Open enrollment is an important time for employees to review and select benefits and those decisions can have a lasting impact on your financial future.
According to the U.S. Bureau of Labor Statistics, the average employee benefits package accounts for 29.7% of total compensation for private industry workers and 38.4% of total compensation for state and local government workers.
But when the average employee has to choose from more than a dozen benefits, it is easy to become fatigued while working through the open enrollment process. The steps that follow will help keep you on track.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
Kiplinger’s Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.
1. Review your current benefits
Start by evaluating your existing benefits. Consider what worked well in the past year and what didn’t.
Look at your health care usage, out-of-pocket costs and any changes in your circumstances — such as marriage, the birth of a child or new health needs — that may influence your choices. Try to judge how much the upcoming year’s expenses may look like this year’s.
A tool that may help is “start, stop, continue.” Try to decide what benefits were missing this year that you would like to start in the new year, what benefits were not used that you might stop and what benefits were helpful that you want to continue.
This exercise can help you group your benefits by category.
2. Attend informational sessions and read materials
Keep an eye out for emails and other communications that offer enrollment support. Your employer offers these resources because they want you to get the most out of your benefits.
Use your human resource team to help you manage your decision-making. Consider talking to HR with your partner, if applicable, to help your family get the most out of your benefits.
3. Compare plans carefully
When selecting, compare plan premiums, deductibles, copayments, coverage networks and prescription drug benefits. Use available online tools or calculators to estimate your annual costs based on anticipated health-care needs.
Try not to get overwhelmed. Start by thinking about how well this year’s plan served you and your family. The complexity of plan comparisons makes relying on your HR team especially important.
Start by telling them what you liked and did not like about this year’s plan.
4. Consider flexible spending and health savings accounts
Flexible spending accounts (FSAs) and health savings accounts (HSAs) offer tax advantages for medical and dependent care expenses. Review contribution limits and eligible expenses for each account and decide how much you should set aside for the coming year.
Remember that FSAs typically have a “use it or lose it” rule, so plan your contributions carefully.
And don’t let the acronyms confuse you. Perhaps think of your FSA as your “fast” account that generally has to be spent in the year it is funded and think of your HSA as your potential “hold” account which can be saved, if not needed, year-over-year and even invested subject to certain conditions.
5. Evaluate supplemental benefits
Beyond core health insurance, many employers provide added benefits such as life insurance, disability coverage, legal assistance, and wellness programs. Assess your need for these supplemental benefits and consider increasing coverage to suit your needs.
Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.
Benefits you have to pay for are a bit like subscriptions for services, such as streaming. Individually they may not seem expensive, but when combined they can be expensive.
6. Plan for retirement
Open enrollment is a great time to review your retirement savings strategy. Check your contribution rates to your workplace savings plan if you have one.
A best practice to consider is to at least contribute enough to get the maximum company match. Another is to increase your contributions steadily to at least 10%.
Other questions to consider include whether to use a pre-tax contribution or a Roth contribution, if offered.
The former allows money to be contributed pretax and comes out as taxable income when withdrawn, while the Roth is made up of after-tax contributions and comes out as tax-free when withdrawn, subject to certain conditions.
Although company contributions will most likely be taxable when withdrawn, having tax-free Roth dollars in retirement may still be beneficial.
7. Understand deadlines and take action
Be aware of open enrollment start and end dates, and submit your selections before the deadline. Late submissions may result in missed coverage or defaulting to less optimal plans.
Because benefits decisions may impact your take home pay it is best to complete the forms with your partner. Completing the process early and sleeping on your decisions before final submission is another good idea.
8. Seek advice if needed
If you’re unsure about which options are best for you and your family, consider consulting with benefits specialists or financial advisors. They can help you understand complex plan terms and make choices that align with your goals.
This is particularly true if you have special circumstances, such as a family member with a chronic condition.
A final note on AI
Open enrollment season is your annual opportunity to tailor your benefits to meet your evolving needs. By reviewing your current coverage, attending informational sessions, comparing options and acting early, you can ensure you’re maximizing the value of your employee benefits.
You could also try using AI for guidance, whether by uploading plan documents to a chatbot and asking it to summarize them, or simply by asking it questions. AI isn’t foolproof, however, so be sure to verify any information you’ve been given with your HR team.
All investments involve risks, including possible loss of principal.
Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account.
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested.
Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.
Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
