It’s that time of year, when workers get to make some decisions about their employee benefits.
Many companies are beginning to hold their annual open enrollment period, which is when employees can sign up for 2023 health insurance — as well as consider other benefits, if your employer offers them. Some may offer extras like supplemental life or disability insurance, pet insurance or help with education costs.
“People tend to [review] their benefits very quickly,” said Paul Fronstin, director of health benefits research at the Employee Benefit Research Institute. “I think the most important thing is that you actually look at what’s being offered.”
For health insurance, workers may have options to choose from, including a high-deductible health plan, which in 2023 means one with a deductible of at least $1,500 for single coverage and $3,000 for a family plan.
Because of the higher deductible — the amount you pay for covered medical costs before insurance kicks in — the monthly premiums may be lower than other coverage options.
Health savings accounts come with triple tax benefit
High-deductible plans also might come with a health savings account, or HSA. This comes with a triple tax benefit: Contributions are made pretax, investment growth is untaxed and withdrawals spent on qualified medical expenses are tax-free also.
For 2023, the annual cap on HSA contributions is $3,850 for self-only coverage and $7,750 for family coverage. You also can leave the money there from year to year.
If no HSA is offered, your company might offer a health flexible spending account, or FSA. Money you contribute to FSAs are also made pretax and used to cover medical expenses. This year, the contribution limit is $2,850 per employee. (FSA caps for 2023 have not been announced yet.)
You could end up losing at least part of [your contributions], depending on how the FSA is set up.Paul FronstinDirector of health benefits research at the Employee Benefit Research Institute
However, they usually come with a “use it or lose it” clause — meaning if you don’t spend the balance by the end of the year, you lose it unless your company is among those that give you a grace period or allow a certain amount to roll over to the next year.
“You have to think carefully about how often you go to the doctor, how much are your maintenance medications,” Fronstin said. “You could end up losing at least part of [your contributions], depending on how the FSA is set up.”
Regardless of whether you use either of those pretax savings options, it’s important to consider how you’d cover any out-of-pocket costs that arise from seeing a doctor or otherwise using the health care system, said Jeff Levin-Scherz, a managing director for Willis Towers Watson.
“It can cost more in premiums to pay less out of pocket … but many families can’t afford unexpected costs,” Levin-Scherz said.
Employees are contributing an average $4,412 for their health insurance in 2022, of which $2,520 is paid in the form of premiums and $1,892 is paid through cost sharing such as deductibles, copays and coinsurance, according to Aon.
Other benefits may be available
Aside from health insurance, you may be offered disability insurance for free or at a low cost. The two basic types are short-term disability, which generally replaces 60% to 70% of your salary, and long-term disability, which generally kicks in after three to six months and is about 40% to 60% of your income. Some companies also let you purchase additional coverage.
The same goes for life insurance: You may get a certain amount of coverage — say, equal to one year’s salary — for a low or no premium, with the opportunity to purchase additional coverage.
If you consider purchasing extra disability or life insurance, keep in mind that the policy is generally tied to your employment at the company offering the coverage — meaning if the coverage is important to you for the long term, you may want to explore securing a policy outside of the workplace.
Other common benefits that might be available through your job include financial planning, tuition reimbursement programs and backup child care, according to a 2021 survey from Willis Towers Watson. Some companies also are offering emergency savings options, providing help with student loan debt or making contributions to 529 college savings plans.