Amazon recently announced their move from a less-common springtime open enrollment schedule to a more traditional fall one—a change that elicited some (Zoom- and Slack-based) water-cooler chatter from the team here at Flow.
Why did this seemingly, uh, mind-numbing topic inspire conversation? We’ll cop to being total nerds about this stuff, to be sure, but also: I’d argue that open enrollment—and, with it, that lengthy benefits booklet you receive each year—is a far more scintillating subject than it may appear at first blush.
Yes, this is a hill I’m willing to die on!
[Meg’s Note: This post was written by Associate Planner Maddie Burton. We’ll see if this turns into something regular, but for now, just benefit from all the insight Maddie has gained by helping clients go through hundreds of open enrollment periods.]
Why you should be thrilled to peruse your open enrollment benefits booklet: let us count the ways.
Your benefits are a major component of your total compensation.
When you’re weighing a job offer, your focus may very well be on your base salary, signing bonus or annual bonus target, and equity compensation.
But under the hood, considerations like the rate of your employer’s 401(k) match, or the generosity of their health insurance offerings (perhaps including an annual contribution to a health savings account on your behalf, if you choose an HSA-eligible plan) add up to thousands of dollars each year.
Employers offer some pretty interesting—but easily overlooked—benefits you might’ve never noticed before.
Pet insurance for your beloved fur-child? Charitable matching programs, so you can multiply the impact of your giving? Mental health and wellness offerings, for anything from free counseling to reimbursement for that fancy gym membership?
If you can get past the dozens of eye-glazing pages about health insurance premiums, deductibles, and copays, you might find some pretty relevant, and dare we say fun, perks available to you.
Your HR department makes additions and improvements to their offerings each year, and these are changes that you can benefit (no pun intended) from.
Your friendly neighborhood HR rep certainly tries to stay on the cutting edge of benefit offerings out of the goodness of their heart, sure, but remember: this is also a way for your company to stay competitive when it comes to attracting the most talented employees. (That would be you!)
We’ve been reviewing open enrollment booklets from a broad swath of tech companies for years now, and it’s been fascinating to see how employers have continually made changes to their benefits packages to keep in line with others in the industry. It’s basically a benefit arms race that elicits…well, whatever it is that’s the opposite of mutually-assured destruction.
Some of your choices might only seem subtly different on the surface…but could lead to very different outcomes in practice.
Here’s one example: in a single sentence within your benefits booklet, you might see that your employer allows you to pay for long-term disability insurance with pre-tax dollars or after-tax dollars.
That consideration might seem so small as to be an afterthought—and paying for this benefit with after-tax money might mean just a few extra dollars out of your pocket each pay period. But if you become disabled and need to use this benefit, that’s the difference between all of your disability income being subject to taxation…or exempt from taxation.
Taking some time to investigate these details—and reaching out to your HR rep, if these tradeoffs and distinctions aren’t clear—can be worth a lot to Future You.
Knowledge, as they say, is power.
Taking just half an hour to fully digest the intricacies of your benefits package means you’ll be able to make better decisions when it comes to making your elections—and making the most of said elections throughout your plan year.
Okay, okay, so this stuff might be interesting (or, at the very least, important). But my benefits booklet is intimidating…how should I approach reading it?
Curled up on the sofa, relaxing beverage in hand, with ambient music filtering softly through the air, of course!
Oh—that’s not quite what you meant? Let me try that again.
As someone who’s read more than her fair share of benefits booklets (it’s a glamorous life, try not to be too jealous), here’s how I tend to approach the key sections.
Updates from Last Year’s Open Enrollment
If your HR team highlights the specific items that have changed since last year, they might do so on a consolidated page at the front of your benefits booklet, or they may simply list these details in a company-wide email that accompanies the announcement of open enrollment season.
It’s worth spending a minute looking for a list of these changes; if you’re otherwise happy with your previous choices, this will allow you to hone in on a streamlined set of options to review.
I won’t sugarcoat it: this is the longest and most overwhelming section of your benefits booklet. For that reason, we like to create a simpler framework for comparing health insurance plans. Enter: the concept of guaranteed and maximum costs.
Guaranteed costs are the ones, like your premiums, that you’ll incur no matter what your healthcare needs are. This figure gets adjusted downward if your employer contributes to a health savings account on your behalf.
Maximum costs are the out-of-pocket maximums for each plan—keeping in mind that plans often have separate in-network and out-of-network maximums. This figure gets adjusted downward to account for any tax savings if the plan allows you to max out a health savings account alongside.
You might still need, or want, to peruse more extensive information on plan costs if you know you’ll need a specific type of care. But using the guaranteed-versus-maximum cost framework will often help you narrow down your choices, even though it isn’t possible to calculate your exact healthcare costs in advance (though if you do have access to that particular crystal ball, let us know!).
