay and which type of program is the best fit for you. Review this carefully to be sure you are not paying more premium for an upgraded plan that you may never use.
Some of the things to consider when choosing a medical plan:
- How often have you hit your deductible in the past?
- Are your children enrolled in activities, such as sports, that could lead to an injury?
- Are your doctors in your medical plan? Are they available at the hospitals you would want to go to, if needed?
- How is your overall health and the health of family members?
- Do you take regular prescriptions and does the current plan cover them?
- Do you have any upcoming surgeries planned that could create an expensive medical year?
- Finally, if you do not go to the doctor frequently, is there a high deductible medical plan that will allow you to participate in an HSA (Health Savings Account)?
If your employer does offer an HSA plan, they may match contributions to a certain dollar amount. An HSA plan allows you to put money away on a pretax basis and can be invested to grow tax free. The money in this account can be used for future medical costs but does not need to be used in the calendar year. Additionally, it is portable, so if you should leave your company, you can take that HSA with you and move it to another company or your own HSA.
An FSA (Flexible Savings Account) allows you to put money away on a pretax basis; however, this money needs to be used throughout the calendar year. You can be reimbursed from this account for co-pays, deductibles, and many other prescription and non-prescription drugs. There are also many other medically related items at your local drug stores that qualify for FSA payment. Again, beware that this type of money must be used during the year or with some exceptions up till March of the following year if the plan allows. If you do not “use it” you can “lose it.”
Dependent care FSA: Many companies offer a dependent care FSA which allows you to put additional money away on a pretax basis for qualifying child and elder care-related expenses. The facility must be a qualifying facility (so check before you sign up) to allow these expenses to be paid with this account. Keep receipts, invoices, a list of services provided and the name, address, and tax identification number of the provider. Be sure to budget what you will be paying for this care and do not put more into it than you will spend, as it does not roll over.
Life insurance: Review your financial plan to determine how much life insurance you need for both yourself and if married, your partner. Covering these risks can be done very cost effectively with a group life insurance plan.
If you need supplemental insurance many times these plans offer the least expensive way to cover a life insurance need. Additionally, most plans to offer spousal coverage so in the event your spouse needs life insurance coverage this could also be a cost-effective way of managing this risk while saving some money.
The lower cost plans typically are term insurance, and the cost can vary annually and may not be portable if you would terminate employment with the company.
Cash balance life insurance plans: Many companies also offer life insurance plans that allow you to build up a cash value in the policy. This cash value can be used for future expenses such as retirement or college. Typically, you will need to pay more premium into this type of plan; however; you can allocate the excess funds into growth-related investments that can build up to cash value potentially faster.
Additionally, these types of plans are considered portable so when you do leave the company you will be able to maintain this policy, as it is considered permanent insurance. So, if the premium is paid you will have coverage, and this can be beneficial should you every become uninsurable later in life.
Disability coverage is many times one of the most overlooked benefits. Your ability to earn an income is one of your greatest assets and should be insured if possible. Many employers do offer a long-term disability insurance for up to 50% to 66% of your income. Benefit caps may apply. Typically, the group plans are a more affordable way of covering this risk. If you and your family depend on your income for financial stability it is in the essential piece in protecting your financial plan.
Long term care insurance: More companies are offering long term care insurance options. This can be a great benefit; however, it is important to understand the portability, and overall benefits before using these plans. These plans are usually less expensive than purchasing the policy individually but just understand how the plan works, when benefits are activated and for how long, and can and how much could your premium increase when you terminate employment with your company.
Other Benefits to Consider
There are many other voluntary benefits that are being added by employers that are worth considering. These benefits can save you a significant amount of money overall if they are truly benefits you will use.
Prepaid legal plans: If you are in need of preparing your estate planning documents such as a will, trust, or durable power of attorney, this can be a very cost-effective way of getting those documents drawn up. Additionally, if you anticipate any changes in your personal situation that may require the advice of attorney this can be an attractive benefit to help save money in attorney fees.
Financial planning services/reimbursement: More employers are offering a benefit to help people put together a solid financial plan with a registered financial adviser. This benefit is generally a reimbursement up to a certain dollar amount. The benefit is paid for completing a financial plan and offsets some or all of the financial planning fees. If you do not already have a financial plan together this can be a great benefit and reason to get started in building your financial future.
Pet insurance: Many companies are now offering pet insurance to help offset excessive veterinary bills. If your pet is aging, has a chronic condition or you find you are spending a lot of money at the vet this could be a benefit that could save you money overall. Be sure that your vet is part of this network or that the bills you pay qualify for this benefit.
Gym memberships: If you typically go to the gym or want to get started this could be a cost savings for you for the year while accomplishing your personal physical exercise goals. This is generally a reimbursement up to a certain dollar amount for exercise and gym memberships.
Identity theft protection: With the increasing risk of hacking and identity theft more companies are supplementing or covering the cost of the annual fees for identity theft protection. If you use the internet, have a smart phone, or use any online services, you are prone to potential hacking and identity theft, and this is a great way to have this protection at a discounted rate.
Retirement plans: While you may typically adjust your contribution’s allocations and type of contributions throughout the year, open enrollment is a perfect time to reassess how much you feel you can comfortably put into these retirement plans. Assess which type of plan is best for you—pretax contributions, or Roth contributions? How are your allocations to your investments and do they meet your risk appetite, growth goals and financial planning projections? Are you maximizing the most appropriate tax benefits, catch-up provisions (if over age 50), and any company match with your contributions?
What you put away today can have a significant impact on your future lifestyle.
Jeanette Pavini is an Emmy Award winning journalist specializing in consumer news and protection. She is the author of “The Joy of $aving: Money Lessons I Learned From My Italian-American Father & 20 Years as a Consumer Reporter.” Jeanette is a regular contributor to TheStreet. Her work includes reporting for CBS, MarketWatch, WSJ Sunday, and USA Today. Jeanette has contributed to “The Today Show” and a variety of other media outlets. You can follow her money saving tips and ways to give back on Facebook: Jeanette Pavini: The Joy of $aving Community. Find links to her social media and her book at JeanettePavini.com.