It’s that time of the year again! That’s right…it’s Open Enrollment season!
Open enrollment periods (typically occurring at the end of the year for most employers) are the times when employees are able to make benefit package selections for the upcoming year.
Knowing how to maximize your benefits for your family can help save you thousands of dollars a year but it will require a little planning on your part.
This guide will help you make the most of your employer’s 2015 benefits package and help ensure you’re getting the most value out of your employer sponsored benefits package.
2015 Health Insurance Plan Benefits:
Under the Affordable Care Act (Obamacare), employers are not allowed to deny coverage for anyone based on preexisting medical conditions. They can, however, use “wellness programs” that offer incentives to employees for being pro-active in leading a healthy lifestyle or for engaging in other “preventative” activities such as receiving annual check-ups.
Physicals: Some companies are now offering health insurance plans with smaller deductibles or “credits” in 2015 if employees participate in a “voluntary” physicals during open enrollment periods. In theory, these screenings may detect early stages of a more serious disease which can be more easily treated than if the disease goes undetected until it becomes a bigger problem.
Some people are reluctant to participate in these voluntary physicals as they feel it is an invasion of their privacy. I see it as a win-win situation as around (you’re saving money and have better monitoring of your health).
Wellness Programs: Your company may offer discounts or free memberships to gyms, fitness centers, health food stores, tennis clubs or similar facilities. Take advantage of these opportunities. It would be a shame to let them go to waste. One company I visited had a cafeteria in which the “healthy” meal options cost substantially less than the fatty fried “unhealthy” options (more of a lifestyle choice than a benefit, but I still thought it was a cool idea).
Varying Coverage Levels: If you’re employer offers several different tiers or levels of health insurance coverage (such as premium or plus plans or gold, silver and bronze level plans) take a look at your average medical expenses over the previous 2 or three years and calculate what your out of pockets costs would have been under each of the various coverage options. Compare your out of pocket expenses and co-pays to the premiums you’d pay for each plan to identify the best savings for you.
Potential Savings: Maximizing your employer’s medical benefits could save you a thousand dollars or more a year depending on your family’s medical needs.
2015 Flexible Spending Accounts, Medical (FSAs):
I wrote a detailed report on 2015 Medical Flexible Spending Accounts (FSAs) last week and they are another benefit you can use to save close to $1,000 a year or more using pre-tax money (money you don’t have to pay income tax on) to pay for certain “qualified” medical expenses (co-pays, contacts, glasses, therapy, orthodontia, etc.).
Maximum Contribution: You’re allowed to contribute up to $2500 each year into a medical FSA account to be used towards qualified medical expenses. If you’re in the 25% tax bracket, you could save $625 in taxes each year!
Roll-over Provision: Also, under the Affordable Care Act (Obamacare), employer’s are now allowed to roll over up to $500 of unused funds (from employees accounts) towards the following year (unfortunately, it is up to the company if they want to offer this feature). Be sure to talk to your employer’s human resources department to see if they honor this option.
Before the Affordable Care Act, any money left over in your FSA was turned back over to your employer. The made people reluctant to participate in their company’s medical FSA because they didn’t want to take the chance of losing the money.
Potential Savings: As mentioned above, depending on your income and federal and state tax burden, you could easily save $1000 or more each year by maximizing your employer’s FSA account.
2015 Dependent Care Flexible Spending Accounts (FSAs):
Similar to medical FSA’s profiled above, you can save a tremendous amount of money on taxes by utilizing Flexible Spending Accounts to pay for dependent care related expenses such as child care or any other person claimed as a dependent on your federal income taxes (child care, elder care, etc.).
Maximum Contribution: The current limit for dependent care Flexible Spending Accounts is $5000 (2015 Dependent Care FSA Limits have not been announced yet).
Potential Savings: If you have at least $5000 of child care each year and you’re in the 25% tax bracket, you could save $1250 in taxes each year by maxing out your dependent care FSA.
2015 Life Insurance Benefits:
Just because your employer offers life insurance as part of their benefits package, it doesn’t mean you can’t get a better deal somewhere else.
Group Life Insurance: Most employers offer some sort of group life insurance plan for their employees. Group life insurance is good for many people because it “groups” people of varying health together allowing people with higher risk health to get relatively inexpensive life insurance. However, if you’re in good health, your premiums are helping to offset the cost of your less healthy co-workers. You can usually get better coverage with a term life insurance policy.
Individual Term Life Insurance: If you’re relatively healthy, you can actually get an excellent term life insurance policy much cheaper than what some companies offer through their group life insurance options. Shop around for the best term life insurance rates. Never buy whole life insurance policies unless you have no other way to get insurance.
Life Insurance Value Depreciation: Remember that most life insurance policies are not adjusted for inflation. If you buy a 20 year $300,000 term life insurance (and something were to happen to you after 15 years) that $300,000 wouldn’t have the same buying power down the road as it would today. Read more on inflation’s effect on term life insurance.
2015 401K Plan Benefits:
401k Contribution limits are expected to rise in 2015 but we won’t know for sure for a couple more weeks. Regardless, open enrollment periods are a great time to review your current 401k contributions to make sure you’re taking full advantage of your employer’s 401k benefits package.
Consider Increasing Your Contribution Levels: Remember, increasing your monthly contributions does not affect your take home pay on a dollar for dollar basis. For more information, check out my article on 401k contributions and their affect on your take home pay. You can also reference this handy table below:
Company Match: At a MINIMUM, make sure you contribute enough money to your 401k plan to get your employer’s maximum matching contribution.
Be Careful When Maxing Out Your 401k: As I’ve written in the past, make sure you don’t max out your 401k contributions too early in the year or you might miss out on your employer’s matching 401k payments the last few months of the year.
Annual Compensation Limits: If you make over $260,000 per year (lucky you) you should also check out my article on 401k compensation limits and how they could affect your company’s matching 401k payments.
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