Open enrollment is an important time of year to review your insurance options and decide what works for you. If you are looking at your benefits guide and have no idea what you’re looking for, then we’re here to help!
Most people go with the default option or simply the option they’ve always chosen without taking the time to understand just what is truly best for them. We can’t blame them! You only have two weeks to decide. Your partner may also have benefits to select which can have a different open enrollment window. Benefit booklets tend to be 40 pages. Yikes!
That’s why open enrollment season is one of our busiest times of the year. Within a 2-4 week period we are reviewing hundreds of benefit booklets. Why do we do this for our clients when so many financial advisors skip this offering? Because these selections can have a monumental impact on your financial plan.
If you are not a client of Fyooz Financial Planning, you’re in luck! We’ve written this blog specifically to help you navigate your 2024 benefit selections. Below, we’ve broken down what we see are some of the most important parts of your benefit elections.
Medical Insurance 🩺
There are several types of medical plans that could be offered to you. When comparing medical plans, it’s important to consider how much you spend annually on total medical costs. For example, a High Deductible Healthcare Plan (HDHP) is exactly what the name implies. It is a medical plan with a high deductible, so if you typically have lower medical costs then this plan may be the right choice for you. These plans tend to have the lowest available premium, highest out-of-pocket-maximums, and offer a Health Savings Account (HSA).
If you would normally have high medical costs over the course of a year, then you might look for a low deductible or PPO plan. These plans tend to have higher premiums, lower out-of-pocket maximums, and may offer a health Flexible Spending Account (FSA).
If you and your partner are offered medical benefits through your employers, then you should compare your plans to find what would be best for the two of you! You can compare the cost of enrolling in medical insurance separately on your respective plans to the cost of enrolling in employee + spousal coverage on one of your plans.
Something to consider if you enroll you and your spouse enroll in one employer-provided plan is a spousal surcharge. Some employers include a spousal surcharge only if you deny your medical coverage to join your spouse’s coverage. This charge could vary but we’ve seen it range from $50-$100 per month and is usually stated on your open enrollment benefits guide. If you don’t see this information and are considering using only one medical plan for you and your partner, you should reach out to your employer and ask if they include a spousal surcharge.
Health Savings Account (HSA) 💰
A Health Savings Account (HSA) is a pre-tax investment account available to those enrolled in a high deductible healthcare plan (HDHP) and is used only for qualified medical expenses. These accounts are a great way to save for medical expenses and tuck away some of your income from taxes! HSAs have a triple tax savings structure where any contributions to your HSA are made pre-tax to reduce your taxable earnings, its earnings through investments are tax-deferred, and your spending is tax-free as long as it's used for medical expenses (who could ask for more?!).
The annual contribution to an individual HSA in 2024 is $4,150 for persons under 55, $5,150 for persons 55 or older, and $8,300 for family coverage. This annual contribution limit includes both you and your employer's contributions.
An employer contribution can have a huge impact on how much you spend on medical insurance. For example, if your employer contributes $1,500 annually to your individual HSA and the cost of your monthly premiums is less than $125, then your employer is paying you tax-free money to have medical insurance! 🤑 Let me say this again, if your employer contribution is MORE than what you’d pay in a year in medical premiums then YOU ARE GETTING FREE MONEY to invest and spend on medical expenses. 👌
Unlike a flexible spending account, your HSA balance can roll over each year. Not only tat, but once you have sufficient cash saved in the HSA, you can invest your surplus funds! This is a missed opportunity we see with a lot of our clients. They forget to invest their HSA dollars. Remember, the HSA has tax-free growth and tax-free distributions for qualified medical expenses. No other account provides that type of tax savings. Don’t forget to invest your HSA!
Flexible Spending Accounts 💸
A Flexible Spending Account is a pre-tax spending account that can be utilized to reduce your taxable income to save for necessary medical or family expenses. These accounts differ from an HSA because they are not an investment account and they have a use-it-or-lose-it policy. This policy makes it important to remember to only save what you think you will spend throughout the year or you will lose it. An FSA may allow you to rollover a certain amount of any unused funds from one year to the next.
There are three types of flexible spending accounts to look for during your open enrollment:
Dental and Vision 🦷👀
Dental and vision plans tend to be one of the simpler choices you will have to make during your open enrollment, but you should consider looking at these plans like you would your medical options. Ask yourself “what kind of coverage do I need” and “which plan out of my options (or a partner’s) will get me that coverage at a better price?”
Life Insurance 🧟
Life insurance on the open market can be more expensive than what it will be through your employer. This is why we typically recommend maximizing your employer-provided life insurance first before going on the open market. Some employers will provide life insurance at one to three times your basic salary up to a certain limit, then it will be up to you to elect supplemental coverage to meet your needs.
One thing to remember when enrolling in life insurance through your employer is if you were to leave or get terminated by your employer, you cannot take your insurance with you. A way to always stay protected would be to diversify your life insurance and combine your employer-provided life insurance with open-market insurance.
Disability Insurance 🤕
Disability insurance is used to protect your income for a period of time when you will not be able to work. Some employers offer short-term and/or long-term disability insurance to their employees at no cost, but if it is not employer-provided then it is a relatively low cost. We typically recommend our clients have short-term and long-term disability coverage that will protect at least 60% of their weekly earnings.
Legal Insurance 🧑⚖️
Some employers can provide legal insurance which could be beneficial if you are due to create or update your estate plan!! An estate plan is an important tool to aid in your financial plan both pre and post-death.
Estate plans are completed through an attorney and finding an attorney can be difficult (or expensive) so utilizing the options of law firms or attorneys provided to you through your employer can be a good move. Legal insurance can have a relatively low monthly cost so check if this is a benefit provided from your work!
Hopefully, this guide will help organize your thoughts as you’re scouring through your 40-page benefit booklet, but remember to break it down! Once it’s simplified down to the most important topics, it’s not too bad. If you feel you need some extra advice or have questions regarding your particular situation, feel free to schedule a free consultation with us! We’re here to help! 🤓
Disclaimer: This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.