MONEY MATTERS: Time to Participate in Open Enrollment

For most companies, open enrollment is about to start or will occur within the month or so. When it occurs, will you be ready or will this become another missed opportunity?

Evaluating and participating in the best of your employer’s benefit should be high on your priority list. To do this, you must first understand what is being offered and when you become eligible to participate. If your employer has a human resources (HR) person, that is the place to start. Most of the time the HR person not only keeps the employee records up to date, but is trained on the benefits as well. Here are some of the basics that your employer may offer: health insurance, retirement plan, cafeteria plan, and flex spending account.

Health insurance is the most common and needs the least discussion. While there may be a few employers in our area that offer more than one health plan, I suspect most have only one plan where your option is a simple yes or no. And with the cost of health, I would hope if this benefit is offered, you are taking it and not going without it.

The retirement plan seems to be one of those benefits that many say they will start later. The problem is, later often never occurs and many individuals find themselves within a few years of retirement and virtually little saved. If a retirement plan is offered, you need to participate without fail. Even if the first year of participation is at the lowest level, perhaps one percent (1%) of your salary. Ask your HR person the smallest percent you can do and still participate. There may be some plans that permit you to contribute a fixed dollar amount rather than a percentage of your salary. My recommendation is for you to determine the amount per paycheck that you can put into your retirement plan. If one percent is more, you should do the one percent. It will only take one or two paychecks to become accustom to your new take home amount and you will be providing yourself a major benefit. By signing up to participate as a percentage rather than a fixed dollar amount, most plans will then withhold more for your retirement when your checks are larger due to overtime, commissions, or bonuses.

Some employers offer a match. This is something you should determine if your plan provides a match and when you become eligible to receive it. Waiting to start participating once the match becomes active is not a good idea. I know of several employees that chose to wait and then never did sign up. Even if you believe you will not be with that employer long enough to benefit from the match, you should still participate. If you ask your friends how long they intended to work at their current job, you may find many saying they intended to work one maybe two years, and yet they are about to earn their five or ten year pin. Things change and if you sign up for the retirement plan and put in more years than you thought, the match may be worth thousands of dollars to you and your retirement.

On the cafeteria plan the quantity of benefits will vary by company. I will touch on two benefits that deserve a closer look. Life insurance is often part of the cafeteria plan or offered as a stand alone benefit. Prior to automatically purchasing this benefit, you need to ask yourself whether you could qualify for preferred rates with an insurance company. Policies offered through employers are rarely offered at preferred rates. Since the insurance company has to insure everyone the employer hires, they generally offer products at a higher cost to cover the additional risks they are taking. While the costs may appear to be very low, amounts being shown are per pay-period rather then monthly or they scale up at certain birthdays, if you qualify for preferred rates, the costs in most cases will be less than plans offered through your employer.

The second benefit through cafeteria plans are accidental death and dismemberment (ADD) policies. The cost of these policies is extremely low and that is for a reason. These policies do not pay out significant funds. In my opinion, it may be best to make sure you have quality health and life plans rather than rely on an ADD plan.

The last benefit that may be offered is the flexible spending account. These may be offered for medical or dependent care expenses. Many people avoid these plans because if you do not spend the money it can be lost. Many plans now permit you to spend leftover current contributions in the first quarter of the next year. Also, since these contributions are before income and FICA taxes, even if some was lost, you may still be better off by participating. Do not ignore this benefit for fear of losing your contribution, as the rules of your plan may have changed.

Becoming financially secure may be one step closer if you take the time to evaluate and participate in the best plans your employer offers. Do not let this open enrollment pass you by.

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