Life is busy, and sometimes we don’t have the time (or the headspace) to make the savviest money moves. But if there ever is a time to roll up your sleeves and learn more, it’s during open enrollment —that period of time at the end of the year when you can sign up for new benefits for the upcoming year or make changes to your current ones.
For several years, I told my friend to check out her company’s dependent care flexible savings account (FSA) so she could save money on taxes when she paid for her toddler’s daycare. I knew other people at the company where she worked, and I knew that it was a benefit they offered.
But with a little one, a demanding job and another child on the way, researching and signing up for yet another employee benefit just wasn’t on my friend’s radar. When she did finally have time to dig in and learn more a few years later, she realized she could save big money each year by participating in the dependent care FSA, which lets employees put away pre-tax money to pay for childcare.
These programs change constantly. It’s a good idea to know what’s new and make sure that what you have is still meeting your needs. Watch for open enrollment lunch-and-learn programs at work where the human resources department explains all the different programs that are available to you in addition to whatever written materials you get.
Here are some of the most common benefits you’re likely to see on your employer’s menu of options.
Health insurance is just the beginning
When thinking about your employer benefits, health, vision and dental are probably the first things that come to mind. There’s a good reason for that. While plans range from little coverage to very generous benefits, companies typically pay 83% of the $7,739 average premiums for single coverage and nearly 73% of the $22,463 average premiums for family coverage, according to the Kaiser Family Foundation.
Because health care is so expensive, it’s important to pay attention every year during open enrollment to make sure you’re getting the most bang for your buck. Plans change year-to-year. Yours may no longer cover your medications, or your doctors may no longer be in the network. Maybe your child’s mental health services now require pre-approvals. Plus, your own life circumstances may have changed enough that a different plan might be better for you now.
If you work for a small business, you probably only have one or two plans to choose from, which limits your options. Larger companies typically have several health insurance plans to choose from, so it’s worth comparing. Most insurance companies have an online tool that lets you see how you use the plan and what type of coverage is best for you.
Get tax breaks for big expenses
Work-based benefits are a great way to save money with several programs. First, there is a flexible spending account, or FSA. These accounts let you put aside money tax free to spend on health care. The tricky part with FSAs is that they’re use-it-or-lose-it, so you need to be realistic about how much you will likely spend on health care in a year. In 2023, FSA maximums will rise to $3,050.
If your family, like mine, maxes out your deductible every year, you could probably contribute up to the FSA limit. But if yours manages to get by without broken bones and emergency surgery, you may want to set aside a smaller amount.
Here’s the good news: If you wind up with money in your FSA late in the year, you can spend it on a wide variety of health-related services and goods, like eyeglasses, braces, crutches and smoking cessation programs. You can see the full list of permissible expenses here.
You can also use a childcare FSA to set aside up to $5,000 (if you are single or married filing jointly) to pay for childcare for children under 13. This includes money for daycare, preschool or summer day camp. Remember, this is a combined benefit, so even if both you and your spouse have a dependent care benefit at work, you can only set aside $5,000 together.
Financial wellness programs make a difference
Once you’ve dealt with the big-ticket items of health insurance and childcare costs, turn your attention to lesser-known benefits. At the top of the list for me is financial wellness programs, which can give you guidance on your financial goals and challenges.
As a financial planner, I know how valuable financial advice can be. But I also recognize that not everyone is in a position to hire a financial advisor. That’s why financial wellness programs are so important. Unfortunately, less than a quarter of employees have access to these types of programs, according to a recent study. And people working for large companies are more likely to have them than those working for small businesses.
Plans vary depending on your employer, but they might include interactive budgeting and saving tools or even a session with a financial coach.
Student loan repayment plans
In July, President Biden signed an executive order forgiving $10,000 of student debt for each borrower and $20,000 for those who qualify for Pell Grants. For the time being, debt forgiveness is on hold due to legal challenges. While $10,000 is a big help, it may not make much of a dent for many borrowers. That’s why you should be looking at any help you can get from your employer.
Right now, just 17% of employers offer a student loan repayment benefit. But another 31% of employers say they are planning to, according to a survey by the Employee Benefit Research Institute.
Weigh life insurance carefully
Your employer may offer a small life insurance policy—usually one or two times your salary—free of charge. That’s a no-brainer. Sign up right away during open enrollment, but don’t forego additional insurance that you purchase on your own. A policy you buy on your own will give you a much higher death benefit and will remain active if you change jobs.
Buying additional insurance products through your work probably isn’t worth the expense. Take the grisly named accidental death and dismemberment insurance, which pays a benefit if you die or get injured from an accident, rather than natural causes. My advice would be to buy as much traditional life insurance as you need and can afford, which will provide your family with vital financial support no matter how you die.
One caveat: You might consider purchasing supplemental life or disability insurance through your work if you have a pre-existing condition that would disqualify you from buying insurance on your own or make it so cost prohibitive that you might not be able to afford it.
It all adds up
Maybe your benefits won’t save you big money every year like they did my friend when she signed up for the dependent care FSA. But over time, getting help from your employer to lighten your financial load adds up. And sometimes company benefits aren’t even about saving money, but getting help with some difficult things in your life, like elder care. Life is stressful enough. During open enrollment season, you might as well take advantage of whatever help comes your way.
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- HerMoney Podcast: Financial Planners, Retirement Specialists, And HSAs For Long-Term Care