Financial Planning Tips for Open Enrollment

For many companies, benefits open enrollment season is rapidly approaching. With open enrollment season comes the annual requirement that employees choose whether to change or keep their current benefits while digesting a plethora of summary plan descriptions, benefits booklets, and seemingly minor but actually significant differences in plan coverages. While the open enrollment season can feel overwhelming, following these tips regarding some of the main benefits you’ll encounter can help cut through the noise and ensure you are making the right decision for yourself and your family.

Health Insurance
Health insurance is typically the most significant focus, and perhaps the most overwhelming aspect, of open enrollment. Choosing the wrong health insurance plan could mean significant financial costs down the road. When evaluating your health insurance options, it is important to consider the following factors:

1. How often do you and your family go to the doctor? (use your doctor visits from the previous year as a guide)
2. How does your current coverage compare to the other options available? (Look at coverages for things such as hospital stays, sick visits, maternity care (if you plan to have children), etc.)
3. How do the plans compare financially?
   1.  To compare the plans from a financial perspective, the following exercise can be helpful:
      1. Multiply the monthly premium by 12 to determine the annual premium cost. In a best-case scenario, this is what you will pay for the year
      2. Then, add the deductible to the annual premium costs. In a year in which you are sick often or have a significant medical issue, this is likely what you will pay for the year
      3. Then, add the out-of-pocket maximum to the annual premium cost. This represents your total medical cost for the plan in a worst-case scenario.
4. Are my current doctors in the network? (This is an important question if you have a doctor that you or your family visit regularly. If you choose a plan and they are not in-network, you may need to switch doctors)

When you evaluate health plans with these things in mind, it makes the decision-making process far less overwhelming. By looking at the total potential costs in the best and worst cases, the differences in coverage, the coverage network, and projecting how often you may need to use the insurance, you can make an informed decision about your health coverage that is right for you and your family.

HSAs and FSAs

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) can be valuable tools when planning your costs for the year. Both accounts are funded with pre-tax dollars and can be used for specific expenses. When considering whether to enroll in an HSA or FSA, it is important to understand some of the basic rules that apply to each. HSAs have a number of benefits, including significant tax advantages. HSAs are triple-tax advantaged, meaning that contributions go in before taxes, grow tax-deferred, and can be withdrawn tax-free for qualified medical expenses. For high-income individuals, in particular, they can be valuable retirement-planning tools. The other benefit of a HSA is that your employer can also make contributions to the account on your behalf, potentially giving your health savings a boost and saving you money on medical expenses. However, HSAs are only available with High-Deductible Health Plans (HDHP)*. While the HSA can be a valuable tool, it is important to weigh the potential costs of a HDHP before enrolling. Particularly for young families and individuals with ongoing medical conditions, the costs associated with a HDHP can far outweigh the benefits of the HSA. FSAs, on the other hand, can be available for various expenses. You may see a healthcare FSA, a dependent care FSA, and a parking FSA, among others. FSAs are also funded pre-tax, but you are not able to accumulate funds in the accounts. Any funds deposited into the FSA must be used during the year in which it is contributed, otherwise, it is lost. When considering an FSA, make sure that you have a plan to use the funds so that they do not go to waste. If you use a dependent care FSA, for example, make sure that you have a plan to get reimbursed for your daycare costs. If HSAs and FSAs are offered as part of your benefits package, it is important to consider the pros and cons of these tools before enrolling.

Dental, Vision, Disability, and Life Insurance

Your employer may offer additional insurance options on top of health insurance, including dental, vision, disability, and life insurance. It is important to consider these options carefully when enrolling in your benefits. Dental and vision insurance can be important benefits for you and your family, particularly if you have children or a history of dental or vision needs. While dental insurance is often fairly limited in terms of the coverage it provides, most dental plans cover routine care visits and can help defray the cost of dental care for you and your family. Vision insurance, likewise, often offers coverage for basic checkups, as well as partial coverage of the cost of new contacts and glasses. If you, your spouse, or a dependent need corrective glasses or contacts, vision insurance can help to cover some of the cost. From a health standpoint, having coverage for basic checkups can allow you to ensure that you are staying on top of your health, so it is typically a good idea to enroll in the dental and vision insurance provided unless you have coverage elsewhere. Your options for coverage tend to be more limited than that of health insurance, but if you do have more than one option, going through the same thought process outlined above for health insurance can help determine the right plan for you.
Disability and life insurance are also important benefits provided by many employers. As a general rule, you should always sign up for the disability and life insurance coverage that is paid for by your employer. In many cases, employers pay for the basic coverage, which provides free, but limited, benefits to you as an employee should you become disabled, or to your family in the event of your untimely passing. Often, the disability coverage provided is only for short-term disabilities and provides a relatively modest percentage of your income as payment. It is important to evaluate your disability insurance and ensure that it is adequate coverage for you in the event of a disability. A quality CERTIFIED FINANCIAL PLANNER™ can help you determine the right disability coverage for you. Likewise, the life insurance covered by your employer may only be 1x your salary, which is unlikely to be enough coverage. You may have the option to purchase supplemental life insurance through your employer-provided benefits at an additional cost. Again, a CERTIFIED FINANCIAL PLANNER™ can help you determine the right life insurance coverage for you and determine the right policy for your needs.
Open enrollment can be overwhelming, but it is also a great time for employees to sit down and ensure that they are taking full advantage of their employer-provided benefits. You do not have to go through the process alone. Your company’s benefits providers may have consultants available to help you through the process. If not, finding a CERTIFIED FINANCIAL PLANNER™ Professional may be the solution.

To find fee-only financial planners serving clients in your area, visit https://www.napfa.org/find-an-advisor, or if you are a participant in a retirement plan that works with Greenspring, schedule a 1:1 with one of our CERTIFIED FINANCIAL PLANNER™ Professionals at www.greenspringadvice.com. If you are a private client or are simply interested in learning more about Greenspring’s services, contact us today at www.greensringadvisors.com.

*Visit www.irs.gov for more information on HDHP and HSA limits.