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How To Rock Your Employee Benefits

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Steve Pomeranz, Employee Benefits

It’s that time again! We’ve almost wrapped up another year and the holidays are here—time to relax, bond with family and community, and enjoy various holiday traditions. But in all the hustle and bustle of Thanksgiving, Black Friday, holiday shopping and socializing, it’s easy to forget about that other most important annual tradition of selecting workplace benefits for the coming year.

The benefits of employee benefits

Health insurance and other benefits helped draw you to your job. But when a bazillion projects fill your inbox, it’s tempting to cruise through open enrollment on autopilot, but I strongly urge you to not take this one lightly, which is why I’m giving you this heads-up ahead of the final deadline.

This is one task worthy of your attention, so here are five common mistakes I want you to avoid:

  1. Choosing the same coverage mindlessly

The biggest mistake is tuning out. I know many of you will spend a fair amount of time looking for deals and planning your Black Friday and holiday purchases, which is great. But I also urge you to dedicate some time on planning for your financial security, and, frankly, this will not take up a lot of your time. It’s totally worth it!

A 2014 survey showed that 90% of all U.S. employees elect the same benefits plan year after year, without really bothering to check if anything has changed. That’s not a good strategy because insurers often change benefits within plans to drive up their profits or fix what’s not working for them—and I don’t want you to get blindsided.

While a change may seem small on the face of it, it may have a big impact on your family. For example, a health plan might change its provider network and exclude your doctor.

On the flip side, your employer may have expanded its selection of plans, with new perks, and by blindly going with your old plan, you might just be leaving money on the table.

So do this: Make sure you attend the open enrollment meeting at work (almost all employers have these open enrollment meetings) and use the tools provided to compare plans. Take questions to your employer’s human resources department or benefits consultant, so you are aware of plan changes and can proactively select one that’s right for you. Get into the habit of doing this every year, and, come what may, make sure you attend your company’s benefits meetings and keep yourself updated all year round.

Also—and this is important—if there have been changes to your family situation, such as a newborn, marriage, divorce or kids leaving home, make sure you notify HR and update your benefits accordingly.

  1. Misunderstanding tax-advantaged accounts for out-of-pocket expenses

Many employers provide tax-advantaged accounts that you can use to pay for child care, commuting, or out-of-pocket medical expenses. If used correctly, these accounts can help you save significant sums of money, but employees really need to understand the rules associated with them because each type of account works a little differently.

For example, with health savings accounts, or HSAs, all the unused money rolls over to the following year. On the other hand, many medical flexible spending accounts, or FSAs, restrict this and let you roll over just $500 of unused money to the next year, and you lose any unused money above that amount.

So understand how the accounts work, estimate your annual expenses before you decide how much to contribute and keep a running track of what you spend through the year.

  1. Choosing a health plan on price only

Never choose a health plan on price only. Most U.S. employees have their portion of healthcare premiums directly deducted from their paychecks, so many of them look at price and often pick a lower priced plan. But, beware!—many of these lower premium plans come with higher deductibles and extra copays. So understand your family’s healthcare risks and pick a plan that optimizes your spending. In other words, paying slightly more each month might be worth it because it might lower your actual out-of-pocket medical expenses in the coming year.

Dig into the details to learn how the plan works. Are the doctors and hospitals you want to use in the plan’s provider network? Is there coverage outside of the network for when you and your family travel? What will you pay out of pocket when you visit a doctor, specialist, or hospital? What is the maximum you’d pay out of pocket annually? I recommend reviewing your 2016 healthcare spending to get a fairly good idea of what you’ll likely spend on healthcare in 2017, then pick a plan that makes the most sense.

Remember the adage: “Some people know the price of everything but the value of nothing”. Don’t be one of those people.

  1. Undervaluing disability insurance

Did you know that over 37,000 people die in road crashes in the U.S. every year? And that an additional 2.35 million are injured or disabled in road accidents in the U.S. That’s not counting other accidents such as fires, homicides, and the like. Today’s 20-year-olds have about a 1-in-4 chance of experiencing a disability sometime before retirement. That’s pretty high, yet most people underestimate the risk.

So after health insurance, disability insurance should be priority No. 1.

Disability insurance replaces a portion of your income if you get injured or are too sick to work for an extended period. No one knows what tomorrow holds, so it’s best to also be protected for a potential worst case scenario.

Make sure you say “yes” if your employer pays the full cost of disability insurance. If your employer offers it but doesn’t pay for it, then seriously consider buying it, especially if you’re young or have a young family and are the sole earner.

  1. Skimping on life insurance

Employers often pay for a small amount of life insurance, perhaps one or two times your annual salary. That’s terrific, but probably not enough if you have a growing family that’s financially dependent on you. Moreover, usually life insurance paid for by the employer ends when you leave the company.

So if you are offered the opportunity to buy more coverage through your employer’s broker, give it serious thought. Usually, you can take that additional coverage with you if you leave the job.

And do your research. Look for life insurance quotes on your own, and compare them to rates offered through your employer. You might just get a cheaper price by buying through your employer if you have a health condition.

A final and important note on employer health insurance: While sometimes you can take it with you, usually the cost is more expensive than getting it on your own, and, most likely, you won’t be able to take it with you. That being said, life insurance requires you to be insurable. If you become ill and uninsurable or contract some chronic condition, your cost of insurance may zoom higher. The solution is to get your own insurance outside of work so you can have control of it at all times. Also getting it when you are healthy is always the best time to get insurance. Employer insurance should only be the cream on the top.

So this time of year, spend some time researching your benefits at work. Also keep the big picture in mind and plan for the year ahead and set goals, not just for your health plan, but for your overall financial plan.

I've been an investment strategist and adviser for over 35 years, leading with a mission of unbiased advice to educate and protect listeners on my weekly radio show on NPR affiliates nationwide. I have been named a “Top 100 Wealth Advisor” by Worth Magazine and “Top Advisor” by Reuters.