A Bigger Salary Or Better Benefits?

When looking for a job, people often focus on finding the job that pays the most. But, unless the difference in pay is significant, more pay does not always determine the best job offer. When considering a job offer, it is important to consider the entire package; this  includes salary, medical and dental benefits, insurance coverage and the retirement plans under which an employee would be covered. 

According to a July 2009 release by the Bureau of Labor Statistics, more than 70% of all workers surveyed had access to retirement and healthcare benefits from their employers. In terms of healthcare benefits, those employers paid 82% of the cost of premiums for single coverage and 71% of the cost of family coverage for their employees. In 2008, those premiums amounted to $3,800 per year for single-person coverage and $8,800 for family coverage. Clearly, the more of the premium your employer will pay, the better.

An employer that does not offer a retirement plan might not be worth considering, unless the salary being offered is such that it will allow you to comfortably add contributions to your nest egg. Your contributions should be comparable to those offered by other companies with a retirement plan. Particularly in your early working years, additional contributions can make a huge difference in the savings you are able to accrue.

Opt for a defined benefits plan if you can get it. With a defined-benefit plan, your plan benefits are not affected by market performance. Instead, investment risks are borne by your employer, and - unless your employer files for bankruptcy and is unable to fund the plan - your pension is guaranteed.

There are two types of defined-contributions plans: guaranteed contributions plans and salary deferral/matching contributions plans.Money-purchase pension plans and target-benefit plans include guaranteed contribution features, and the employer is mandated to make contributions to the plan each year. This makes the money-purchase and target-benefit plans more attractive than a profit-sharing plan, in which employer contributions are discretionary.

If there is a salary deferral feature, check to see if there is a cap on the amount that can be deferred. Also, if comparing two plans that provide matching contributions, pick the one offering the higher matching contribution amount.

Qualified plans usually include distribution-restriction features that may force you to leave the funds untouched until you retire or change employers. This can be a good feature because it prevents the removal of funds from the nest egg for non-necessities. IRA-based plans, such as SEP IRAs and SIMPLE IRAs, have no distribution restrictions, which means that withdrawals from the fund are allowed. Other features, such as contribution limits and creditor protection, should be considered if you need to choose between the two.

Most experts recommend that employees with dependents should have life insurance coverage to ensure that their families are provided for if the employee dies unexpectedly. The Bureau of Labor Statistics, 59% of all private sector workers had access to life insurance benefits. Short- and long-term disability benefits were also offered by more than 30% of employers. If having a life insurance policy in place is important for you, you will certainly benefit if your company pays a portion of the premiums.

A cafeteria plan is a benefits plan that allows employees to choose from a variety of benefits. Choosing the employer with the better cafeteria plan benefits may mean fewer out-of-pocket expenses for medical and dental needs as well as better insurance protection for your dependents. Cafeteria plans include benefits such as:

• Flexible spending accounts (FSAs
• Medical and dental benefits
• Assistance for dependent care and adoption
• Health savings accounts (HSAs)
• Term life insurance coverage

A mistake that is often made by job hunters is to focus on salary, but bear in mind that your total compensation is not limited to your salary. Consideration must be given to benefits such as cafeteria and retirement benefits. If you want to get a good understanding of a potential employer's benefits package, ask for a copy of its summary plan description (SPD).