5 Mistakes You Don't Want to Make During Open Employee Enrollment

Fall is the time when the leaves are changing colors, kids are going back to school, families are enjoying Thanksgiving dinners, and…enrollment is open. Yes, for most employees this is an opportunity to choose which benefits they will choose for the following year.

They don't fully understand the value of an HSA-eligible health insurance plan.

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HSA-eligible high-deductible health plans tend to come with lower premiums (what you pay monthly or with your paycheck for your coverage) but higher deductibles (what you pay out-of-pocket before most benefits kick in) than more standard health care. insurance plans. In addition, they allow you to contribute pre-tax dollars (for 2023 up to $3,850 for individual coverage or $7,750 for family coverage plus $1,000 if you're 55+) to an HSA (Health Savings Account) that can be used. tax-free for qualified medical expenses at any time.

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While it's easy to compare the difference in premiums and deductibles, be sure to consider the value of an HSA. That's free money! If you make an extra contribution, you'll also get a tax deduction (including FICA if you're contributing from your paycheck).

For example, I spoke with an employee who would save nearly $1,900 a year in premiums if he chose a high-deductible health plan. In addition, he would receive $1,000 in his HSA from his employer and save almost another $2,000 in taxes by contributing an additional $6,000 to the HSA. The total savings of $4,900 more than outweighed the difference in deductibles.

Underfunding or overfunding the FSA.

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FSAs (Flexible Spending Accounts) allow you to put money aside before taxes that can be used tax-free for health (up to $3,050 per person next year) or dependent care (up to $5,000 per family next year) expenses. If you're in the 24% tax bracket, it's like getting 24% off these eligible expenses! Not using these accounts can cost you hundreds or even thousands of dollars in lost tax credits.

However, there is a catch. Unlike HSAs, FSAs are mostly "use it or lose it," so you don't want to contribute more than you're sure you can spend. (Having an FSA for general health care also prevents you from contributing to a higher-value HSA in the same year.) If you actually have extra money left in your account at the end of the year, try to use it by stocking up on qualified supplies like contact lenses and medications on prescription. Find FSA-eligible items here.

You are not taking advantage of a prepaid legal plan.

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Do you have up-to-date estate planning documents such as a will, durable power of attorney, advance health care directive, and a living trust? If not, you can save a lot of money by using your employer's prepaid legal service to draft or update these documents. You pay a payout fee, but legal services are free or greatly discounted. You can then choose not to renew it the following year after you get your documents.

Ignoring Disability Insurance.

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Disability insurance is often overlooked, even though about 25% of 20-year-olds are likely to be out of work due to disability for at least a year before they reach normal retirement age. If your employer does not provide it, you can purchase it. The good news is that employee disability benefits are tax-free.

He doesn't have enough life insurance.

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Your employer may offer you life insurance coverage of one or more times your salary, but if you have dependents, you may want to purchase supplemental life insurance. Then compare the cost of purchasing it through your employer to the cost of term insurance on the individual market. (See if your cover at work can be converted to an individual policy once you leave work.)

Your benefits can be a significant part of your total compensation, and open enrollment may be your only chance to take full advantage of many of them. If you're in doubt about your benefits selection, find out if your employer offers a financial wellness program with free guidance and coaching from unbiased financial planners who are trained in your specific benefits. Then go and enjoy the holidays knowing your family is protected.

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Warm regards,
@Winy

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