Adulting 101: Employee Benefits to Look For

Open enrollment season is almost upon us. This is the time of year when employers are typically sending out packets of materials to employees to review and make decisions about their employee benefits for the upcoming year. So, now is a good time to start thinking about things to look for when reviewing your employee benefits package. Beyond valuable health insurance coverage, here are three other items you should keep an eye out for and consider at enrollment time: 

1)    Long-term disability insurance is essentially paycheck insurance. Think about what might happen if you were to become disabled and were no longer able to work to pay your bills. It’s more likely that you could experience a disability in your lifetime than face an early death, which makes long term disability insurance a crucial part of your personal financial plan. If your employer offers this coverage and you’re not automatically enrolled, I suggest you consider electing this benefit. Not all policies are the same, so be sure you understand how much of your paycheck would be covered in the event of a long period of disability, if you have an option to “buy up” to a higher amount, how long the coverage lasts, and when the coverage would kick in.  

2)    A group legal plan is oftentimes a little-known employee benefit. Under this type of plan, participants can work with local attorneys for many common legal issues, typically for no additional charge beyond the small amount deducted each pay period. If you’re planning to buy or sell a home next year, need to have an estate plan drawn up, or are even considering something like adoption, these types of plans can be beneficial for low-cost access to a qualified attorney. As mentioned above, not all policies are the same. So, take a look at the legal issues covered under your employer’s plan and consider if the cost per pay period is worth the coverage.  

3)    Dependent care flexible spending accounts (DCFSA) can offer additional tax benefits to parents with children enrolled in day care programs, before and after school care, or even summer day camps. These types of accounts are funded with pre-tax money (deducted each pay period) and parents apply for reimbursement of qualified expenses. In 2021, a contribution of up to $10,500 can be made to a DCFSA for a married couple filing jointly. For a family in the 22% tax bracket, this could result in a tax savings of up to $2,310. Beware, DCFSA accounts do have a “use it or lose it” requirement meaning you will need to coordinate your contributions with the amount you plan to spend on qualified expenses.  

Not all employers will offer all the benefits I’ve mentioned here. However, they may offer other alternatives that can be just as beneficial. Be sure to read your annual benefits packet thoroughly each year so you can take advantage of what’s offered and what best fits your current life stage.

- Margaret Gooley, CFP®, CDFA®, Worley Erhart-Graves Financial Advisors