5 Common Open Enrollment Questions
The leaves are falling, so open-enrollment season must be upon us! While, it’s easy to just check the same boxes as last year when you enroll, making strategic group-benefits decisions could save you thousands of dollars over time.
Below are the five most common open enrollment questions that I’ve been hearing.
Which health insurance plan should I go with?
This is a loaded question, as you might have several health insurance options available in your group benefits plan through work.
Generally, if you and your family have had historically low medical expenses in previous years—meaning you generally don’t meet your deductible—then a high-deductible health plan (HDHP) may be in your best interest. This will likely be your lowest-cost health insurance option and is suitable for individuals and families who may only rely on health insurance for unexpected catastrophes.
If, on the other hand, you and your family have high medical expenses and tend to blow past your deductible each year, then a PPO or other lower-deductible plan might be best. In this case, the higher premium may be worth the more extensive coverage as compared to an HDHP.
Don’t forget to analyze your dental and vision insurance coverage to make sure you’re getting the most bang for your buck based on anticipated expenses for the upcoming year.
Should I save into an HSA or FSA?
HSA
If you enroll in a HDHP, then you may have the opportunity to save into a Health Savings Account (HSA). These accounts are pure gold, as they offer a rare triple-tax benefit:
Tax-deductible contributions
Tax-deferred growth
Tax-free withdrawals for qualified medical expenses
If you are in a HDHP, then I’d strongly encourage you to consider an HSA. Also, keep a lookout for potential employer contributions that your company might make into your plan.
Below are the maximum allowable contributions into HSAs for 2022:
$7,300 for families
$3,650 for individuals
Most HSA custodians allow you to invest your account in funds/ETFs after your balance reaches around $1,000 - $2,000. Many people will benefit from investing their HSAs in a growth-oriented portfolio and then waiting to use the funds until retirement, when most of our health expenses will inevitably increase.
You could otherwise use your HSA to cover your deductible and other medical expenses throughout your working years. Find out why I didn’t use my HSA for laser eye surgery.
FSA
Flexible Savings Accounts (FSAs) are generally “use-it-or-lose-it” plans, meaning if you don’t spend the funds in one calendar year, you forfeit them. Not every employer offers these plans, but they might make sense to save into in addition to or instead of HSAs.
Dependent Care FSAs
If you have kids and incur expenses related to daycare, nanny, summer camp, etc., then you will most likely benefit from funding a Dependent Care FSA. Check out all the eligible expenses for these FSAs.
You can contribute up to $5,000 in pre-tax dollars into Dependent Care FSAs for 2022 as a joint filer. This limit is up from the temporary $10,500 maximum for 2020 due to pandemic-related legislation.
You could save a ton on child-care expenses, which tend to be loft. For example, if you fall in the 32% marginal federal tax bracket, then theoretically, you can cut your child-care expenses by one-third by leveraging an FSA.
Health Care FSA
If you do not have access to an HSA through your health plan, or you want to supplement your tax-deductible health-related savings, then a Health Care FSA might be for you.
With a Health Care FSA, you can use pre-tax dollars to pay for qualified medical expenses. You can contribute up to $2,750 for 2022 and rollover up to $550 into the next year, so it’s not an entirely use-it-or-lose-it plan.
Keep in mind, if you also save into an HSA, then your Health Care FSA will probably be limited use, meaning you might only be able to use these funds for dental and vision expenses.
How much life insurance should I get?
This is another loaded question. Most people need insurance because they love someone or owe someone.
In other words, you and your family will likely benefit from life insurance if you have dependents—others who rely on your income—or if you have debt such as a mortgage, student loans, car payments, etc.
As far as the amount you should opt into, consider getting enough coverage to pay off your liabilities at a minimum. At the other end of the spectrum, you could seek enough coverage to replace your income over your lifetime, which means that your family would maintain their lifestyle as if you were to continue to work after passing away prematurely.
One benefit of getting life insurance through work is you probably won’t need to go through medical underwriting, which is a lengthy process. This is even more valuable if you have pre-existing conditions or are in poor health.
In addition, your employer might help cover the premium cost of group life insurance. Keep in mind, if your company helps foot the bill, your benefit could be partially taxable.
Read more about what to consider when buying life insurance.
Is disability income insurance worth it?
Yes.
For those of us in our working years, the single-greatest asset in our financial plan is our earning power. Our income drives our cash flow and savings contributions, which allow us to reach our “work-optional” years.
As such, your income should be well protected in the event that you become disabled prior to retirement age. Most disability income policies will pay out a portion of your salary in the event of a disability and you are unable to work.
Keep in mind, a qualified disability can be physical, mental or emotional. The most common disability claims include musculoskeletal disorders (such as arthritis or muscle strains), pregnancy and mental-health issues.
Short-term disability will usually protect your income for a few months, while long-term disability insurance generally covers you through the age of 65. It’s important to have both and to understand what your group plan provides.
Which supplemental benefits should I consider?
Health, life and disability income insurance are the heart of your group benefits plan, but you probably also have access to additional benefits, including:
Legal services
Get your estate-planning documents (will, powers of attorney, healthcare directives, trusts) in order for a fraction of the cost that an independent attorney might charge
Pet insurance
Some plans offer insurance for your pets which might help cover veterinarian bills, prescriptions, etc.
Workplace wellness programs
You might be able to get a discount on your health insurance premiums or a company contribution into your HSA if you opt into your employer’s wellness program(s)
Identity theft protection
Many companies will cover the cost of basic identity theft and credit monitoring services
Do you want to review your open-enrollment benefit elections? Reach out to me at Ben@coveplanning.com or schedule a free consultation call.
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Ben Smith is a fee-only financial advisor and CERTIFIED FINANCIAL PLANNER™ (CFP®) Professional with offices in Milwaukee, WI, Evanston, IL and Minneapolis, MN, serving clients virtually across the country. Cove Financial Planning provides comprehensive financial planning and investment management services to individuals and families, regardless of location, with a focus on Socially Responsible Investing (SRI).
Ben acts as a fiduciary for his clients. He does not sell financial products or take commissions. Simply put, he sits on your side of the table and always works in your best interest. Learn more how we can help you Do Well While Doing Good!
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Ben Smith, and all rights are reserved. Read the full Disclaimer.