Your guide to open enrollment benefits season

Every year, employees are asked to review and update their benefits to take effect the following year. This is known as the Open Enrollment period, and choosing the right benefits for your situation is crucial in setting yourself up for financial success.

This guide will walk you through common benefits options and what to consider when selecting or declining them.

Benefits you’ll learn about:

• Health insurance
• Dental insurance
• Vision insurance
• HSA
• FSA
• Disability insurance
• Life insurance
• 401(k)
• Other benefits

Health insurance

During Open Enrollment, health insurance is often the biggest consideration for employees. Health insurance plans vary drastically across employers, but there are several things always to consider:

• Will you enroll your spouse and/or children on your health insurance plan?
  • If you have a working spouse, compare plans across both your employers to find the best plan for your entire family.
• What are everyone’s health needs that your health insurance policy will cover?
  • The best health insurance plan will likely be different for someone who only needs the occasional checkup versus someone with a chronic health condition that requires frequent medical attention.
• What kind of plans does your employer offer?
  • Unlike many other benefits, most employers offer several health insurance options. Cheaper plans generally have higher deductibles and out-of-pocket expenses, while more expensive plans have the opposite. PPO plans can be great for those needing regular medical care, while a HDHP can make sense if you only need an occasional checkup.

Dental insurance

Despite dental care being vital to maintaining good overall health, dental insurance is separate from health insurance. For practical purposes, dental insurance operates more like a dental discount program than actual insurance. Biannual cleanings are often entirely covered or steeply discounted, but any dental work beyond that will likely require partial out-of-pocket expenses.

The factors you should consider before enrolling in your employer’s dental plan are also very different from health insurance:

• What is the cost of your employer-sponsored dental plan?
  • Dental insurance is often worth it, but this can depend on your dental needs and the cost of your employer-sponsored plan.
• How much would you spend on dental care without insurance?
  • Try estimating how much you would spend for two cleanings a year plus an additional budget for other potential dental work. Compare this to the annual dental insurance premiums and decide what is best for you.

Vision insurance

Like dental insurance, vision insurance operates more like a discount program than actual insurance. Whether you should enroll in your employer-sponsored vision insurance could depend on if you need vision care beyond a routine annual exam. Consider the following when enrolling in vision insurance: • Do you need vision care beyond routine exams? o Vision insurance often covers a portion of the cost of glasses or contacts, as well as costs associated with treatment for eye-related medical conditions. Still, if you only need routine exams, the savings on those from vision insurance may not be enough to enroll. • Could you afford to pay unexpected vision expenses out-of-pocket? o If you are considering not enrolling, make sure you can afford to pay for vision expenses out of pocket if needed.

HSA

A Health Savings Account (HSA) is an incredibly powerful financial tool, but it isn’t available to everyone. To qualify, you must enroll in a High Deductible Health Plan (HDHP) to qualify. HSAs allow you to set aside pre-tax money for qualified medical expenses. HSAs are triple-tax advantaged. This means that the money contributed is pre-tax, invested funds grow tax-deferred and spending on qualified medical expenses is tax-free. However, there is an annual contribution limit, which for 2024 is $4,150 for self-coverage and $8,300 for family coverage. This amount typically goes up annually to follow inflation. You can also invest funds in your HSA. Unlike an FSA, HSA funds never expire, and there is no deadline for submitting reimbursements. Similar to a 401(k), some employers contribute funds into your HSA; however, please note that employer contributions count towards your yearly contribution limit. Check with your employer to see if this is available for you. Before enrolling in an HSA, consider the following: • Do you have access to a HDHP? o This is a requirement for an HSA. If you have access to one but would otherwise choose a different health insurance plan, weigh whether having HSA access makes switching worth it. • Would your employer contribute to your HSA? o If yes, consider this as free money and only forgo it if being on a non-HDHP health plan still makes more sense than getting these contributions.

FSA

A Flexible Spending Account (FSA) serves a similar purpose to an HSA but operates differently. You can contribute to your FSA pre-tax and use it to pay for qualified medical expenses. However, consider the following before enrolling in an FSA:

• What would your FSA contribution limit be?
  • Your employer sets this.
• How much do you feel confident you’d spend in your FSA annually?
  • FSA funds don’t carry over from year to year. As of 2024, you can only carry over $640 to the next year. You must spend funds beyond that within 2.5 months of the following year.
• Do you have an HSA?
  • You cannot have a traditional FSA and an HSA at the same time. However, you can have special types of FSAs, such as a limited-purpose or dependent-care FSA and an HSA.

Disability insurance

While it’s hopefully unneeded, disabilities can arise unexpectedly. Disability insurance covers a portion of your income if you cannot work due to a covered illness or injury. There are two types of disability insurance: Short- and long-term. They serve the same function, with the main differences being how long they last and what portion of your income they cover. Your employer may provide disability insurance at no cost to you. Otherwise, consider the following when enrolling in disability insurance.

• How likely would developing a disability keeping you from work be?
  • While disabilities are typically unforeseen, some professions are at more risk. For example, a construction worker would be unable to work with a broken leg, while a remote office worker could still work.
• Do you have a fully funded emergency fund?
  • If so, you may be able to forgo short-term disability insurance. You should still consider long-term disability insurance, as a medical condition that keeps you from working for years could arise.
• What is your household financial situation?
  • If you bring in a substantial portion of your household’s income, disability insurance becomes more important to ensure that income is partially replaced if lost.

Life insurance

Many employers offer life insurance policies as part of Open Enrollment. Term life insurance can be well worth the cost. Here are key considerations when choosing to enroll in term life insurance. • Do you have a spouse or dependents that rely on your income? o If yes, term life insurance is a great way to ensure the lost income isn’t financially devastating for your family in the unfortunate event you pass away. • How old are you? o Term life insurance is cheaper when you’re younger, given the lower risk of passing away. When deciding on a policy and term length, consider how rates could increase as you get older.

401(k)

While 401(k) retirement accounts aren’t directly a part of the Open Enrollment process, this period is a great time to review your contributions and adjust if needed. When reviewing, consider the following:

• Are you receiving your full employer 401(k) match?
  • Employer matches are one of the easiest ways to boost your savings, and you should try to get the full match whenever possible.
• Are you on track to retire given your current contribution rate?
  • Online retirement calculators and financial advisors can assist in answering this question. If you aren’t on track, you may need to raise your contribution rate. Remember to factor in all retirement accounts and your expected retirement expenses.
• Are you currently contributing to a Roth 401(k) or a traditional 401(k)?
  • A Roth 401(k) has tax-free withdrawals, while a traditional 401(k) has pre-tax contributions. You can also mix and match contributions as you wish. However, keep in mind all employer contributions are traditional 401(k) contributions.

Other benefits

While these are some of the most common benefits, there are plenty more your employer could offer. For example, some employers offer Alliant Credit Union membership as a benefit to their employees! Pay close attention to additional benefits to decide if they’re worth enrolling in. While making all the right decisions during Open Enrollment can feel overwhelming, going through each benefit and carefully evaluating the options is critical in setting yourself up for financial success the next year. If you ever need extra assistance, don’t hesitate to contact your HR department.