What do football, pumpkin spiced lattes, and Labor Day have in common? Yes, fall, but also Open Enrollment. If your employer provides benefits, such as health insurance and 401k plans, your upcoming open enrollment period allows you to make changes to those benefits for the upcoming year. First, do NOT forget to review your benefit options and selections before the deadline. You will not be able to make changes to your current coverage options until next year's open enrollment period unless you experience a major qualifying event (i.e., marriage, divorce, birth, adoption, or death).
- Don't assume that your coverage will be the same. Many employers regularly change plans and premiums.
- Carefully examine your health insurance options and costs. You'll want to compare plan premiums, deductibles, co-pays, and total out-of-pocket limits.
- Don't be tricked into thinking lower premiums equal lower costs. Many lower premium plans have high deductibles that end up costing you more out of pocket.
- If you're married, compare your coverage options to your spouse's coverage options. Plan permitting, you can switch to your spouse's plan if the options are better (make sure to check with your HR Benefits Department to ensure your plan allows this).
Health Savings Accounts v. Flexible Savings Accounts
- Consider contributing to a Health Savings Account (HSA) or Flexible Savings Accounts (FSA) if you are eligible.
- These plans allow for you to put pre-tax (salary deferrals) or tax deductible (after-tax HSA-only) money into a separate account for qualified medical expenses (e.g., your annual deductible, doctor visit co-pays, prescriptions, but not insurance premiums). You can have only one plan, HSA or FSA, not both.
- For HSAs, you can contribute up to $3,400 for an individual and $6,750 for a family. For FSAs, you can contribute up to $1,300 for an individual and $2,600 for a family.
- FSA money must be spent that year otherwise you forfeit that money to your employer. That's why FSAs are called "use it or lose it" accounts. HSA money can be rolled over to the next year and can move with you if you leave your current employer.
- HSAs and FSAs offer tax benefits. The pre-tax contributions lower your taxable wage (e.g., if you contribute $3,000 of your gross salary of $50,000, you'll be taxed on $47,000 - less income tax lessens your potential tax liability). Your withdrawals may also be tax free if you use the withdrawals for qualified medical expenses.
- The tax benefits are a nice bonus, but for "use it or lose it" accounts, a little upfront planning on your projected medical expenses for the next year goes a long way.
Tax Withholding - W-4 Exemptions
- Since you're already reviewing and making changes to your benefits, open enrollment is a good time to review how much tax your employer withholds from your paycheck.
- If you've received a large refund or owe a big tax bill, you may not be withholding the right amount.
- Examine your W-4 withholdings by using the IRS calculator.
Retirement Plans - 401k
- Don't forget to review your 401k plan - your contribution amount and your investments.
- If your employer offers a match, contribute the percentage that allows you to get the full match (i.e., if your employer offers 100% match up to the first 3% contribution, then contribute at least 3% to get the full match).
- If you can, try to contribute the maximum each year - up to $18,000 per year if under age 50 and up to $24,000 if age 50 or older.
- Review your current investments as well as your available investment options to ensure your current investments align with your goals.
If you need help understanding or assessing your benefits and available options, reach out to your HR department or contact Odyssey. We're happy to help.
Editor's Note: This blog post is part of the September 2017 edition of Odyssey NexGen Newsletter. Curious about Odyssey's NexGen program? Email Anne.Simpson@odysseypfa.com to learn more.
Reviewed & approved via C2C by BT 9/15/17