By Matthew Gaude & Shawn McGuire
This year has been challenging for many. With record levels of inflation and extreme market volatility, it seems like everyone is feeling uncertain about the future. If there’s one thing that can help alleviate this stress, it’s making sure you have the proper employee benefits (health, disability, and life insurance) in place to protect yourself and your family in case unforeseen events occur.
If you haven’t taken the time to thoroughly review your benefits in the past, the good news is that it’s currently open enrollment season. That means you can review and select new benefit elections. Many people automatically disregard the open enrollment notifications as junk and move on with their days—but in doing so, you could be missing out on important benefits that you’re rightfully entitled to. Don’t leave money on the table in 2023. Make the most of your employee benefits with these 8 tips.
1. Ask About Supplemental or Voluntary Benefits
Even if you are already set up with medical coverage, it’s worth the effort to do a cost-benefit analysis on supplemental coverage. Many employers offer supplemental health insurance at affordable prices that can bridge the coverage gap that 44% of retirement plan participants have.
Supplemental insurance can take care of everything from hospital stays to accidents to disability coverage to cancer treatment. For example, some supplemental hospital insurance plans will provide you with a daily benefit amount paid directly to you and even cover the copays on a set number of doctor visits. In a trying situation, this cushion can ease your stress considerably.
2. Consider an HSA
If you are enrolled in a high-deductible health plan, you have access to a health savings account (HSA). An HSA allows you to make pre-tax contributions and tax-free withdrawals for qualified medical expenses; plus your funds will grow tax-free. Many employers offer HSA contribution matches similar to a 401(k) and your funds roll over year to year, even if you switch jobs or no longer have a high-deductible health plan.
And if you don’t end up using the money for day-to-day healthcare expenses, HSAs provide an efficient way to pay for healthcare in retirement. You can invest your HSA money in ETFs or mutual funds once you have a certain amount in your account, allowing you to build your own separate healthcare nest egg for retirement.
To qualify for an HSA, your 2023 plan must have a minimum deductible of $1,500 for self-only coverage or $3,000 for family coverage. Before you sign up for this lower-premium plan, make sure you understand how the deductibles work, whether you have coinsurance or copayments, and whether the coinsurance or copayments count toward your deductible.
You can use your health savings account to pay for a long list of out-of-pocket costs, from copayments to contact lenses. Because of the high levels of inflation seen this year, the contribution limits for HSAs are increasing in 2023. The HSA annual contribution limit for self-only coverage increases from $3,650 to $3,850. If you have family coverage, the limit jumps from $7,300 to $7,750 next year. If you’re 55 or older at the end of 2023, you can put in an extra $1,000 in “catch-up” contributions.
For 2023 high-deductible plans, the maximum out-of-pocket cost is $7,500 for self-only coverage or $15,000 for family coverage. Keep in mind, though, that these plans are required to cover most of your preventive care, such as blood pressure screenings, mammograms, and immunizations, at no cost to you. They also may consider certain treatments connected to chronic care—for example, statins for heart disease and insulin for diabetes—as part of preventive treatment, meaning you can receive care at a reduced cost or no cost without having met your deductible.
How to Crunch the Numbers
Even if you’re leaning toward selecting the high-deductible option, run the numbers for each plan. To make an apples-to-apples comparison, add up the monthly premium payments that would be deducted from your paycheck and the deductible you or your family would have to meet; for the high-deductible plan, subtract your employer’s HSA contribution.
Your employer may provide a comparison tool through its open-enrollment portal to make the task of comparing plans easier. The tool typically allows you to run scenarios with estimates of various claim amounts for the year. From there, it should show you an estimate of your total expense.
Next, look at the provider networks to see if anything has changed. Employers are making adjustments to their networks to keep costs down. Many are trying to shrink the number of hospitals and doctors in the plan network without sacrificing quality of care. If your current doctors are no longer in network—and you’re not inclined to switch providers—look up your plan’s out-of-network costs. Typically, in-network care is cheaper because the insurance company has negotiated rates with the provider. Going out of network means you are subject to a provider’s non-insurance rate.
Under the Affordable Care Act, preventative care services, such as annual physicals, blood pressure screenings, and flu and shingles vaccines, should be provided at no cost.
Finally, make sure you understand all of your insurance terms. More than three-fourths of Americans don’t know the correct definition of coinsurance, according to a recent Forbes Advisor survey. Coinsurance is what you’ll pay for a service after your deductible is met. Typically, your insurance company picks up 80% of the tab, and you pay the remaining 20%. This differs from a co-payment, which is usually a flat fee that could be as low as $25.
3. Review Your FSA Account
Your employer may also offer a healthcare flexible spending account, which allows you to set aside pre-tax money for qualified out-of-pocket medical expenses. In 2023, contribution limits will increase to $3,050, up from $2,850 in 2022.
FSAs do not require that you participate in a high-deductible health plan, and they are not as versatile as HSAs. For instance, HSAs allow you to carry over any unused funds to the next plan year, whereas FSAs only allow you to carry over up to $610. Generally speaking, you cannot have both an HSA and FSA at the same time.
