'Tis the Season...for Open Enrollment

It’s already the time of year most employers send out notices to employees that open enrollment season is set to begin. Most people will be facing higher insurance premiums once again. Much of the focus of open enrollment is around medical insurance but there are some other things your employer may offer that you should consider. There are also other things you may be already utilizing that deserve a second look.

Flexible Spending Accounts

 Though the rules have changed on these (you can no longer use the money for over the counter drugs unless you have a prescription), it is still a good idea to use an FSA to save money on taxes. Determine the amount you will use on co-pays, prescriptions, contacts and any other medical expenses you know you will have. This will save you money in taxes and level out the payments.

Life Insurance

If you are in good health it is likely you may be paying too much for your group life insurance policy. The group coverage likely does not require underwriting. While this is good for your unhealthy friend down the hall, it is not good for anyone in great health. You are paying the same amount as anyone else your age and the company. Also, the rates typically go up over time. It may be worth your while to look into replacing this policy and using your dollars to buy a term life insurance policy. If you are in bad health then the group coverage is probably the best deal going for you.

Prepaid Legal

I rarely see this offered as a benefit anymore and always found it difficult to envision it being a “benefit.” However, if you have this offered and you have never had your basic estate documents written (will, power of attorney, health-care directive, etc.) then this may be an expensive way to do it. Make sure these things are covered and make sure your total cost for the year will be less than around 1k. Only sign up for one year and get these important documents done. (Note: you can also do this inexpensively at legalzoom.com but I always think seeing a real estate attorney is best though it may cost you about $1,500-2,000)

Medical Insurance

Its good idea to review this ever year to make sure your election is covering your needs. It is of particular importance if you are pregnant and giving birth next year. Make sure you are choosing the coverage with the best maternity coverage. The expense of giving birth can be quite expensive without a solid medical insurance policy. Go to any seminars or on-line classes offered by your employer and/or insurer. Ask questions and take advantage of the time. Also, be sure to compare your medical offerings with your spouses. Just because one was the best this year doesn’t mean your spouse doesn’t have some new or cheaper options. Lastly, make sure any doctors you prefer are still part of the network of the plan you are choosing.

Disability Insurance

Make sure you understand what your employer offers you. Most give a 60% of income benefit for a long term disability. Many companies even pay for 100% of the premium. If your company pays the entire premium then any benefit you would receive would be taxed. If you pay the premium, then the benefit is tax free. This is an important distinction because 60% of your income tax free is a lot more than 60% if your income taxed. If your employer offers additional optional coverage, you may want to consider adding it unless you own a disability policy outside of your employer.

Long Term Care

I am seeing this more and more every year. Companies offering employees the opportunity to purchase group long term care. I think it’s a great thing. Typically, all the premium is paid by the employee but the premiums tend to be a little less than out in the “open market.” Younger individuals who may not have thought they could afford a policy can now consider it since it is cheaper through this group setting.

Few employees read through their enrollment kit every year. It’s likely you are one of these people. Do yourself a favor and at least consider attending any free workshops your company offers. There may even be some free food.

This article originally appeared here.

Matthew B. Brock, CFP®
Senior Partner, Owner
Divergent Planning, LLC
301.466.4833 | www.divergentplanning.com 

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