Vision and Dental Insurance
Enrolling in vision insurance is a reasonable idea if you’ll need contacts, glasses, or eye exams during the plan year, and enrolling in dental insurance (using the plan network to ensure the highest level of coverage!) is similarly a Responsible Adult Choice.
Some employers offer two dental insurance options. Often, one is “higher-octane” and includes orthodontia benefits or additional benefits for more extensive dental care needs. In that case, you know yourself (and your mouth…or your family’s mouths…) best, so select the option that makes the most sense for your personal situation.
Flexible Spending Accounts
Healthcare FSAs allow you to set aside pre-tax funds for out-of-pocket medical costs, like copayments and deductibles. In general, a healthcare FSA is only available if you are not enrolled in a high-deductible health plan with a health savings account (HDHP + HSA plan).
If you enroll in a HDHP + HSA health plan, you can enroll in a limited-purpose FSA plan if one is offered. (Limited-purpose FSAs allow you to set aside pre-tax funds, but can generally only be used for eligible dental and vision expenses.)
You’ll likely only want to defer a conservative amount of money into your FSA that you know you’ll use within the plan year, as FSA funds are use-it-or-lose-it.
For those with eligible childcare expenses, the dependent care FSA is another great option to take advantage of.
In addition to basic life insurance coverage—which most employers enroll you in automatically—you might have the option to elect supplemental life insurance. Generally, if someone in your life depends on your income, getting more life insurance coverage is a good idea.
That said, pursuing a private policy that isn’t tied to your employment is most often the best option. If you need extra life insurance but haven’t gone through the underwriting process yet, supplemental group coverage through your employer might be beneficial as a short-term solution.
Long-Term Disability Insurance
You’re a young, vibrant human being with many years of life ahead of you! So your ability to continue bringing in the bacon is, in and of itself, an asset that requires protecting. Long-term disability insurance constitutes a good portion of that protection, in the event that you’re unable to work for an extended period of time.
Most employers enroll you in this benefit automatically. However, some require you to opt in, so pay special attention to make sure you’ve done so!
Usually, you won’t have a choice in terms of your level of long-term disability coverage. If you do, choosing the highest level of coverage is often the most reasonable choice.
And if you’ll remember from the example above: some employers allow you to pay for your long-term disability benefits with after-tax dollars. If you’re given this opportunity, it’s generally a great idea to seize it.
While you can change your retirement savings plan contribution rate and type (pre-tax or Roth) throughout the year, your employer might announce changes to your 401(k) plan during open enrollment.
If you’re already maxing out your pre-tax or Roth 401(k), take a moment to pat yourself on the back, and also be on the lookout in case your employer offers—or introduces—an additional after-tax 401(k) option.
Usually, you’ll find a laundry list of offerings at the back of your booklet. If you have the bandwidth, don’t skip these—you’ll probably unearth some hidden gems!
Your employer might match a certain level of charitable contributions to eligible organizations. They might offer legal benefits, making it free or cheap to draft a will, trust, and powers of attorney. Lots of tech employers offer fertility benefits, which can be hugely impactful. And someday, when this global pandemic has eased and you anticipate returning to your commute on a crowded train or bus, pre-tax transit benefits might come in handy again.
Okay, great. Now that I know how to read through my open enrollment booklet, how do I make the benefits elections that are right for me?
When making your elections, there are three different types of decisions you’ll have to make:
- Decisions that are pretty straightforward, no matter your personal circumstances. Maxing out your long-term disability coverage, and paying for it with after-tax dollars if you’re able, is one of those decisions that is reasonable for most people.
- Decisions that require asking yourself one or two relatively simple questions to arrive confidently at a conclusion. For example: determining if anyone depends on your income will likely be the largest determining factor in whether or not you need supplemental life insurance.
- Decisions that involve a more complex series of tradeoffs, for which there may not be one “right” answer. Choosing a health insurance plan falls under this umbrella.
You’ll want to spend the most time and energy on the decisions that fall into bucket #3. After reviewing the numbers involved, spend time thinking about the qualitative aspects of your own personal situation, including your preferences, priorities, and psychology.
When it comes to health insurance, for example, how important is the network of doctors you’d have access to on each different plan? Do you anticipate requiring a considerable amount of medical care in the next year, or probably just an annual physical? Will choosing a “higher-octane” PPO with bigger premiums—but lower out-of-pocket costs—mean that you’ll be more likely to seek necessary medical care without delay? Do you have the savings capacity to max out a health savings account, if you choose an HSA-eligible plan?
After naming and weighing these tradeoffs, your choice might be a little (or a lot) clearer.
Do you finally want some help figuring out how to pick the best benefits from the obscure nonsense that your company provides to you during open enrollment? Schedule a free consultation or send us an email.
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Disclaimer: This article is provided for educational, general information, and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.