4. Check Your Dental, Vision, and Prescription Coverage
Once your medical needs are out of the way, don’t forget to check out your options for dental and vision care. Those are usually separate policies, with employers often offering two dental plan options and one vision plan. This year, don’t be too quick to sign up for the cheapest dental option, or skip the coverage altogether. Regular dental and vision screenings are important, because changes in eye, tooth, and gum health can signal other medical problems. If the pandemic caused you to delay some of these appointments, your dentist or optometrist may find some problems that require immediate attention.
If your out-of-pocket costs for prescription drugs increase, there are ways to keep your expenses in check. Make a list of your prescriptions, and dive into how they would be covered under a new plan. Typically, coverage is split into categories, with generic drugs requiring the lowest co-payment. Co-payments for nonpreferred, name-brand drugs are usually higher, and some drugs may not be covered.
Keep in mind that it may be less expensive to pay cash at a big discount retailer, such as Walmart, than to fork over the co-payment your insurance plan requires. You may be able to save even more by using drug manufacturer coupons provided by GoodRx.com or through your doctor. If the costs of your current drugs will rise steeply with a new plan, ask your doctor for a list of lower-cost alternatives. Then go back and rerun your cost analysis.
5. Don’t Forget Disability & Life Insurance
Many employers offer short- and long-term disability policies as well as group life insurance as part of their employee benefits packages. These are important policies that can be used to safeguard what you’ve worked so hard to build. Disability insurance can protect your income-earning potential in the event of injury or illness, and life insurance can protect your family in the event of premature death.
There is a tendency to ignore disability insurance, but this can be a costly mistake in the long run since it’s estimated that working adults are four times more likely to become disabled than to die before reaching retirement. Are you the sole breadwinner for your family? Can your spouse meet the income demands of the household if you were no longer able to work? With questions like these, it’s crucial to make sure you and your family are protected in the event of a worst-case scenario.
6. Evaluate Life Changes
Even though much is uncertain right now, what life changes do you hope to make next year? Will you be getting married? Adding to your family? If so, consider increasing your coverage on your group life insurance or adding coverage for your spouse. If your dentist has mentioned that you will need some work on your teeth soon, you may want to increase your HSA contributions or ask about supplemental dental insurance. Have you or someone in your family experienced some health issues? A different plan option might work better for you for the upcoming year.
7. Compare Your Coverage
Many companies make both minor and major changes in the benefits they offer from year to year. Take a look at last year’s details, compare them to this year’s updates, and determine what makes the most sense for you, not just financially, but also considering your life circumstances. Also, if there have been major changes and you’re facing considerably higher costs, look into your spouse’s health plan. While it’s usually more cost-effective to obtain coverage through your employer, your spouse may have better coverage through their company.
8. Ask About Nontraditional Workplace Benefits
Often employees don’t realize how many great resources are available—and many without cost to them—directly from their employer. This is especially true when it comes to taking advantage of nontraditional benefits and services, such as emergency savings support, and because of the pandemic, up to 46 million Americans depleted their emergency savings just to make it through 2020 financially. As a result, more employers are now offering emergency savings accounts. Some are funded by automatic deposits through payroll deductions, much like how employees fund their 401(k)s. The biggest difference with emergency saving accounts is that the dollars deducted from the employee’s paycheck are taxed as income, and the funds are available to an employee when they need them.
Student loan repayment is another nontraditional benefit on the radars of both employers and their employees. To help address this concern, employers can set up direct after-tax contributions to the servicers of their employees’ student loan debt. The employer is—in effect—making loan payments on behalf of the employee, but since the money is considered income for the employee, both the employer and employee must pay taxes. This solution helps employees pay down their debt more quickly and, in turn, direct more of their income toward other saving and spending needs.
How We Can Help
We have seen companies add new benefits as well as replace existing companies with new companies offering the same or similar benefits. This will normally require you to go through the enrollment process and re-select your original benefit.
I highly encourage you to send us your benefits documents so we can review them and make sure you’re taking advantage of everything that is available to you. We want to make sure you have the appropriate disability and life insurance in addition to what is usually provided by your company, as well as review any new benefits that may have been added to your plan.
In the midst of all the uncertainty of 2022, take some time to prioritize your employee benefits. You’ve worked hard for the employee benefits available to you, so be sure to maximize your options and use the open enrollment period to make decisions that align with your life.
And if you haven’t heard anything about open enrollment, reach out to the human resources department at your work to find out when it’s happening and if there is a scheduled meeting or webinar to highlight this year’s benefits. Remember, your HR department is there to walk you through these decisions and answer any questions.
At Live Oak Wealth Management, we are also here to help you navigate the details and make choices that work in tandem with the rest of your financial plan. Please don’t hesitate to call our office at 770-552-5968 or email [email protected]. Or, if you prefer, you can simply click here to schedule an appointment online.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insight and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
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