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!

SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019

At the very end of 2019 the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 was signed into law.  It gave this weeks blog author and Financial Planner, Amy Irvine, CFP®, EA, MPAS®, CCFC, flashbacks to the 2017 tax law changes that happened at the very end of that year too. There are a lot of little nuggets in this Act, below is our interpretation of the Good, the Bad, and the Weird …

The Good

• If you are turning under the age of 70½ this year, you can now push the required minimum distribution down the road.  The new age is now 72.

• Beginning this year (2020), if you continue to work past the age of 72 (was 70.5), you can now make a contribution to your Traditional IRA.  Prior to this Act, even if you had earned income, you couldn’t contribute once you reached the “magic” age.

• This does not change the Qualified Charitable Distribution age though, that is still 70½ 

• If you receive a stipend or fellowship, that is now considered qualifying income for an IRA (or Roth IRA) Contribution.

• Small businesses will be able to join a pooled employer plan (called a MEP or Multiple Employer Plan), which is meant to reduce the cost to small employers  And if the employer plan has an automatic enrollment feature, they get a small tax credit.

• If you are a volunteer firefighter or EMC, then you will have a one-year repeal of the SALT limit on your federal tax return.  Remember SALT stands for State and Local Tax.

• If you are planning on having a baby, or adopting a child, in 2020 you can now take a $5,000 distribution from your retirement plan WITHOUT penalty.  Of course you have to pay tax on it, but if you redeposit it within 60-days of withdrawing it, then it would not be considered taxable.

• We are thrilled that you can now withdraw up to $10,000 during your lifetime from a 529 plan to repay student loans WITHOUT tax or penalty.

The Bad

• If you turned 70½ in 2019 but elected to defer the RMD until 2020, sorry, but you still have to take it before April 1, 2020.  Also, only those that turn 70½ in 2020 can defer until age 72. If you’re 71, sorry, but you still have to take yours.

• Stretch IRA’s won’t be able to stretch as far in the future.  Historically, your beneficiaries have been able to elect to take the remainder of your IRA over their life expectancy.  That has been nixed in the SECURE Act and the maximum number of years they can defer the account is 10-years. This does not apply to spouses, disabled beneficiaries, chronically ill beneficiaries, certain minor children (until they reach age of majority) and existing inherited accounts.  Based on this, we will be looking at our clients situation to determine if it makes sense to convert taxable retirement accounts to Roth Sources.

• Employers will now be able to add annuity options to their retirement plan programs.  This was fought for very hard by insurance companies and we are very concerned about how this is going to play out. We are not the only ones that feel that way.    Read Rick Kahler’s commentary in an article published on December 30 - “Accessing the Damage Done by the Secure Act.”

The Weird 

We think these are weird considering the Act is called Setting Every Community Up for Retirement Enhancement and the following have absolutely nothing to do with retirement.

• The credit for installing an electric car charger has been restored

• Anyone under the age of 21 will be prohibited from purchasing cigarettes and e-cigarette products (i.e. vaping)

• The medical expense deduction was set to go up to 10%, but the Act has it at 7.5% once again in 2020.

• 529 plans can now be used to pay for Apprenticeships

We will be looking at each of our clients' individual situations to determine how this new Act will fit into their financial lives...so more to come!

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