The last quarter of each year has unofficially become “open enrollment season” for employee benefits, as millions of workers have the opportunity to retain or revise various job-related fringes.
Health insurance questions may dominate this year’s conversation, as the Affordable Care Act’s effects become widespread, but Shomari Hearn, vice president in the Ft. Lauderdale office of Palisades Hudson Financial Group, says that advisors should go beyond health plans to other key areas. Those topics include:
“For many employees,” says Hearn, “this will be the main focus during open enrollment season. Costs are rising and some family plans may not be covering workers’ spouses.”
Thus, financial planners should encourage clients to scrutinize next year’s health coverage carefully. If both spouses work, both company health plans should be compared, to seek the best coverage for all family members. An uncovered spouse may have to find health insurance elsewhere. “Financial advisors may not be experts on health insurance,” says Hearn, “but they might be able to help clients who have done the legwork and brought information about various plans for an advisor to evaluate.”
At some companies, employees can select high-deductible health insurance, which will have relatively low premiums. “That might be a good choice for someone who is in good health and doesn’t expect large medical bills,” says Hearn. “A client who chooses a high-deductible plan may be able to have a health savings account (HSA) as well. There are tax benefits to HSAs, employees have more control over their medical spending, and there are no limits on how much you can roll over to future years.” Some clients may want to build up an HSA so they can pay medical bills with pretax dollars after they stop working.
Again, Hearn says that clients should review their current decisions carefully, not merely continue past practices. “They should be sure to contribute at least enough to get a full employer match, if one is offered. If they don’t, they’re leaving free money on the table.”
Once employees have contributed enough to get the full match, they should plan for where the next dollars of savings will go. Advisors can help clients decide among choices such as unmatched employer plan contributions, Roth IRAs, and perhaps HSAs. “In some cases,” says Hearn, “putting money into a taxable account can be a good choice, especially if clients may need access to those funds.”
“Many employees pay attention to health and retirement plans but overlook areas such as life insurance,” says Hearn. “Some companies provide coverage of, say, one year’s salary but employees can increase that amount to perhaps four or five years’ salary. Clients may want to take advantage of low-cost group coverage.”
Here’s another area that often deserves more attention, according to Hearn. “Most people don’t think of this,” he says, “but it can be important protection, considering the likelihood of not being able to work.” He suggests focusing on long-term rather than short-term disability coverage (what does the company provide, what can employees add at a reasonable cost) because that’s the greater risk to financial security.
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