Each year, open enrollment gives employees the opportunity to reevaluate their workplace benefits. It’s a chance to switch plans, add coverage and shop for voluntary benefits such as identity theft protection and pet insurance.
“Employees really need to set time aside to make thoughtful decisions,” says Melanie Tinto, chief human resources officer for payment solutions provider Wex.
Benefits make up nearly a third of average total compensation for workers, according to 2021 data from the Bureau of Labor Statistics. That means employees could be leaving a lot of money on the table if they make their selections haphazardly. Open enrollment choices are typically locked in for the entire year once made.
Fortunately, employers stand ready to help. “Last year was a year of great experimentation,” says Lydia Jilek, senior director of voluntary benefits solutions for global advisory firm Willis Towers Watson. Amid the COVID-19 pandemic, companies expanded the ways they made benefits information accessible to workers, and Jilek sees more the same coming this year. “I think we’re going to continue to see innovative communications options,” she explains.
Here’s a look at some of the choices U.S. workers will likely have this fall.
Health, Dental and Vision Insurance
Health insurance is often considered the highlight of the open enrollment period. It is the benefit that generally has the greatest value as well as the most potential to affect a household’s financial bottom line in the year to come.
To select the right health plan, review your claims from the previous year, suggests Rachel Sapoznik, president of Sapoznik Insurance in Miami. Many insurers have online portals where policyholders can see whether they met their deductible last year and add up out-of-pocket costs.
If you rarely see a doctor, using a high-deductible health plan is one way to save money. These can be paired with a health savings account to pay for out-of-pocket costs with tax-free dollars. Meanwhile, those who regularly see doctors or have ongoing prescription drug should confirm those will be covered by any insurance plan they select for the upcoming year.
Dental and vision benefits may be included as part of a health insurance policy or offered separately. Either way, evaluate your past usage and expected needs for the coming year before making your choices.
Life insurance is another standard benefit offered in many workplaces. Purchasing coverage this way can be both convenient and affordable.
“The days of life insurance salespeople coming into people’s houses are over,” Sapoznik says.
Instead, workers may be able to select certain levels of coverage through their employer at no cost and with no medical exam. If they would like additional coverage, that may be available at an extra cost as a voluntary benefit.
Since employers offer group coverage, life insurance purchased through open enrollment may be cheaper than what is available to individuals buying their own policies. However, some workplace benefits may not be portable – meaning once you leave a job, you can’t take your insurance coverage with you. Check the details before opting for additional coverage.
If you aren’t able to work for a period of time, disability insurance can help replace missing paychecks. “It’s probably the most important benefit to look at,” Sapoznik says. She adds that group coverage from an employer may cost 50% to 60% less than someone would pay if they purchased an individual policy.
Disability coverage may be broken down into short-term and long-term disabilities, so be sure you understand how much coverage you get and when it starts. Most policies have an elimination period, which means you have to wait a certain amount of time after being disabled to receive benefits. Then, depending on the plan you choose, benefits will cover a certain percentage of your paycheck.
Taxes also need to be considered when selecting a plan. Depending on how premiums are paid, disability insurance benefits could be subject to income tax. In that case, be sure to select a policy that offers enough benefits to pay your expenses even after taxes are deducted.
Flexible Spending Account vs. Health Savings Account
There are two ways to pay for medical care with tax-free dollars. The first is a health savings account, or HSA, which can only be opened by the those with a qualified high-deductible health insurance plan. The second is a flexible spending account, also known as an FSA, which is open to all workers.
With an HSA, in 2021, people can deduct up to $3,600 in contributions if they have single insurance coverage or $7,200 for family plans. Money in the account grows tax-free and can be withdrawn tax-free for qualified medical expenses.
FSAs can be funded with up to $2,750 for medical expenses in 2021. There is also a dependent care FSA option that allows workers to save up $10,500, depending on their tax filing status, for expenses such as day care.
Money in FSAs does not roll over each year. Employers have the option to either allow up to $550 to roll over to the following year or provide a grace period until mid-March when the money must be spent on eligible purchases. Excess or unused money is forfeited back to the employer.
For this reason, workers should carefully calculate their annual medical expenses before committing to an FSA. Some employers, such as Wex, offer HSA and FSA calculators to help their workers make informed decisions about these accounts.
Many companies offer what are known as voluntary benefits. These are perks that aren’t offered free of charge but made available to workers for purchase.
“There can be discounts associated with the various plans,” Jilek says. Not only can the benefits be cheaper than what someone could purchase for themselves, but brokers used by employers have expertise to ensure workers are getting the best plans at the best price, according to Jilek.
Voluntary benefits can vary, but here are some examples:
Supplemental medical plans. Hospital indemnity, accident and critical illness insurance are all examples of supplemental medical plans that may be offered during open enrollment. If you think you will have significant out-of-pocket costs in the coming year, these plans may fill any gaps in your health insurance.
Prepaid legal plans. Jilek says there has been increased interest from employers in offering prepaid legal plans, and these may appeal to those who anticipate a divorce or similar event in the coming year. “If you’re going to have a significant life change, a legal plan can be a real benefit to you,” she says.
Pet insurance. Nearly 70% of employers expect to offer pet insurance by 2022 or beyond, according to the 2021 Emerging Trends in Health Care Survey from Willis Towers Watson. That makes it one of the five fastest-growing voluntary benefits. Not everyone needs this benefit, but it may be a welcome offering to workers who added a pet to their household during the pandemic.
Gym memberships. Tinto says Wex is offering on-site gyms at some of its locations, and other employers may offer discounted gym memberships as a workplace perk. This follows an ongoing trend of employers looking for ways to support their workers holistically.
Identity theft protection. Buying identity theft protection as a voluntary benefit may cost only slightly more than a third of what someone would pay elsewhere, Jilek says. She estimates an individual plan could run someone $20 a month, while a group plan through an employer could cost only $7 or $8 a month.
Unlike insurance benefits, you can change your retirement savings amount at any time. Still, open enrollment is a good time to review what you have selected and make changes as needed.
401(k) plans, the most common workplace retirement accounts, come with tax benefits and can be funded with up to $19,500 in employee contributions 2021. Those age 50 and older can make an additional $6,500 in catch-up contributions.
Contributions to traditional 401(k) accounts are tax-deductible, but withdrawals in retirement are subject to regular income tax. Some employers also offer Roth accounts, which don’t offer an immediate tax deduction, but money in the account grows tax-free and can be withdrawn tax-free in retirement. In both cases, there can be a tax penalty if money is withdrawn prior to age 59 ½.
Regardless of which plan you choose, it’s a smart idea to contribute at least as much is necessary to maximize your employer’s matching contributions, if a match is offered.
Open Enrollment and the Coronavirus Pandemic
The COVID-19 pandemic meant many employers changed how they approached open enrollment last year. In particular, many took benefit fairs and other events online.
“I think the virtual fair we did last year had a ton more attendance and engagement,” Tinto says. However, workers have also expressed an interest in returning to in-person events, and she hopes this year will include a combination of both options.
The pandemic may also indirectly play a role in the benefits offered during open enrollment. “Most employers have the same universal problems,” Sapoznik says. “They have a problem with retention and with recruitment.” Providing a robust benefits package is one way to help companies stand out and attract top talent during a time when worker shortages seem common.
Open enrollment only comes once a year, so don’t squander your chance to sign up for benefits that could save you money in the months to come. If you have questions about your options, contact your human resources office. They are there to help.