Employee Benefits You Should Know About

Fall is an exciting time because it's benefits enrollment season for many employees. Open enrollment occurs only once a year in a one-to two-month window, typically starting around October or November. Whatever decisions you make during that window, you're typically committed for an entire year (with exception to a few qualifying life events). As important as that sounds, many individuals, on average, spend far too few minutes reviewing their choices. Going through your benefits may feel like a chore, but it's worthy of your time and effort to review your employee benefits.

Ahead, we'll explore the different types of employee benefits and then take a look at how to maximize them. But first, let's look at what constitutes a benefit and why companies offer them.

Employee benefits are part of a total compensation package, separate from salary, that a company provides to employees (commonly offered to full-time employees). Employee benefit packages can include things like insurance (health care, dental, disability, life), retirement plans, paid time off, and employee assistance programs.

Employee benefit packages help companies attract and retain top talent. When searching for jobs, benefits are one of the most important items people review when looking at job postings. Additionally, employee benefits can play a significant role in a company's employee retention strategy because they provide important coverage like insurance and retirement savings plans that are valuable to employees and their families.

The federal government's Department of Labor legally requires companies to provide certain benefits to full-time employees. Federally mandated employee benefits include Social Security, Medicare, unemployment insurance, workers' compensation, and family and medical leave.

In addition to the above legally required employee benefits, there are plenty of employee benefits that are optional for employers to offer. Benefits like paid time off, flexible work schedules, tuition assistance, transportation assistance, childcare or adoption assistance are typically offered to you without having to make an election for them. However, there are other benefits where you have a choice, and they are usually consolidated into an annual enrollment election period. If this isn't your first enrollment period, don't just assume that what worked in the past is the best for you now. Benefits can and will change. Here's a list of benefits you may encounter.

Provides medical coverage for you (and your family's) healthcare needs. Participants in the plan pay a premium, and in exchange, the health insurance company pays for an agreed upon list of healthcare services and coverage. The cost of the plan (premiums that you'll pay), deductible, copayment, out-of-pocket maximums, and prescription coverage, can vary from plan to plan. Note: any employer with 50 or more full-time employees is required to offer health insurance.

FSAs allow you to set aside pre-tax dollars (up to a set annual limit) for qualified medical expenses or dependent care costs. A health care FSA can be used to pay for medical expenses like over-the-counter medications, dental and vision care. Dependent care FSAs can pay for day care, summer day camp, and preschool expenses for eligible dependents (children or adults). In most cases, outside a small amount that you may be able to carry over to the following year, you'll need to spend the money by year's end or lose it.

These insurance plans can help pay for specified expenses related to an illness, accident or hospital stay whether or not the expense is covered by health insurance.

Also known as employer-sponsored insurance or group life insurance, basic life insurance is often a low-cost insurance option for employees that typically offers coverage for a specified period and pays a death benefit to the beneficiary if the policyholder passes while the contract is still active.

Provides additional coverage (on top of basic life insurance) to help a family cover expenses, in the event of the policyholder's death.

Short-term disability and long-term disability insurance both provide coverage to help you replace your income if you can't work due to a covered illness or injury. Typically, disability insurance pays a percentage of your base salary to help you meet your financial obligations.

Note that disability insurance can cover you if illness or injury occurred outside of work while worker's compensation, which is similar, is based on work-related illness or injury. They serve different purposes.

Provides coverage for costs related to long-term care. Typically, benefits are triggered when you are unable to perform at least two activities of daily living (ADLs) or are cognitively impaired for a certain number of days.

Some employers offer additional insurance policy services such as auto, home, and pet insurance at discounted group rates.

Retirement plans can include 401(k)s (or similar 403(b) or 457(b) plans), as well as small business retirement plans like SEP IRAs and SIMPLE IRAs. Retirement plans can potentially offer employer matching contributions where a company puts money into your retirement account based on the amount you put in, helping you build your retirement savings.

Gives access to discounted legal advice and services, such as estate planning, help with identity theft, and general legal guidance.

