Do's and Don'ts of Employee Benefits

By Kerrie Beene, CFP®

During October and November a majority of people will be having open enrollment for benefits.  We encourage you to take the time to thoroughly review your benefit options. Make sure you pick the best options for your situation and do not leave any benefits on the table.   Below are some do’s and don’ts when reviewing your employee benefits.

Do

1. Take the time to compare the medical, dental, and vision plan options.  While it may be easiest to pick the plan with the lowest premium, that plan may not be the best option for your situation.  Some factors to consider when reviewing your plan are:

   1. Premiums

   2. Out of Pocket Expenses

   3. Prescription drug coverage

   4. Networks (Before switching plans or signing up for a new one, check the availability of doctors within that network) 

2. Sign up for disability coverage.  It is easy to think nothing will happen to us, however, a 35 year old has a 50% chance of becoming disabled for a 90 day period or longer before the age of 65.  While you can purchase a policy from an outside source, employer options are often the best place to start.

3. Sign up for life insurance.  Your personal situation will depend on how much life insurance you need but your employer is often the lowest cost provider.  Take the time to analyze how much life insurance you may need and maximize the benefit available to you through your employer and then seek outside insurance if needed. 

4. Take advantage of employer sponsored retirement plans. This could be a 401k, 403b, 457b, Simple IRA, etc.  Most employers offer a match, such as 3% of your salary.  This is money you do not want to leave on the table.  Be sure to contribute at least the percentage your employer matches to ensure you receive the full benefit.

5. Ask questions.  If there is a benefit you do not understand, reach out to your human resources manager and ask questions. 

Don’t

1. Wait until the last minute to enroll in your benefits.  Review your benefits as soon as possible and make sure you understand the options available.  If there is a benefit you don’t understand, reach out and get clarification.

2. Sign up for benefits based on your co-workers choices.  Make sure you are picking the best options for your personal situation.

3. Rule out supplemental disability options.  Some employers offer a supplement policy that will add coverage above and beyond the basic policy. Think about how much of your pay you would need if something were to happen and you needed to file for disability.  If the policy covers 60% of your salary, will you be able to manage without the other 40%?

4. Rule out the high deductible plan.  While signing up for a policy with a higher deductible can be scary, the health savings account available with this plan makes this a very attractive option.  For more information on health savings accounts, check out this article.

5. Rule out “other” benefits available.  Sometimes employers offer benefits such as dependent care spending accounts and legal plans.  If your employer offers a legal plan, this is something you could take advantage of if you need Estate Planning Documents set up. 

It's That Time! Employee Benefits and More

By  Kate Welker, CFP®

This month we want to continue to remind our readers that it will soon be open enrollment through your employer and Medicare, the time of year you are able to review and change your health insurance and other benefits. 

There are several posts on our blog that cover this topic more in depth:

• Last week Rachel discussed how to review your health insurance options and prepare for making that decision in her post “Knock, Knock - Open Enrollment Who?”

• Last year I wrote a guide to the terms and options you may be deciding on in a post titled “Build Your Wealth by Taking Advantage of Benefits Open Enrollment.”

While you are taking the time to review your employee benefits it is also a good time to tackle several other employment related tasks.

• Beneficiary Review- We recommend that you review your beneficiary designations once a year on all of your accounts. Those tied to your employment would be your retirement accounts (Pension, 401(k), 403(b), etc) and any life insurance benefits.

• Benefit Package - If you have a position that comes with flexibility in negotiating additional benefits such as bonus payouts or additional time off, this would be a time to review your performance and approach your supervisor. 

• Salary Benchmarking - It is a good practice to occasionally review your salary for your position and duties. Compare what your compensation is against others in your industry and in your geographical area. If your research shows you are underpaid this would again be another time to approach your supervisor for a discussion. To research this you could use sites such as salary.com or glassdoor.com.

Knock Knock - Open Enrollment, Who?

By: Rachel Poe

Open Enrollment is a time in which individuals are required to opt in or out of health, dental, and vision insurance for the upcoming calendar year. Those who receive benefits through an employer program will usually receive notification and be a part of a company census to gather quotes. While important in itself, it is also noted that, once open enrollment closes, so does your chance to change coverage for the upcoming years (unless you qualify for a life event change). Life event changes consist of some of the following: marriage, divorce, additional children, loss of job, movement from region, etc. 

Open Enrollment for 2021 generally runs from mid-October to mid-December for coverage that begins January 1, 2021.  According to Value Penguin, within individual households, it is important to review these insurance plans compared to 2020’s Affordable Care Act; plans may vary based on coverage and provider. In addition, depending on your state, individuals who opt out of health care coverage provided by ObamaCare will not be required to pay a tax penalty, however, it is important to check your state-level mandates. 

