3 Things to Mind as You Re-Up Your Benefits this Fall
Most companies will have their open enrollment season for employee benefits starting in October. Before you click “submit” – stop! The decision may not be as simple as you think. Pay attention to these three things as you re-up your benefits this fall.
Employer Sponsored Retirement Plans
Most people are in the “set it and forget it” mindset when it comes to their 401(k)s, 403(b)s, and other employer sponsored plans.
Here is what you may be missing out on.
Your money may not be invested the right way anymore. How much risk are you taking? If you’re taking too much and the market crashes, you may find yourself staring at an uncomfortably low balance.
Moreover, are you even sure that you are putting the right amount into your 401(k)? Most of us just siphon off what we think we can afford and call it a day. If you are contributing above your company match, this means you are essentially locking up the excess funds in an account you typically can’t withdraw from until you retire.
Benefits season is also an ideal time to review how you have allocated your funds. Do your investment choices still make sense? How have these assets performed? All of these are good questions to ask.
Healthcare has gotten painfully expensive for many people which is why it’s everyone’s least favorite thing to think about. What does next year look like in terms of predictable healthcare expenses? See how that aligns with your deductible.
Basic guidelines would be:
If you anticipate going to the doctor frequently, a lower deductible plan with a higher monthly premium might save you from getting hit with high expenses every time you have a doctor’s visit.
If you don’t have a need for consistent care and don’t anticipate any need in the foreseeable future, perhaps a high deductible plan with a lower monthly premium may work best.
Also consider how you are using your Health Savings Account (HSA ). It is often overlooked that funds placed in these accounts can be invested. Much like a retirement account, these funds accumulate earnings on a tax deferred basis. Should this be something you should consider? If you’ve maxed out contributions to your retirement accounts, maybe so.
Employee Stock Options, RSUs, Awards
As employee stock options and equity plan experts, we’ve written at length about the important things to keep in mind if you have chosen to utilize this benefit.
If you’re new to employee stock options, check out our Guide to Employee Stock Options Terminology.
If you’ve been offered employee stock options, read our blog about the questions to ask to make sure you don’t lock yourself into an unfavorable stock options situation.
First of all, there can be a tremendous tax impact from exercising a stock option. Learn the difference between incentive and non-qualified stock options. Very high-income earners may still get hit with the Alternative Minimum Tax despite the generous exemptions under the 2017 Tax Cuts and Jobs Act.
Restricted Stock and related Stock Awards also need special attention. There are situations where we’ve seen people rack up a ton of tax liability because they didn’t have a decision plan in place; and then with a falling stock, they’ve got no cash to pay for the taxes next April.
The decision of whether or not to invest in executive-level equity compensation plans, when to exercise, hold, and sell are all choices that should be made within the context of a broader plan. Engage in solid tax planning, whether it is before, during, or after your annual benefits season (or all three).
Summary of what you should be considering as you re-up your benefits
There’s no hard and fast rule that applies to any of the decisions you make regarding your employee sponsored retirement accounts, healthcare benefits, or employee stock options, RSUs, and Awards. The important factors to take into account involve your personal situation and life needs. For questions on this please contact us and set up a time to talk before your enrollment season is over!