Tips for Choosing Employee Benefits, Part I

If you are changing jobs or simply approaching open enrollment season for your employee benefits, selecting the right options for you and your family can be stressful. Whether it involves utilizing a Health Savings Account (HSA) with your health plan or deciding how much to contribute to your 401(k), the selections you make every year can impact your wallet today and your retirement down the road.

What You Need to Know

It’s important to remember that you can only make changes to your benefits at certain, pre-determined times. If you are a new employee, you will have a deadline for selecting your benefits. If you are a current employee, alteration or selection periods will vary based on the benefit. For example, you may only be able to change your health insurance during your company’s open enrollment period or when you experience a life-changing event (e.g., the birth of a new child). When it comes to retirement funding, though, most organizations allow adjustments at any time. Consult your Human Resources (HR) department to find out how your company’s system works.

Health Insurance

When selecting your employer-sponsored health coverage, make sure that you think about all the details beyond just premiums and deductibles. Factors like co-insurance, co-payments, out-of-pocket maximums, and exclusions may turn a seemingly good deal into a bad one for your family. If you want to continue seeing a certain provider, you may also want to see if that person is considered in-network or out-of-network for each insurance offering.

• Preferred Provider Organizations (PPOs): PPOs offer more flexibility at a cost; members can go to out-of-network providers and still receive some reimbursement from the insurance company.
• Health Maintenance Organizations (HMOs): HMOs are typically cheaper than PPOs because participants are required to use providers who have contractual arrangements with the insurance company.
• Health Savings Accounts (HSAs): Usually offered with certain types of PPOs and High-Deductible Health Plans (HDHPs), HSAs allow you to take out pre-tax money to use on medical expenses.
• Dental & Vision Insurance: You may not have many options when it comes to dental and vision coverage, but if you do, look at your spending in these areas historically and choose the plans that best fit your needs.

Disability & Life Insurance

When considering disability and life insurance, it’s best to keep your income needs in mind – whether you only take care of yourself or you are in charge of supporting your entire family. It’s also crucial to note that disability benefits can be taxable. It all depends on who paid for the coverage and whether or not after-tax dollars were used.  When given the choice, we typically recommend that clients pay their premiums with after-tax dollars in order to have that portion of their disability income received tax free.

• Short-Term Disability (STD): This coverage generally pays a portion of your salary when you cannot work due to a non-work-related injury or illness. It lasts anywhere from nine to 52 weeks, depending on the terms set forth by the insurance company.
• Long-Term Disability (LTD): LTD starts when STD ends. These policies may have a fixed payment period or pay out until you retire. Just like STD, this coverage usually only pays a portion of your salary.
• Accidental Death & Dismemberment (AD&D): AD&D will pay out a certain amount to your beneficiary if you die during an accident or lose a limb (per the policy’s definition). It is usually very inexpensive. Because there are limitations on AD&D benefits, we feel that traditional life insurance should be purchased up to the client’s need. Any potential AD&D benefits should be considered extra money for heirs.
• Life Insurance: Most employer-sponsored plans allow you to buy into a group policy that is inexpensive, but not portable. If you want to have control over your policy regardless of where you work, you may want to supplement your coverage with an individual policy. Check out our blog to help determine how much life insurance you might need.

Retirement Funding

Pensions are not very common in today’s workplace. That means that your retirement is up to you and how much you put into it. As with every investment strategy, it may be a good idea to talk to a Registered Investment Advisor and a tax professional before making decisions regarding fund allocation.

• 401(k)s: The government allows individuals to contribute a certain amount of money to a 401(k) every year. Traditional 401(k)s utilize pre-tax funds while Roth 401(k)s use post-tax ones. That means that each option has different tax implications upon distribution. Additionally, check with your employer to see if they match your contributions; it may be an excellent way to invest “free” money.
• Employee Stock Purchase Plans (ESPP): ESPPs can be great investments. Before buying company stock through and ESPP, though, see what kind of restrictions there could be on buying/selling shares and what the potential tax implications the stock sale would produce.
• Pensions: If your employer offers a pension, you will probably have to choose between a single-life annuity or a joint-and-survivor annuity. You may want to discuss both scenarios with your financial advisor before making a selection.

Other Benefits

Every employer has different benefits. Some may go beyond the standard healthcare and retirement benefits to offer things like elder care, wellness benefits, and critical illness insurance. Contact your HR representative to ensure that you know all of your options.

The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual. This information is not intended to be a substitute for individualized tax, investment, or legal advice. We suggest that you discuss your specific situation with a qualified professional.

As a Registered Investment Advisor (RIA), Partnership Wealth Management is committed to providing our clients with financial planning and wealth management services to help them make the most of their investments. At Partnership Wealth Management, we have a long history of working with the LGBT community. Among the many services we offer are financial planning and estate planning strategies for gay and lesbian couples. Financial planning is an important part of preparing for the future; contact us today to get started: www.partnershipwm.com.