How To Prepare For Open Enrollment
September 24, 2007
Does open enrollment seem to sneak up on you every year? Your human resources department sends out an email announcing the enrollment period and before you know you’re scrambling to make your selections on the last day before it closes.
You’re going to be stuck with these choices for a whole year – why not take a little extra time to research your options ahead of time so you can understand your potential choices and make the best decision for you? The Financial Planning Association sent me this guide to reviewing your benefit options before open enrollment.
Check Your 401(k) Holdings
Most companies allow more than one chance per year to adjust the holdings in your 401(k) retirement accounts, but generally, it’s a bad idea to be constantly changing your investment allocations. However, fall is a good time to see if your holdings still fit your age, your risk tolerance and the kind 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.
Review Your Health Plan Choices
During open enrollment, make sure you think about 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– and make sure you confirm that you are – 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 go below any plan that limits lifetime benefits to $1 million – you’d be surprised how little time it takes to get there for an accident or serious illness.
Review Your Prescription Coverage
You need to 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 expected needs.
Understand the FSA/HSA Maze
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 yearend 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. These dollars often can be directed into different investment accounts and used on a tax-favored basis in retirement. In 2007, individuals can deposit up to $2,850 in their HSA, even if the minimum single person deductible of $1,100 is selected. Insured individuals with family coverage can deposit up to $5,650, even if the minimum family deductible of $2,200 is selected.
Check on Education Benefits
Tuition for college or professional seminars is extremely valuable because it can help you advance in your career. If your company offers to pay for coursework of any kind – even courses taken strictly for fun – don’t ignore that benefit. It might help you in your next job or a promotion with your current employer.
This column is produced in association with the Financial Planning Association (FPA), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning.
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