by Kaitlyn Ranze
Open enrollment – the time when employees can change and apply for new benefits at work- might be around the corner at your company. A survey by Aflac found that 23% of employees would rather clean their toilets than spend time researching their benefits.
Trust me when I write it’s worth spending more than the average 30 minutes making the right selections. Taking advantage of your benefits during open enrollment has the potential to change your life and improve your financial future.
After all, a study by Harris Interactive and Aflac showed that 77% of people admitted that they made mistakes when signing up for their benefits packages in past years, and 42% said those mistakes cost them money.
To ensure that you select the right employee benefits for you, we’ve crafted a checklist to help you tackle open enrollment and make the most of your work perks.
1) Before enrolling in your employer benefits, create a budget.
If you don’t already have a budget, you need to figure out which way your money is moving.
Do you have extra money at the end of the month? If not you might be putting those extra expenses on a credit card, which is increasing your overall debt. We want you to have money left over each month (and we know you do too).
To create your budget, start by figuring out how much you earned.
Add up your wages along with any stipends (like an internship for example) or supplementary allotments like alimony, child support, disability, etc.
Then, determine how much you spent.
You can do this quickly by looking at your bank statement totals for the entire month. How much did you spend over the past month? How much did you charge to your credit card? Did you pull anything out of savings? Looking at these should cover most of your expenses.
Finally, subtract expenses from income.
How did you do? Do you have extra, or did you spend more than you earn? Before enrolling in any additional expenses like employee benefits, you may need to start by cleaning up spending habits, tracking your expenses, and getting your budget on track.
Now it’s time to tackle your benefits.
2) Review all available benefit options
When you switched jobs, got a raise, asked for a promotion, you did a good thing: you negotiated your salary. But part of your compensation is your benefits package is your employee benefits. Let’s make sure you’re not leaving things on the table by reviewing ALL of the options available.
After all, 30% of employees don’t know whether or not their company offers wellness benefits.
Knowing all of the options is the first step in deciding whether or not you participate in them or have to make alternative choices.
For instance, if your company doesn’t offer health insurance, you can choose a health plan through the ACA Healthcare Marketplace. For most states, the open enrollment period for shopping the marketplace starts November 1st and ends December 15th giving you six weeks to choose a health plan and get signed up for the new year.
3) Self-reflect to decide what benefits to take advantage of during open enrollment at work
Is your family size changing? Do you even wear glasses? Can you find more cost-effective dental care through a community dentist than using dental insurance? If you follow a co-worker’s recommendations or use default options, you could miss out on important benefits that suit you or your family.
Consider your actual needs when reviewing things like your health insurance coverage, life insurance, and disability insurance.
Enrolling in employee-sponsored life insurance
When it comes to life insurance, most companies offer smaller term coverage (typically one-time income) as well as buy-up options. Will your family be able to support themselves with the total loss of household income if the worst happens? You may need to consider increasing your coverage or looking for a private plan.
Enrolling in employee-sponsored disability coverage
As Jen Sapel points out, “If you are sick or injured and unable to work, how will you pay your bills? Your medical insurance will pay for your medical care, but how will you buy groceries or pay the mortgage? Disability income insurance replaces your income in that event.” That’s what disability coverage is for.
We know very few young professionals that can live, save for retirement, continue to pay for their health insurance, and cover their health expenses if they don’t have an emergency fund. If your employer offers a disability plan, open enrollment is the time to sign up for it.
If you won’t use it, don’t enroll in it
Personal factors such as health and lifestyle could impact whether or not you would actually benefit from an employer offering. If you don’t wear glasses, you may not benefit from a vision insurance plan. If your family doesn’t have a history of cancer and you’re young with a low-risk lifestyle, you may not benefit from supplemental cancer policies.
4) Understand the basics of choosing a health plan
With so many variables going into choosing a health insurance plan, it’s no wonder making the right decision can seem daunting. A little confusion is inevitable, but there are ways to make sure you choose the best option for you.
Start by understanding healthcare terminology basics.
Your premium, deductible, out-of-pocket maximum, and other terms play a significant role in how big your healthcare expenses are paycheck to paycheck and medical event to medical events.
Check out this primer on basic healthcare terminology.
Review your medical history.
Think in terms of your doctor’s visits or prescriptions, but also look at your claims history online. Review how you used your health insurance benefits last year and determine whether they actually fit your needs. If you’re paying a premium for a “Cadillac plan”, but only visiting the doctor for wellness visits, you may be better off switching to a lower-cost, a high deductible plan that lets you put the savings in an HSA.
Then, make sure you review your healthcare options carefully.
Once you review your history, compare your current coverage to what is available in the upcoming year. During open enrollment, your employer’s plan may have renegotiated the terms with the employer. Make sure there are no changes to coverage that impact how much you pay for healthcare essentials.
5) Review voluntary benefits
If your employer offers incentives for participating in wellness programs, open enrollment is the golden opportunity to take advantage of them. There could be hidden dollars that can help you lower your own living expenses.
Taking advantage of 401(k) matches
Make sure you’re not missing out on “free” money. While budgetary constraints may have prohibited you from participating in 401(k) matching programs, missing out on an employee match means forgoing additional income. While you don’t see these investments on your paychecks or take-home pay, 401(k) matching compounds your retirement savings. Open enrollment is the perfect time to take advantage of these hidden dollars that contribute to your overall financial well-being.
6) Take advantage of tax breaks
One of the most overlooked aspects of open enrollment is reducing your overall tax burden. Money contributed to an employer-sponsored retirement plan, such as a traditional 401(k), isn’t included in your taxable income and, as a result, reduce the amount of federal taxes you owe. These funds also grow tax-free until retirement.
Enroll in a Health Savings Account.
Contributions to HSA’s offer immediate tax deduction, grow tax-deferred and can be withdrawn tax-free for qualified medical expenses. Any balance left at the end of the year rolls over indefinitely, similar to the assets in a retirement account.
7) Do the math
Make sure you understand how each selected benefit impacts your take-home pay. While some benefits may be fully covered by your employer, some voluntary benefits you share the cost or pay for entirely. Know how much will be deducted from your paycheck for each selection. Then, revisit step number one. Do your selections work in your overall budget? After all, with most types of benefits, once you select an option, you are bound to it for the entire year unless you meet a few exceptions with a major qualifying life event.
A year is a long time to wait to change your benefit selections. Be sure to follow these steps to selecting your employee benefits during open enrollment to avoid regretting them all year.
Related Reads:
Taking Advantage of Open Enrollment
8 Reasons You Need Disability Insurance
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