Navigating Employer Benefits
March 19th, 2014 | Comment
Being prepared for the working world requires being ready to make many new decisions. Where do I want to live? What type of organization suits me? How do I build a budget? Some of the decisions will be made when you accept your first employment offer. In addition to finding a new place to live and acclimating to your new job, you will also have to make some key benefit decisions during your new hire period.
The new hire period is the first 30 days of employment with your new organization. During this time you will complete all the new hire paperwork including tax forms and benefit enrollment forms. All the choices you make will have an impact on your take home income and the level of insurance coverage you have. It is important to consider all of the organization’s benefit programs from a total rewards perspective instead of looking at compensation and benefits in isolation. Paige Meltzer’s blog on Salary Negotiations is a great complement to my guidance below. Here are some helpful things to think about when reviewing your benefits package:
1. Medical Plans
You will have several medical plans from which to choose and while they will all be good options, you will want to consider the following:
Staying on your parent’s medical plan until age 26 – The Affordable Care Act (ACA) allows young adults to remain on their parent’s plan until age 26. This is a way to save money during the first few years of employment. Make sure that plan covers the doctors in your location so you are adequately covered.
Prescription drugs – Understand how much prescription drug copays are in each of your organization’s medical plans so you can determine annual costs for these medications.
Health Conditions – Do you have any health conditions for which you need ongoing treatment? Take care of yourself by selecting a primary care physician (PCP) and participating in annual wellness check-ups is a great way to stay healthy.
Use an in-network medical provider – Each insurance plans has a list of physicians that they negotiate a deeper discount with for services. These are the in-network providers. Always choose an in-network provider when receiving routine care. Each insurance plan has a great search tool on their website to find providers by name, location, specialty, and gender.
Compare the plan choices by understanding the total cost of the plans – Understand the total cost of the plans but evaluating the annual payroll premiums and total out of pocket for the plan (deductible and out of pocket maximum). The annual premiums will be taken from your paycheck regardless of how much care you received but the amount you pay into your deductible and out of pocket maximum will depend on how much you use your medical plan. It is important to understand how much you will have to pay for a catastrophic type of situation and what you will likely pay year to year for more routine care. If you are relatively healthy, you will pay for your payroll premiums, a prescription or two, and a few office visits. Understanding what those will cost reviewing the Summary of Coverage (SOC) document of each plan is a great idea.
2. Retirement Plans
Employee Contributions – These plans can come in many forms – 401(k), 403(b), 401(a), etc. They all allow you to put aside money from our paycheck on a pre-tax basis which lowers your taxable income. While you may think you need all of your paycheck to make ends meet, please consider setting aside money into your retirement plan as early in life as you can. This money will grow throughout your professional career and be a significant income resource at retirement. The money grows tax free and you are only taxed on the money at withdrawal. Your tax bracket is likely lower in retirement so you will be taxed less on the withdrawals then than you would be paying in taxes today.
Organization Contributions – Many organizations will put aside money into a retirement plan on your behalf after you have been with organization for a period of time. You will want to fully understand how this plan works so you can maximize it. If they provide contributions only if you put a portion of your own money in, please do it. It is free money to help secure your financial future. It is also important to understand if the plan has a vesting schedule. Vesting schedules allow the organization to keep a portion of the contributions they set aside for you in case you choose to leave an organization. You’ll want to review those schedules if we are looking for another position at a future date.
3. Income Protection Plans
While you may be young and healthy now, it is important to think about the future. You may start a family and need to think about how you are going to financially protect yourself and your family. Take the time to understand what types of life insurance and disability benefits your new organization offers. You may not need a large amount of life insurance early in your life but you will want to make sure you have financial protection in place if you are unable to work. Short and long term disability insurance will assist with securing your income. Some organizations pay for these benefits while others require you to pay for access to these plans. These are benefits that I suggest considering when making your new hire benefit elections.
4. Auxiliary Plans
Organizations will offer a multitude of additional benefit programs including but not limited to: dental plans, vision plans, flexible spending account plans, legal plans, long term care plans, child care programs, education reimbursement plans, well-being plans, work-life balance programs, employee discount programs, and other types that fit the organization. While you may not need these programs now, please make sure you understand what is offered so you can potentially use it at a later time.
5. New Hire Period Elections
As I stated above, you will have 30 days to make your first set of elections into these benefit programs. Take the time to understand and make the right choices for you. Ask your Human Resources representative which programs can be modified in the future in case you need to make any changes.
6. Annual Benefits Enrollment Period
Each year your organization will allow you to make changes to many of your benefit elections without a qualifying event (marriage, birth, loss of other insurance coverage). This is the time to review all of your benefit elections and decide what you wish to participate in for the upcoming year. A half hour of review can go a long way to securing the appropriate level of coverage for yourself and your family.
Please know that you are not alone if you feel overwhelmed with all of these choices. It is a lot to understand. The more you become involved in these programs, the more confident you will feel with your choices. Your organization’s Human Resources department will be filled with helpful and passionate individuals who want what is best for you and while they cannot tell you what choices to make, they can answer your questions so you know you are making the best decision.
Category: Professional Development