For many people in the working world, the onset of fall means it’s benefits election season: time for employees to review and choose from among the workplace benefits offered by their employer.
Known as the “open enrollment period,” this annual window for employees to evaluate and select benefits offers an excellent — yet often overlooked — opportunity for workers to maximize their on-the-job compensation by taking advantage of the voluntary benefits available to them, whether it’s certain forms of insurance or less traditional benefits such as wellness incentives, identity theft protection, or even pet insurance.
Voluntary benefits are offered by employers as add-ons to a core benefits package. Employees usually pay for them out of their own pockets, in most cases via an automatic payroll deduction.
Don’t be deterred by the extra cost, and don’t infer from the “voluntary” label that they’re superfluous, however. From an employee’s perspective, voluntary benefits are a powerful way to enrich your compensation package, asserts Darin Shebesta, a certified financial planner with Jackson/Rosskelley Wealth Advisors in Scottsdale, Ariz. “Virtually every aspect of a person’s financial life is touched by their [workplace] benefits. But few people take the time to really look at them. They’re leaving benefits on the table that are rightfully theirs.”
Don’t let another open enrollment season pass without at least investigating the voluntary benefits offered by your employer. Here are some that can deliver valuable perks at an affordable price:
An employer-sponsored retirement plan typically comes with a limit on annual tax-favored contributions, depending on the type of plan. Shebesta suggests contributing as much as you can afford, not only into so-called “qualified” retirement accounts such as a 401(k), where money is taxed on the way out, not the way in (pre-tax), but also to a Roth account, where money is taxed on the way in, not the way out (after-tax).
If your employer has some form of program to match your retirement plan contributions, take full advantage of it, he says. These matching contributions essentially amount to extra income for you — income that, when invested, has a chance to grow over time.
Health insurance: If your employer offers a high-deductible health plan (HDHP) that comes with a health savings account (HSA) option, consider it. “Everybody should have access to an HSA for the flexibility they provide,” Shebesta says. That flexibility includes the ability to deposit a certain amount annually into the account tax-free, then take it out (also tax-free) to pay for qualifying medical expenses. For people over 50, it’s worth considering using HSA money to pay for a long-term care insurance (LTCI) policy, according to Shebesta, because LTCI can protect a person from potential financial devastation if they should require expensive care for an extended period.
It’s also worth taking advantage of health and wellness benefits and incentives, if your employer offers them, says Shebesta. Some employers may offer a health club membership or discounts on membership fees as a benefit to employees. Others may offer financial incentives to employees who undergo preventive medical tests, for example.
HSAs also function as useful retirement savings vehicles, providing an IRA (individual retirement account)-like home for pre-tax dollars, whereby funds deposited in the account can be withdrawn for non-medical purposes starting at age 65. As with funds inside a qualified IRA, the account owner will in most cases be required to pay income tax on that money on the way out. “The HSA works almost like an alternate retirement plan,” Shebesta explains. “It’s basically another pre-tax investment vehicle.”
Life insurance is a worthwhile investment, particularly when you have someone else dependent on you and your income, such as a spouse, life partner and/or children, he says. Oftentimes, a life insurance policy is more affordable when purchased through an employer, where a person may gain access to special group rates and/or avoid medical underwriting.
If your employer doesn’t offer disability insurance as a core benefit, it’s worth investing in is an optional benefit, according to Shebesta. Long-term disability insurance in particular is a valuable tool to protect your earning power — the biggest asset you have — by replacing income that’s lost if you’re no longer able to work due to an injury or disability. He suggests getting as much optional long-term and short-term disability insurance as possible.
Additional voluntary benefits worth considering:
…and the list goes on. The selection of voluntary benefits that an employer can offer employees is broad and expanding. What’s more, offering voluntary benefits costs employers virtually nothing, as employees are the ones paying for them. So if you hear about a voluntary benefit you think your employer should offer, Shebesta says, “don’t be shy about approaching the HR department about it.”
November 2015 — This column is provided by the Financial Planning Association® (FPA®) of Northeastern New York, the principle professional organization for Certified Financial PlannerTM (CFP®) professionals. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process. Please credit FPA of Northeastern New York if you use this column in whole or in part.
The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION. The marks may not be used without written permission from the Financial Planning Association.
Comments are closed.