Tips on Making the Most of Your Benefits
Are you making the most of your employee benefits? It probably depends on which benefits your employer offers – and whether you’re aware of all of them.
“It can be intimidating for employees to sort through all this benefits information,” says Sean M. Anderson, an expert in employee benefit plan policy and regulation at the University of Illinois College of Law. “But it’s worthwhile because employers sometimes have certain benefits in place but do a bad job of publicizing them.”
According to Dallas Salisbury, president and CEO of the Employee Benefit Research Institute (EBRI), survey after survey shows that the top benefit employees want from their employer is health insurance. But over half of those with health insurance don’t actually use it in any given year.
“It really is and always has been more of a catastrophic protection against bankruptcy and from large expenditures,” Salisbury says. In a trend that began in the 1980s and has further accelerated since the passage of the Affordable Care Act, workers have increasingly shifted to low-premium, high-deductible plans. While these kinds of plans make sense for those without any pre-existing conditions or illnesses, they also leave many workers at risk.
“People overwhelmingly do not report even having a couple thousand dollars saved to use in emergency circumstances,” Salisbury says. “But if you’re going to pay a lower premium and have a higher deductible because you don’t think you need that much insurance, you’d better have enough money saved to deal with the deductible if you do experience a health problem.”
When it comes to more routine healthcare expenses, using a flexible spending account (FSA) can prove beneficial. Many employers offer FSAs, which enable you to take a certain amount of money tax-free out of your paycheck for copayments, deductibles, drugs and other healthcare costs up to $2,500 per year.
FSAs can result in considerable tax savings on predictable health expenses. But because the benefits don’t roll over from year to year, they do require some planning, and should only be used for expenses that you are confident you will have.
FSAs also offer the advantage of being a fairly low-expense benefit for employers. “It’s something an employee could, without much danger of being labeled as a troublemaker, ask their employer to add to the benefit list if it’s not there already,” Anderson says.
Employers often also offer similar pre-tax spending benefits for dependent day care and for transportation and parking, so it’s worth investigating whether your employer provides those, as well.
When it comes to retirement plans, experts typically recommend saving at least enough in a defined-contribution plan to maximize your employer matching contribution. But Salisbury notes that nearly half of Americans work for employers with 100 employees or less. At these small companies, the most common plan design does not include an employer matching contribution.
Without an employer match, a 401(k) isn’t always a great deal. “In a very small firm, it can often carry with it higher costs than going down the street and opening up an IRA someplace,” Salisbury says. “So it’s a mixed bag.”
Likewise, 2014 Bureau of Labor Statistics data shows that only 8 percent of private-industry workers have access to defined-benefit pension plans. And few among these workers are likely to stay at the job long enough to collect a significant pension. More than half of American workers at any given time have been with their employer four years or less.
Employees understand the need to save for retirement, even if their personal efforts in that department often prove insufficient. But they may underestimate the potential value of other workplace benefits such as life insurance and long-term disability insurance. According to Salisbury, only about a third of workers take advantage of such plans, even though they can be a great value for married employees with children. “If you buy them through the workplace compared to through the individual market, there are often significant design advantages and price advantages,” Salisbury says.
Anderson notes that many companies will also include some level of disability and/or life insurance as part of their basic benefits plan. And he recommends that anyone who is deciding between job opportunities look carefully at these offerings when reviewing the overall menu of benefits for both positions.
“If the jobs are otherwise comparable, and one doesn’t have disability and the other will pay you 40 or 50 or 60 percent of your salary if you become disabled, that’s significantly better,” Anderson says.