Open Enrollment Primer
Many employers have an open enrollment season that runs through the fall of each year. Some start as early as September, while others kick off in October or November. Regardless of when your employer holds open enrollment, there are several key tasks you can tackle during this window, including:
- Elect or change health insurance options (including dental, vision, etc.)
- Adjust life insurance elections through your employer
- Add an HSA or FSA to your election
While all of these items are important, we find that this time of year can also serve to remind employees to complete an audit of both the benefits that are subject to change during open enrollment, and other elements of their financial plan. Let’s go through a quick checklist that you and your family can complete during this season.
Understand Your Health Insurance
First and foremost, open enrollment is the perfect time to evaluate your insurance needs, and to figure out if your current insurance plans meet them. Check your existing coverage first. This should include your health, prescription drug, vision, and dental insurance plans. Does the coverage you’ve had in the past year still represent the future needs of both you and your family? A few things may push you to change your insurance plan:
- Adding a new family member. If you’re having a new baby, getting married, or adjusting your family size in any way, look to ensure that your coverage will still be cost effective as you add individuals to your plan.
- Anticipate future needs. If you know that your medical needs will increase (or decrease) in the next year, you may think about changing your coverage to reflect those changes. For example, if you are considering elective surgery, or you know that you’ll have higher medical costs due to preexisting conditions, you might look for coverage with a lower out of pocket maximum or family deductible.
- Consider a high-deductible health plan in conjunction with an HSA. If your medical needs are consistent, and the out of pocket maximum and family deductible is reasonable through your employer’s HDHP health insurance option, you may consider pursuing this insurance plan while also opening an accompanying Health Savings Account (HSA). Your HSA contributions reduce your taxable income, and the funds in your account roll over year to year. This could mean you’re able to effectively save for out of pocket medical expenses, or continue to accumulate savings earmarked for medical expenses down the line in retirement.
Evaluate If Your Life and Disability Insurance Needs are Covered Through Work
Most employers offer life and disability insurance to their employees at a discounted group rate. However, as your income steadily climbs over the course of your career, the insurance offered may not be enough to truly protect you and your loved ones in the event of death or injury. Take this time to check your life insurance and disability coverage through your employer, and compare it with your needs. Everyone’s life and disability insurance needs will be different, and it will largely depend on how many people in your family depend on your income, and what you want to cover through insurance if your income were to go away. For example, you may decide that, through life insurance, you want to cover:
- All living expenses through your youngest child’s 18th birthday.
- The annual cost of childcare.
- “Extra” expenses, like paying off your mortgage for your spouse or partner, or covering other expenses like a child’s future wedding, down payment on their first home, etc.
The same considerations should be applied to determining the amount of disability insurance you need.
If, for some reason, your employer doesn’t offer enough coverage, now is a good time to look at policies outside of your workplace. Private term life insurance or disability coverage through a private insurance company can often give you significantly more wiggle room, and allow you to better protect your family in case of emergency. Having private term life and disability insurance can also help to:
- Ensure you have coverage if you choose to leave your employer, take a sabbatical, or change jobs for any reason.
- Offer coverage outside of your employer if you have to leave work for health reasons and lose coverage.
- Supplement your existing coverage to ensure your spouse or loved ones have enough insurance in the event of an emergency.
Use This Time to Evaluate Your Workplace Finances
Check Your Beneficiaries
While you are evaluating your insurance coverage, check to make sure your beneficiaries are updated! Any policies through your workplace should have a primary and secondary beneficiary available for designation.
As you look through your employee benefits, consider adjusting your tax withholdings to dial in your return for next filing season. The goal should be not to owe too much or get a massive return. Have questions about this? Speak with your financial planning team, or look at your previous return to get an idea of whether you need to increase or decrease your withholdings.
Research Fringe Employee Benefits
The majority of employers offer additional benefits including gym membership discounts, services that help you find child or pet care providers, cybersecurity services, and more. Ask your HR department to see information about all of your employee benefits, and ensure you’re maximizing the ones that apply to your unique needs.
Speak with Your Financial Planning Team
Open enrollment season offers a “kick off” point for many people to dig deeper into ensuring their financial needs are being met, and that risk is being appropriately managed through insurance coverage. If you have questions this enrollment season, reach out. At FPC Wealth, our financial planning team is here to help clients navigate these conversations and evaluate if any changes need to be made.