Duke Health offers the following tips to prepare during the open enrollment process.

1. Know your needs - chronic conditions, emergency options, upcoming procedures, risk analysis

2. Family Changes - college, study abroad, new family members

3. Know What’s Covered

4. Identify Your Provider Network

5. Calculate costs

6. Evaluate Health Savings (HSA) and Flexible Savings Accounts (FSA)

7. Consider Other Insurances

8. Don’t Ignore - even if satisfied with the current plan - always review!

WARNING, open enrollment is not the same as Medicaid and Medicare. As a reminder, Medicaid is put in place to aid in low-income households and disabilities. This has no enrollment period and can be applied for at any time. Medicare creates access for individuals 65+ to health care (disabled individuals can apply at a younger age). Coverage begins January 1, 2021 with open enrollment ranging from October 15, 2020 till December 7, 2020. 

While reviewing dental, vision, and health insurance needs, it is equally important to consider reviewing other needs such as long-term care, disability, and life insurances. See this attached pdf to review some questions that may help identify some of the needs, revisions, or gaps within upcoming insurance policies. 

Not sure where to start? Contact us today for a Discovery Call to schedule a Free Consultation to discuss if an employee benefits review and an insurance policy review and recommendation session is right for you!

Thrift Savings Plan: Military Retirement Plan

by: Kate Welker, CFP®

In honor of Veteran’s Day we want to take a moment to thank and appreciate the service given by our veteran’s and active military members. We are incredibly grateful for your sacrifice and protection of our freedom. We also like to remember the families of those serving.

In light of the remembrance I thought today I’d discuss one of the benefits offered to our military members and federal government employees: the Thrift Savings Plan, or TSP. Keep in mind this is a brief overview of a system that can be complex.

The best definition of the Thrift Savings Plan comes right from the tsp.gov website. “The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. It was established by Congress in the Federal Employees' Retirement System Act of 1986 and offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans.” (https://www.tsp.gov/PlanParticipation/AboutTheTSP/index.html)

The TSP is similar to other employer sponsored retirement plans where you receive a tax deduction for the contributions you make and you pay tax when you withdraw the money.

The investment options have a bit of an alphabet soup going on, following is the breakdown of the different funds listed in order of least risk to most risk:

• The G Fund - This fund invests in treasury securities backed by the U.S. Government. This means the fund can not lose money, but will generally have a low rate of return. The

• F Fund - This fund is composed of other types of bonds that could be government, corporate, or mortgage backed.

• The C Fund - In this fund you will find stocks of large and medium sized U.S. companies. It is structured to reflect the S&P 500 index. 

• The S Fund - This fund invests in the stocks of small to medium sized companies. 

• The I Fund - Here is where you will find the stocks of International companies. Currently there are stocks of more than 20 developed countries.

• The L Funds - These are the Lifecycle Funds. Each of these funds is tied to a specific year, generally this would be your year of retirement. The investments would contain a blend of all of the above funds and managed to become more conservative as your get closer to retirement. 

If you need an easier way to remember this like I do, here is what I’ve come up:

G for Government.

F for Fixed Income.

C is for Considerable sized Companies. 

S for Small Companies. 

I for International

L for Lifestyle

Uncork Your Wealth - Discover the Difference Between HSA and FSA

In this week’s blog, Financial Planner Kerrie Beene, CFP® defines two benefit terms that often cause confusion:

The products available to us in the financial and healthcare industry can be confusing.  So, with the use of Health Savings Accounts (HSA’s) and Flexible Spending Accounts (FSA’s), we are combining the two worlds and this can be overwhelming when trying to pick a health care plan.  Healthcare plans vary from job to job and state to state, but most of the time the options include health care plans with HSA’s and FSA”s as one of the available plans, along with other plans. So what is the difference and should I choose one of these options?

Similarities 

• Both HSA’s and FSA’s are used in conjunction with your health care plan.  

• Both also reduce your income tax liability and help pay for medical expenses with pre-tax dollars

• You and your employer can deposit money into the account

• Debit/Credit Card offered to pay for expenses

• Must maintain receipts and records for expenses

Health Savings Account

• Used in conjunction with a High-Deductible Plan

  • For 2019, the IRS defines a high deductible as $1,750 for individuals and $2,700 for a family 

  • For 2020, the IRS defines a high deductible as $1,800 for individuals and $2,800 for a family

• Available to self-employed individuals

• Money deposited into the HSA is tax-deductible

  • Interest and earnings are tax-free 

• Withdrawals used to pay for medical expenses are tax-free

  • Withdrawals can be used for medical expenses, such as doctor visits, hospital stays, eyeglasses, contacts, dental procedures, prescription drugs, etc.

