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How to Make the Most of Open Enrollment

How to Make the Most of Open Enrollment

October 04, 2021

Open enrollment season is fast approaching, which means that you’ll soon be asked to make many decisions about which employer benefits you want to take advantage of. And while that may sound incredibly dry, it represents a big opportunity for you to strengthen your financial situation, one that often gets overlooked and underused. Depending on what your employer offers, you can get help with everything from health care to childcare, to retirement. The dollar value of these benefits can add up.

Health insurance

Health insurance is often the biggest and most helpful benefit that most employers offer, and it’s also usually the most confusing. If you’re lucky, you’ll have many choices between different plans and maybe even different insurers, giving you plenty of opportunities to choose the right plan for your family’s needs. But with that opportunity comes the responsibility of understanding the differences between those choices, which is no easy task. So how do you sort through it all? First, don’t assume that the health insurance you chose last year is automatically, or even likely, to be the best choice this year. It certainly maybe, but it’s just as likely that one of the other options is better.

Health savings account (HSA)

Some of those health insurance options may allow you to contribute to a health savings account which has a few big benefits:

  1. HSAs allow you to deduct contributions and use that money tax-free for qualified medical expenses, which essentially serves as a big discount on health care.
  2. HSAs are not “use-it-or-lose-it,” which means that any money that’s in your account at the end of the year simply rolls and can be used in future years, even if you no longer have an HSA-eligible health insurance plan.
  3. Your employer might contribute some money to your HSA.
  4. HSAs can be powerful retirement accounts, especially if you’re able to contribute now and pay for your medical expenses through other means.

Only certain high-deductible health insurance plans allow you to contribute to an HSA, and it’s far from guaranteed that such a plan will be the right choice for you and your family. But it’s worth understanding what’s available to you so that you can make a fully informed decision.

On May 10, 2021, the Internal Revenue Service (IRS) announced the HSA contribution limits for 2022:

  • $3,650 for individual coverage
  • $7,300 for family coverage

Health care flexible spending account (FSA)

A health care flexible spending account (FSA) is very similar to a health savings account. The money you contribute is tax-deductible and can be withdrawn tax-free for qualified medical expenses. The biggest difference is that a healthcare FSA is basically “use-it-or-lose-it.” Your employer is allowed to let you roll over up to $500 for the next year.

The IRS hasn’t announced 2022 contribution limits yet, but in 2021 the annual limit was $2,750.

Dependent care flexible spending account (FSA)

This one is a significant potential benefit, and it’s also one that’s often overlooked by young families who send their children to daycare and both parents work.

This is essentially the same as the flexible healthcare spending account, just for dependent care expenses (read: childcare) instead of medical expenses. Your contributions are tax-deductible, and you can withdraw the money tax-free for eligible dependent care expenses.

The IRS hasn’t announced 2022 contribution limits yet, but in 2021 the annual limit was $2,500 if married filing separately, and $5,000 unless filing separately.

Retirement plans

Open enrollment is a good opportunity to make sure you are taking full advantage of the retirement plans available to you. Here are some key questions to ask as you look through the information you’re given:

  • What types of retirement plans are available to you? Is there a 401(k)? 403(b)? A pension plan? An ESPP (Employee Stock Purchase Plan)? Something else? Different types of plans have different strengths and weaknesses, and simply knowing what you have is the first step towards figuring out how to take advantage of them.
  • Is there an employer match? If so, what is the policy, and are you taking full advantage of it? That match is likely the best return you’ll find anywhere, so it’s worth contributing enough to get it if you can.

For employers, you can learn more about employer-sponsored retirement plans here or on our small business owners page.

Life insurance

Many companies offer a base level of life insurance at no cost to you, with the option to buy more if you’d like. If you don’t already have enough individual coverage outside of work, this could be a good opportunity to get that coverage in place until you’ve secured your own policy.

Thinking about term life insurance? Get a free quote!

Other benefits to keep an eye out for

Those are the major benefits that you’ll have to make decisions on, but there are plenty of others to keep an eye on. Every employer is different, but here’s a partial list to keep an eye out for:

  • Dental and Vision Insurance
  • Wellness programs
  • Short-term and Long- term disability insurance
  • Education assistance
  • Vacation time, sick time, and personal days– Make sure you know how these policies work so that you can take full advantage of them when the need arises.

If you have accrued unused PTO, you might be able to defer it into your retirement plan.

Make the most of open enrollment

Open enrollment is often overlooked, but in many cases, it’s a great way to find cost-effective protection and significant savings on things like health care, childcare, and more.

So, it’s worth taking the time to look through all of the options available to you and ask questions when you want help understanding something. With the right decisions, you stand to save a lot of money and put your family in a better financial position.

If you have questions or would like to see if you should enroll in a specific benefit to help with your overall financial plan, set up a 30-minute phone call with us. We would love the opportunity to help you.