With Open Enrollment on the Way, Check Your Health and Benefits Needs Now

There was a time when the open enrollment period for health insurance, retirement options and other benefits was a fairly straightforward, stress-free period where you could see what additions your employer was making to your health and other fringe benefits in an otherwise healthy economy.


Today, open enrollment is largely about reading the fine print and determining how you will manage your own out-of-pocket costs and making up any shortfalls in retirement savings.

According to the Society of Human Resource Management’s 2010 Employee Benefits Survey released in June, 72 percent of HR professionals said the benefits offerings at their companies had been affected “in some way” due to the economic downturn that began in 2008. And while 79 percent said they were reviewing their benefits offerings annually, 10 percent reported that they were reviewing them more than once a year.

And in one notable SHRM statistic, 10 percent of respondents said they plan to reduce or eliminate employer match for 401(k)s in the coming year.

That means that for the best benefit deals in the future, employees are going to have to become better shoppers, and where employers are offering incentives for losing weight, quitting smoking or getting certain chronic health situations under control, employees need to change behavior to save more money.

Employee benefits are a very important component of an individual’s financial plan, and in two-income households, they should be coordinated. That’s why it makes sense to talk about your benefit choices with a financial planner to see how such choices fit into your overall financial strategy.

Some critical issues you should check before you choose your benefits for the coming year:

If your company retirement plan is changing, get some help: Most companies allow more than one chance per year to adjust the holdings in 401(k) retirement accounts, but it’s important to get help if you’re planning to change allocations to see if they still fit your age, risk tolerance and the standard of retirement you want. Get some advice, and obviously, if you’re not a member of your employer’s 401(k) or 403(b) plan, try to join, particularly if your employer matches your contribution. Also, if your company cut back on its 401(k) matching during the recession, see if they plan to restore that contribution after the economy improves. You might want to review whether to stay with a company that offers benefits that are below that of its competitors.

Take a health inventory: As you’re reviewing health plan choices, think of all the health issues you’ve experienced throughout the year. It could be a diagnosis of a chronic disease, the birth of a child or the need to place a new spouse or partner on your coverage. A new spouse or child can usually be added with proper notice throughout the year, but open enrollment is a good time to review all current and future situations. If you’re healthy, you might want to opt for a lower-premium plan that requires higher co-pays or deductibles and try to put more into your retirement savings. Just try not to choose any plan that limits lifetime benefits to $1 million or less – you’d be surprised how little time it takes to get there for an accident or serious illness.

Review your prescription coverage: You should look at your prescription needs and find the best insurance choice to cover them. While you may have a co-pay of $5 to $10 for generic drugs, will your plan pay for a brand-name drug that you really need, or will you get stuck with a co-pay of $50 or more? Make sure you understand the tier system within your pharmaceutical plan and pick the right one for you based on your current or expected needs.

Understand FSA/HSA options: A flexible spending account (FSA) is an account some employers offer so workers can deposit funds on a pre-tax basis to pay their out-of-pocket health and dependent care costs. However, workers need to make a good estimate on the funds they’ll use by year-end because excess funds can’t be carried over. Health Savings Accounts (HSAs) allow workers to save pre-tax dollars for health care costs without the "use it or lose it" restrictions in FSAs, though they require the enrollment in a qualified high-deductible health plan, which more companies are moving toward. These dollars often can be directed into different investment accounts and used on a tax-favored basis in retirement. In 2010, individuals can deposit up to $3,050 in their HSA, and those with family coverage can deposit up to $6,150. Individuals above age 55 can add another $1,000 in contribution on both individual and family coverage.

See if you can buy additional coverage: Open enrollment can offer life insurance coverage – or increases in coverage and sometimes long-term care insurance without a medical exam. Check that the insurance providers are highly rated in A.M. Best, and if they’re well ranked, take the coverage and find out if you can keep it going if you leave the company.

September 2010 — This column is provided by the Financial Planning Association® (FPA®) of Puget Sound, the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process. Please credit FPA of Sound if you use this column in whole or in part.

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