• HSA’s are portable

  • The account belongs to you 

  • You keep it even if you switch jobs

  • Money remains in the account from year to year, even if not used

  • Money can be invested within the account

• HSA funds can be used to pay insurance premiums if you are collecting federal or state unemployment benefits or you have COBRA insurance through a former employer

• The IRS also imposes contribution limits on the amount that can be deposited into an HSA account

  • For 2019, the maximum contribution is $3,500 for individuals and $7,000 for families, with a $1,000 catch-up amount for those 55 and older (including employer contributions)

  • For 2020, the maximum contribution is $3,550 for individuals and $7,100 for families, with a $1,000 catch-up amount for those 55 and older (including employer contributions)

Flexible Spending Account

• Used in conjunction with a Health Care Plan

• Not available to self-employed individuals

• Money deposited into the FSA is tax-deductible

• Withdrawals used to pay for medical expenses are tax-free

  • Withdrawals can be used for medical expenses, such as doctor visits, hospital stays, eyeglasses, contacts, dental procedures, prescription drugs, etc.

• FSA’s are not portable

  • The account belongs to your employer 

  • Money must be used by the end of the year or you lose it

    • There are a few exceptions some employers offer, such as being able to carry-over $500 or a 2.5 month grace period to use the funds. (Employers can offer either option, but not both)

• The IRS also imposes contribution limits on the amount that can be deposited into an FSA account

  • For 2019, the maximum contribution is $2,700 

  • For 2020, the maximum contribution is $2,750

• Employers often offer other types of FSA accounts 

  • Dependent Care Account - used to pay for eligible child and adult care expenses like daycare, before and after school care, nursery school, preschool, and summer day camp

  • Other FSA Accounts

    • Adoption Assistance

    • Transit and Parking

The most important things to do when trying to pick a health care plan:

• Understand your available options

• Know your annual healthcare expenses

• Understand the requirements for required documentation for tax purposes

• Don’t be scared to ask questions

Build Your Wealth by Taking Advantage of Benefits Open Enrollment

In this week’s blog, Financial Planner Kate Welker, CFP® defines top benefit terms to help demystify some of the confusing benefit terms.

In the next few weeks you may open your mail or email to see notices regarding open enrollment season through your employer. Open enrollment is a period of time you can make changes to your employee benefit options that are normally restricted. This is also a great time to review your entire benefits package and make any other adjustments as well. Let’s walk through a few options you may be looking at.

Health Insurance is the main thing most people think about during open enrollment. Compare the components of the plans offered and look beyond the premium. You will want to compare the deductibles, co-pays, and which providers are in-network. Also take the time to review the prescription plans against your current medications to see how those are covered.

The FSA or Flexible Spending Account is the next thing to consider. A flexible spending account allows you to contribute pre-tax dollars to cover out of pocket medical expenses including co-pays, medical supplies, dental, and vision expenses. If your benefits include access to an FSA this is a way to lower your taxable income and pay for expenses you would incur anyways. You will have to decide how much to contribute each pay period. Be sure to review the plan terms and not to contribute too much. If you have a balance at the end of the year the plan will allow you to either roll over $500 or spend it within a grace period.

The HSA or Health Savings Account is an option to consider if you have a high deductible health plan. To qualify you must have a deductible of at least $1,350 for an individual and $2,700 for a family plan. The contribution limits are much higher and depend on the type of insurance and other benefits you have. Like an FSA this account is used to cover out of pocket medical expenses and is an income tax deduction. Unlike an FSA, an HSA balance will roll forward year to year and the growth on the account also grows tax-free. Be sure to look for an employer contribution that may be offered and take full advantage of that contribution.

Dependent Care FSAs are like the medical FSAs, but for childcare. This includes daycare, preschool, summer day camp, and after school programs. Also included is adult daycare. If an adult is your qualifying tax dependent and they require care while you work this is an eligible expense. With a DCFSA you are able to contribute up to $5,000 pre-tax.. Some employers also offer a matching contribution into these accounts.

Other Benefits may be available to update at this time as well. Reach out to your HR department to ask about your benefits package and see if there is an option you were not aware of. Some employers offer additional insurances like pet insurance or unique legal services.  

Block out some time for yourself to be able to really read the information you are given and consider your options. Look at the bigger picture benefits like tax savings, lower taxable income reported, employer matches, and the satisfaction that you are getting the most benefit out of what is offered.