Most employers that offer a menu of employee benefits have an annual open enrollment period. During open enrollment, employees can enroll in benefits for the first time, change their current benefit choices or coverage amounts, or completely opt-out of their employer's benefit program.
Employee benefit decisions impact your family's overall financial strategy, so taking the time to do more than simply confirm the benefits you already have in place can be beneficial. It is important to weigh your options carefully, consider your choices in the context of your overall financial situation and weigh the risks and rewards that come with transitioning to more or less coverage.
What to Consider
As you review your employee benefits, make sure that your:
• Health and dental plans still meet your needs. Companies regularly change plans and premiums. Selecting plans that provide the protection you need, while minimizing the coverage you do not, may help you save money. Also, if you are married, look at the coverage options that your spouse's employer provides. Just because your employer's plan was the best fit last year does not mean that it will be the best choice this year. Compare deductibles, co-pays, and premium contributions, and make sure you are fully aware of any changes to your plan before you finalize your choices.
• Life and disability income insurance are sufficient to meet your needs. Do some research and consider consulting with a financial professional if you need help determining what kinds of insurance – and how much – you need to protect your lifestyle and your family given your goals and financial situation. This review will enable you to make the most of your employer-sponsored coverage and to determine whether you need any supplemental coverage.
• Beneficiary designations are up-to-date. Stating something in your will is not enough. Your beneficiary designations on a life insurance policy, annuity, or retirement account — such as a 401(k) or an IRA — override what is stated in your will or trust. So, if you have experienced a life-changing event like a marriage, divorce, birth, adoption, or death in your family, make sure that your beneficiary designations reflect your current wishes.
• Retirement savings plan is still appropriately diversified. Should you start contributing to your employer-sponsored retirement plan? Many companies offer a match, so make sure you are getting the maximum amount of "free" money you can. If your familiarity and skill level with investing is more advanced than average, you may consider rebalancing your retirement 401(k) on your own, but for many people, an automatic rebalancing plan where professionals manage the investment accounts is easier. Other plans leave the investment choices and rebalancing up to you. In this case, consider consulting with a financial professional for help in choosing the investments best suited to your objectives.
• Tax withholding amount is on target. If you always receive a large refund from the Internal Revenue Service (IRS) or find that you owe the IRS money every April, you may be having too much or too little withheld. To help avoid either extreme, consult with a tax professional to determine the best withholding amount.
The Affordable Health Care Act introduced health insurance changes that will roll out during the next few years. Two of the changes that will have an impact on your employee benefits options are:
• Coverage for young adult dependents. Previously, young people would not be included as an eligible dependent unless they were a full-time student, but now with this coverage, young adults can stay on their parents' group health plan until age 26 if they do not have access to health insurance through a spouse or employer. Though parents with an adult child on their health plan may have to budget for higher insurance costs, it may help more young people save some cash by not having to purchase an individual plan.
• Flexible Spending Accounts (FSAs) — FSAs existed prior to the Affordable Health Care Act but were slightly changed with the act's passage. FSAs allow you to save pre-tax dollars in an account designed to reimburse you for out-of-pocket medical expenses. As of 2012, over-the-counter medications are no longer included unless your physician prescribes them. Beginning in 2013, the maximum amount that you can set aside in an FSA will be $2,500 a year. Keep in mind that accurate planning is critical, because any money leftover in your FSA at the end of the plan year is lost.
To better understand all of the employer-sponsored benefits available to you, consult with your company's benefits coordinator or other human resources professional. Now is also a good time to meet with your financial advisor and tax or legal professionals. They can help you evaluate your choices and ensure your medical, dental, other insurance, and retirement savings benefits — such as your 401(k) and pension — are aligned with your needs and integrated with your short- and long-term plans in the most efficient and effective ways.
Ameriprise Financial and its representatives do not provide tax or legal advice. Consult with your tax advisor or attorney regarding specific tax issues.
Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.
This communication is published in the United States for Texas only; and this advisor is licensed only in the states of CA, CO, FL, MO, NC, NM, OK, TX, and VA.
M. Ahmad Adnan, CFP®, CRPC®, RFC®
Business Financial Advisor
Ameriprise Financial Services, Inc.
3200 Steck Avenue | Suite 250 | Austin, TX 78757
Phone: 512.213.6400 Ext. 102 | Toll Free: 866.238.4230
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