Open Enrollment Season is Upon Us: Here’s What You Need to Know
Just this week my husband received his open enrollment packet for his new full time job at a company that recently went public and I was thrilled.
How could I possibly be excited by a packet of seemingly boring information that gets delivered to your work inbox every year at the same time?
A little over three years ago, I quit my W-2 job to start Mana with Stephanie. As happy as we are with the decision, we didn’t initially realize how much we should have cared about some of the basic perks of working for others, like free healthcare, 401k matching, and pet insurance.
For our many readers and clients who are employees of companies, big and small, you’ve probably received a reminder about open enrollment for health insurance and other benefits. This post is for you! This week I am writing to tell you to think twice, before you move that open enrollment email to the trash bin. I hope to convince every reader - regardless of how you are employed - that carrying some basic knowledge on work benefits could mean the difference between set-it-and-forget it bliss vs. paying a lot out of pocket regularly. The right open enrollment plan can mean fewer bills and more time saved. For all employees and employers, one more important step on the path to financial wellness.
HOW OPEN ENROLLMENT WORKS
First thing’s first: what exactly is open enrollment? Open enrollment is the time to pick the benefits that will serve you and your family best for the next year. Open enrollment is presented to you when you first start a new job and then once a year every year thereafter.
You should receive an employee benefit packet from your company that outlines what’s available. These packets might be presented to you in the form of a presentation, pamphlet, or website, and the corresponding benefits are typically managed by your HR department. You are eligible to select options from your company’s benefits package when you join, and then you can update them each year. Once your elections have been made, you can’t change anything until the following year. For most companies this is January to December, but some companies offer benefits over a different annual time frame.
In other words, open enrollment is the time to study, learn, and take advantage of your total compensation package.
Outside of popular investment benefits like your 401k and your Employee Stock Purchase Plan, which can be altered throughout the calendar year, the core benefits most companies offer relate to insurance and pre-tax reimbursement benefits. Some of the core benefits you will likely see in your open enrollment can include:
A 401k matching program - Every employee that participates in the company 401k plan will receive a matching contribution based on the amount you elect to contribute. The average matching contribution is 4.3% of an employee’s pay. If you read our blog regularly you know we’re all about maximizing this match to its fullest. It’s free money!
Health insurance - Many folks overlook the fact that the best health insurance for you and your family can change from year to year. Planning on having elective surgery or a baby in 2022? If so, ask your HR department for a summary of benefits and pick the healthcare plan that covers the most costs. Alternatively, if you are generally healthy and don’t plan to make many visits with healthcare providers next year, then it’s worthwhile to explore a high deductible health plan paired with a Health Savings Account. We recommend looking up benchmark healthcare costs for your age and state to help make this decision.
Short and long-term disability - These insurance benefits - which protect you against a loss of income in the event of a disability - might be the most important benefits that I took for granted as a full time employee. It was only after I became an entrepreneur that I learned the cost of purchasing the same amount of individual disability insurance previously provided by my employer would cost me thousands of dollars more. If and when you sign up for your disability insurance, be sure to understand the benefits and costs of paying for your premiums pre-tax or post-tax. A while back, I wrote a blog about how helpful short term disability insurance can be for individuals without maternity leave.
Life Insurance - Just like disability insurance, this is a benefit that’s typically offered at a much lower rate than you would receive if you were to buy insurance individually or for each of your family members. However, most group life insurance policies won’t provide sufficient life insurance coverage, instead, we recommend supplementing group life insurance with individual life insurance. It’s also worth asking your HR department whether the supplemental life insurance you purchase is portable, ie., “Can you take it with you if you leave your current job?”.
NEWER AND ADDITIONAL BENEFITS
In 2021 we’re seeing many HR departments adding new and out-of-the-ordinary benefits because a tight labor market is giving employees the upper hand. The tighter the labor market, the more competitive companies need to be in their benefit offerings. Here are some of the most noteworthy and exciting benefits we’ve seen companies offer in recent years:
Fertility benefits - Yes, many companies are now offering this benefit with non-taxable compensation up to a certain dollar amount to fund In Vitro Fertilization and other treatments supporting family planning.
Adoption expenses - Some companies are also offering non-taxable compensation towards adoption-related expenses.
Primary carer’s leave and compensation - During COVID, many companies began offering more flexible leave options, recognizing that family members may become seriously ill, or children may need care in a pinch. We also saw larger tech companies offering one-time financial gifts for new mothers to help bond with their babies or pay for food delivery services.
Primary and non-primary parental leave - The United States is one of only a few countries without a mandated paid parental leave policy. If you are thinking about starting a family in the coming years, this benefit or the very similar one above could save you thousands of dollars.
Charitable matching programs - Do you have causes you support monetarily? This benefit enables you to multiply your giving dollars with a company match (usually up to a certain dollar amount annually).
Educational expenses and student loan repayment - Many companies offer to pay a percentage of or all continuing education costs for employees. Additionally, a few big companies are now offering assistance with student loan repayment, including cash bonuses and incentives for refinancing at a lower rate.
Pet insurance - The average cost of pet insurance ranges from about $25 to $70 per month for dogs and $10 to $40 per month for cats. If you have a fur baby in your life, this benefit is worth considering. Otherwise, you’ll need to save the equivalent or greater per month in your emergency fund.
Depending on the company, there may be even more bespoke offerings. At Mana, we think all of these options are pretty exciting! I hope I’ve convinced you that it’s worth opening that HR email come open enrollment time. And when you do open your packet, take some time to consider how you can make the most of this information and maximize these benefits for you and your family.
Remember to dream big into next year...
Though it’s impossible to predict the future, our work with our clients has shown that just a little planning can go a long way. If this type of thinking is relatively new to you, we’d encourage yourself to ask yourself a few questions:
What do I want to get out of the next year? For (an albeit extreme) example, if you’re planning on getting your pilot’s license next year, this might be the time to evaluate your life insurance policy. What effect will an unforeseen accident have on anyone who depends on your income?
How much do I/we need to retire? Open enrollment is a perfect time to check in on how you’re progressing toward your retirement goals. We recently contributed to an article in the Wall Street Journal on this topic!
What big life events could happen next year? We can’t stress enough how important it is to ask this question ahead of trying to start a family!
How do I want to spend my pregnancy and postpartum time? How much leave do you want to be covered for? How can you balance this with any potential leave for your partner? How will your family or other support networks help with these decisions?
Your company benefits will impact not just you, but your spouse and/or family as well. Open enrollment gives you a perfect opportunity to have a conversation about what the future holds together. If these considerations and conversations feel overwhelming or hard, the good news is that you don’t have to face them alone. At Mana, we invite our clients to share their open enrollment packets with us so we can help them make the most of what their company offers.
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Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.