Employee Benefit Options
It’s getting to be that time of year. If you haven’t already, you should soon receive your 2020 employee benefit options from your employer. These options typically include selecting a health insurance plan, dental, and vision coverage. Your employer may also provide for things such as life insurance, disability insurance, and/or a flexible spending account (FSA). Because you have to wait a full year before you can change your mind, it’s important to take care with your elections.
Employers often provide some sort of basic insurance coverage. This could be $50,000 or some multiple of your salary. They may also provide optional coverage that comes at your expense.
Optional group life insurance is usually some sort of term insurance that provides a death benefit to your elected beneficiary while you’re employed. This coverage will likely come in amounts that are multiples of your salary. The coverage typically ends when you leave your employer or retire.
Because this is group insurance, the insurance company provides coverage at a blanket cost based on age, not health. Due to this, the insurance may come at a cost that is higher for healthy individuals and cheaper for smokers or people with health issues. You may also find that your premium goes up in bands (meaning that it increases as you reach ages such as 35, 40, 45, 50, etc).
Having some sort of life insurance is important for most people. After you determine the correct amount of coverage to purchase, you may want to weigh the costs of purchasing insurance on your own versus having coverage through your employer. Again, this is because the coverage may increase in cost every five years and that it may end after you leave your company’s employment.
Your employer may also offer disability insurance. If they do, you may find that they provide a short-term plan for you. That plan may cover you should you become sick or disabled for a period of time that exceeds your personal leave. The plan often starts to pay some percentage (likely 60% or so) of your salary for 90 to 180 days. Because your employer is paying for this coverage, it will be taxed to you as ordinary income.
Your employer may also offer the option of purchasing long-term disability insurance. This would provide coverage after the short-term period ends though age 65 at a rate of somewhere around 60% of your current pay. You may be provided with the option to pay for your premium pretax or after tax. If you elect to pay pretax, you will get a tax break on the premium payments but pay income taxes on any benefits you receive. If you elect to pay your premiums with after-tax dollars and you are paying the full amount (not employer subsidized), you will likely receive benefits free of income taxes. If you have the choice, consider if you’d rather get a tax break on the small premium or the much larger insurance benefit should you become disabled.
Disability coverage is important to have-especially if you are single or the primary bread winner in your family. Disability insurance offered through your employer is also often inexpensive. Because of this, I generally recommend that my clients opt for the maximum disability benefit that they can receive through their employer.
Flexible Spending Account (FSA)
FSA accounts are accounts where you can take pre-tax dollars from your pay and your employer puts them into a holding bucket. When you encounter a medical expense that is not covered by your insurance company, you can submit a claim to your employer and they will issue you a check.
The FSA should reimburse you for dental expenses, vision expenses, insurance deductibles and co-pays, as well as purchases for over-the-counter medications. You are only limited in reimbursements up to the amount that you contribute to the FSA for the year.
Just as is the case with your other benefits, you cannot change your FSA deduction after you elect it. If you decide to have $1,200 deducted from your pay for the year, your employer will take $100 per month from your pay and place that into the FSA. Later in the year, if you decide that the $100 a month is not enough or is too much, you cannot change your mind.
The other drawback to the FSA is that if you do not spend your full deduction for the year, you lose it. That means if you deducted $1,200 from your pay, but only used $500, the other $700 is lost. Again, make sure that you make the proper election because you cannot change the amount later and could lose a portion of your savings.
The good news is that the full amount you elect to deduct is available to you starting in January. For example, if you opt to deduct $1,200 for the year and you have a $1,200 or greater medical expense in February, you should be able to be reimbursed for the full amount right away.
Contact us to help assess your insurance needs and to help review your options. You want to make sure you have the coverage you need; but you also want to make sure you don’t have too much coverage, that you’re not paying too much for it, and that you have the right type of coverage for your situation. We’re happy to discuss your options with you and your benefits department.
The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual. Consult your legal, tax, and/or financial advisor to determine what is appropriate for your situation.
Events & Sponsorships
Mark your calendar for the 14th Annual Paws for a Cause Charity Night & Silent Auction. This year, Paws will be held on Thursday, October 3, 2019 from 5-8PM at Monument City Brewing Company. This event will benefit The Buddy Foundation of Maryland, Community Cats of Maryland, and Furry Friends Network.
The 14th Annual Paws for a Cause will feature guest bartenders, brewery tours, animals brought by the charities, a silent auction, raffles, games, a food truck, & more!
The Buddy Foundation of Maryland provides the financial and emotional support necessary to prevent euthanasia and/or surrender of a canine family member due to the high cost of urgent veterinary care.
Paws for a Cause is raising money for The Buddy Foundation of Maryland to help them provide financial support to 3-4 families with pets in need of urgent medical care.
Community Cats of Maryland is dedicated to helping feral cat caretakers pursue TNR. Community Cats of MD provides resources, information, and support to Maryland residents who are caring for outdoor/feral cats. They offer educational workshops about feral cat management and TNR and they run monthly low-cost spay/neuter clinics for feral cats.
Paws for a Cause is raising money to help support Community Cats of MD’s efforts to relocate, vaccinate, and medically treat the feral cats living at the former site of Bethlehem Steel. As many as fifty cats could still be living there.
Paws for a Cause also gives back annually to the Hope Fund of Furry Friends Network, Inc as a token of appreciation for bringing Fenway into the lives of founders Woody and Heidi Derricks. If it wasn’t for their experience with Furry Friends Network, Paws for a Cause wouldn’t exist.
We’re sponsoring Charm City Rooftop Day again this year. It’s a great afternoon for everyone to host parties on their rooftop decks to raise money for BARCS and the Buddy Foundation of Maryland.
Diversity & Inclusion
We attended the Excellence in Diversity & Inclusion awards and diversity think tank. Our firm was a finalist for the I nvestmentNe ws outstanding practice award . Although we didn’t win, we were proud to see our primary custodian, TD Ameritrade Institutional , win an award for their diversity work.
I’m very proud of the work we do. A firm of two employees became one of six finalists from a pool of 160 nationwide firms. I’ll take that any day. We’ll continue to do more in the years ahead to help better serve our diverse client base.
Partnership Wealth Management turned 14 in September. Thank you to all of our wonderful clients who have helped make these past 14 years such a joy. We’re looking forward to many great years ahead.
We are always accepting do nations for the local animal shelters – toys, tennis balls, collars, leashes, food, cat litter, cardboard trays, office supplies, cleaning supplies, towels, mats, washcloths, etc. We will accept donations Monday-Friday between 9am & 5pm.
September is a busy month for our home. Not only does PWM have a September anniversary but so do Heidi and I. We celebrated our 18th wedding anniversary earlier this month.
Not to be outdone, Fenway had the best party of us all when we brought out the pupcakes for his 14th birthday. While he’s slowing a bit, he still breaks out the puppy crouch and runs around with his boyish grin. Fenway would say the grey is from us adopting Roxy and having Elise because his face was jet black before then. I hear ya, buddy!
Elise started kindergarten this month and the transition has been going great. She’s excited to have already received a paw sticker (the school’s mascot is a fox) for using her words to communicate a request to another child and her table won a prize from the treasure chest the other day. She’s also enjoyed getting a change of scenery during the day by going to other classrooms for music, library, art, and gym. For us, watching her walk into school with her backpack knowing that she’s off to her locker is adorable.
I hope you enjoyed this month’s newsletter.
Woody Derricks, CFP®, ADPA®
CA Insurance License #0C40217