Provides incentives, discounts, or reimbursements for programs that can improve an employee's health like gym memberships or smoking cessation programs. Some employers offer free wellness and stress management programs.

Now that you're familiar with some of the possible employee benefits out there, here are some tips to help you make the most of your benefits.

Change is inevitable, but the good thing is that many employers will likely tell you what's been updated since the last enrollment period.

For example, you may be able to sign up for a new legal plan benefit that might enable you to create a comprehensive estate plan you've wanted to build or you might want to change the health care plan you're on now because the out of pocket maximum increased more than you expected.

Life events can play an important role in deciding which employee benefits to select and how much coverage you need.

For example, the birth of a child might lead to re-evaluating your benefits. Consider switching to a family health insurance plan, maximizing your payout option for disability insurance, and adding more to your life insurance policy beyond the basic coverage. If you're recently married, you and your spouse could do a side-by-side comparison of the different benefits offered by your employers, then mix and match benefits that best meets your family's needs, goals, and budget.

Your health insurance choice is one of the biggest decisions you'll make during the enrollment period. Depending on the employer, you may have one or a few options. For those that have options, the right election is based on getting the most comprehensive coverage that you can afford based on you and your family's needs. One way to help narrow your choices is to review your out-of-pocket costs from the previous year and consider any new medical needs that will require additional payments in the new year.

If you don't anticipate needing a lot of medical care and want to put money away for future health care expenses, you may consider a high deductible plan with a Health Savings Account (HSA) if available. An HSA is a vehicle to help you save and pay for future health care costs. HSAs offer a unique triple tax advantage: contributions are usually funded on a pretax basis, earnings are tax-free, and withdrawals are tax-free when used for qualified medical expenses. If you leave your current employer, you're able to take the HSA funds with you.

On the other hand, if you have a medical condition or a large family and you anticipate spending a lot on health care expenses in the upcoming year, a more traditional copay plan could be a better fit. In that situation, you may have access to a flexible spending account (FSA) as a tax-efficient way to save for potential health care expenses.

It's a good idea to review your 401(k) (or similar plan) at least annually to see if your retirement savings are on track.

Consider contributing at least enough to receive the employer match, and more if you can afford to do so. Increasing your contributions for the upcoming year by an extra 1% might go a long way in pursuing a financial future.

If your contributions are pre-tax, they may help lower your current tax bill, and there's also the potential for tax-deferred growth. Alternatively, your employer may offer a Roth 401(k) plan (or similar plan). Your Roth contributions are based on after-tax money, meaning they're taxed before they're deposited into the plan, which can allow your earnings to potentially grow tax-free and have access to tax-free distributions as long as you held the account for at least 5 years and are at least age 59.5 years old. There are very few opportunities for tax-free income in retirement, so this might be one to consider.

Life is full of unexpected events, some of which could have a potentially negative impact on your financial and mental well-being, such as disability, death, or the need for long-term care. Everyone's tolerance for the unknown is different as well as how we like to prepare for them. Make sure you have sufficient protection for your individual and/or family situation through insurance products like short- and long-term disability insurance, basic and supplemental coverage (if needed), and long-term care insurance.

Keep in mind, there are no requirements to purchase any of this insurance through your employer and your employer may already cover a base level of insurance for you. Although an employer's policy is often cheaper because they can negotiate rates, you should always shop around and compare prices and benefit offerings. If you're in above average health, you may want to look at individual insurance policies which may be more cost effective and can be customized to you.

Give yourself time to make sure you understand the benefits your company offers and what the deadlines are to enroll. For certain benefits, you may have to register during open enrollment. For others, such as tuition reimbursement, you may be able to wait until the need arises. Remember, your company considers these benefits as part of your total compensation package, whether you use them or not.

Open enrollment season is an exciting time, be sure to attend any benefits fairs or webcasts offered to learn what's new or changing for the upcoming year and to get questions answered to help tailor the offering to your unique situation. These benefits can be valuable, so don't dismiss them.