Ask Kim
5 Things to Do During Open Enrollment
Health insurance isn't the only thing you need to consider when making decisions about benefits offered by your employer.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
October 13, 2009
I read your article about open enrollment for employer-sponsored health plans. What other decisions will I need to make during open-enrollment season?
Within the next month or so, most employees will get that big pile of paperwork with information about their 2010 benefits. Health insurance is the big-ticket item to consider (see Employer-Sponsored Health Coverage Costs Rising for more information). But there are also some other important decisions. Here are five additional things you might want to do during your open-enrollment period:
Related Links
- Employer-Sponsored Health Coverage Costs Rising
- Flexible Spending Account vs. Dependent-Care Credit
- How Much Should I Put in My Flexible Spending Account?
- SPECIAL REPORT: Open Enrollment 2009
Boost your medical flexible spending account contribution for 2010. If your employer is increasing deductibles and co-payments for your health insurance, as many are, then it’s a good idea to put more money into your flexible spending account. Because your FSA contributions avoid income and Social Security taxes, you can save 35% or more compared with spending after-tax money on these medical expenses. Use our How Much Should I Put in My Flexible Spending Account? calculator to figure out how much you will save. Many employers limit medical FSA contributions to $3,000 per year. Plus, you must use the money by December 31 (or March 15 of the following year, in some plans) or lose it.
Make the most of a dependent-care flexible spending account for child-care expenses (or home health care for a parent or other dependent family member). This money avoids income and Social Security taxes, too, stretching your dollars much further. Most families will come out ahead by using an FSA rather than the dependent-care tax credit. See my column Flexible Spending Account vs. Dependent-Care Credit for more information. You can also use our calculator to help decide how much money to set aside in a dependent-care flex plan (the maximum is generally $5,000 per year).
Consider buying more disability insurance. Many employers offer a limited amount of disability insurance to their employees as a free employee benefit. But these policies generally cover just 60% of your base pay (not counting any bonuses), and your pretax monthly benefit may be capped at $5,000 to $10,000. If that isn’t enough to cover your bills, consider buying extra coverage through your employer.
You may be able to find a policy that provides more-specific coverage for your line of work, and you can take the policy with you if you leave your job. Plus, if you pay the premiums yourself, you won’t have to pay taxes on the benefits. If you buy a policy now, you can keep it if you leave your job or start your own business –- when it would otherwise become much more difficult to qualify for coverage.
Look into long-term-care insurance. More employers are offering long-term-care insurance coverage during open-enrollment season. In most cases, employees have to pay the full premium themselves, but they’ll generally get a group discount of 5% to 10%. Long-term-care policies offered through employers are usually a much better deal now than they were in the past. The first generation of group long-term-care policies didn’t require a medical exam, so they were a good deal for people with health problems. Otherwise you could find a better policy and price on your own. But newer employer-sponsored long-term-care policies now offer preferred-health discounts, spousal discounts and a much wider range of coverage options.
Check your beneficiaries. Make sure your retirement-plan and insurance-policy beneficiaries are up to date, especially if you’ve gotten married or divorced or had a child recently. Keep in mind that your beneficiary designations supersede your will, so if you’ve kept your will up to date but haven’t changed your beneficiary designations, the intended person may not inherit your accounts.
Reader Comments (2)
Posted by: Scott A Olson of LT at 10/14/2009 11:08:22 PM
Many people don't realize that long term care insurance policies offered by employers and associations are sometimes priced 20% to 35% higher than buying a policy on your own. What's even more surprising is that some group long term care insurance policies oftentimes have LESS benefits (especially home healthcare benefits and inflation protection features). In many situations, individuals can get better benefits, for less premium, by purchasing a policy directly from an insurer rather than through their employer or association. There are 3 main reasons: preferred health discounts, marital/domestic partnership discounts, and lenient underwriting. Many group policies charge everyone in the group the same rate, regardless of their health history. If you have severe health problems, a group policy may be better for you. But, if you’re healthy, you might be missing out on a 10% to 30% preferred health discount if you go with a group LTCi policy. Marital/Domestic Partnership Discounts: Many group policies charge everyone in the group the same rate regardless of whether they are single, married, or living in a domestic partnership. Most policies you purchase on your own can give as much as a 30% (sometimes higher) discount if you’re married or have a domestic partner. A discount is usually given even if only one spouse/partner gets a policy. Lenient Underwriting: Many group LTCi policies have lenient underwriting and will approve for coverage someone who would not normally be able to qualify for an individually-underwritten long term care insurance policy. Because of that, group LTCi policies often have higher premiums because they are insuring people who have severe health problems. If you're considering buying a group LTCi policy that's offered from your employer or association, make sure you compare some of the leading individual policies.
Posted by: SPM at 12/29/2009 12:12:41 PM
Also check - Many long-term care policies now are part of a government "partnership" wherein someone can protect a chunk of their assets if they buy the long-term care partnership policy. For example, somone who had paid for long-term care policies in advance, then goes to a nursing home; the policy pays out US$100K, and I read that, that much of the insured person's assets can be sheltered from being used to pay off the nursing home bills. I am not an expert on this, and not every state has these policies, and not every long-term care policy is a partnership policy, but for those that are, it is a very good situation. Check out your state/policy's situation! SPM