Once a year many companies offer an opportunity to make adjustments to corporate benefit plans that may include a 401(k) plan and medical, group life and disability insurance. Few people are fully aware of all the benefits available to them and nearly everyone can make some improvements. Here are a few ways to get the most out of your corporate benefits.
Pay your Long-Term Disability Income Insurance With After-Tax Money
This will result in the benefit being paid as tax-free. Some companies will allow you to elect for additional coverage and pay out of pocket. If you take a deduction, know that the benefit could be taxable. Having a tax burden when disabled, stressed and unable to work is the last thing anyone wants.
Insure Your Full Human Life Value
Your life insurance should cover the full replacement value of your future income. For a 30-year-old with a rising income, this can be as much as a few million dollars. Talk to your financial advisor about how to implement a good blend of permanent and term life insurance.
Review Your 401(k) Investments and Contributions
Are you on the right track? Are you saving enough? Do you know what your employer matches? Maxing out your 401(k) is not a guarantee for sufficient income in retirement and a Roth may not be the right strategy for everyone. Schedule a review with the advisor who manages your 401(k) plan. (For related reading, see: 3 Reasons Your 401(k) Is Not Enough for Retirement.)
Review Your Medical Plans
Do you expect to have more medical expenses in the coming years? Are you planning on expanding your family? Having the right medical plan and deductibles can help you reduce unnecessary out-of-pocket expenses. For families where both partners have employer-sponsored benefits it is important to review both plans to see if it is better for the family to be covered by one partner’s plan or to have individual coverage. According to Ellen Meza, Senior Manager at Global Benefits at Riverbed Technology, for someone planning on having a child, "There could be some deductible savings that could be missed if you are only looking at one plan."
Understand the Differences Between HSA, HRA and FSA
Did you know that a health saving account (HSA) is essentially a medical 401(k)? You can invest the money, roll it over year after year, and take it with you when you leave. A flexible spending account (FSA) is more similar to an allowance account, and any unused money goes back to the employer. Blue Cross Blue Shield has a nice website that details the differences.
Consider Long-Term Care Insurance
It provides you and your spouse with a daily allowance to be used for at-home or facility care when you have trouble with activities of daily living. (For related reading, see: Long-Term Care: More Than Just a Nursing Home.)
Don't Miss Your Enrollment Deadline
Look for notifications from your human resources department that give you the timeframe for enrollment and adjustments. You might not be able to get coverage after the deadline.
Name Your Beneficiaries
Qualified plans transfer by beneficiary designations and are not included in the family revocable trust. According to Marina Modlin, an estate planning attorney at Modlin Legal, naming a beneficiary will help avoid probate and will save both money and time.
Take Advantage of All the Benefits Offered
When I consulted with Ali Kwon, Director of Benefits and Compensation at DCHS1, she emphasized that many benefits are portable. This means even if you leave the company you can take your benefits with you to ensure important coverage does not lapse when you advance to a new career. Also, due to group rating and a younger age category, group benefits can also be cost-effective for some. (For more from this author, see: 3 Options for Your 401(k) When You Leave a Job.)
Enroll in an FSA Account
Some plans require that you enroll each year. Discounts and/or free public transit benefits may be included and missing out could cost you a lot. (For related reading, see: How Flexible Spending Accounts Work.)
Considering the complete financial picture and maintaining the right balance of risk and reward is the key to success. Check in with your financial advisor and make an appointment with your human resources professional at work. Make sure your personal and corporate benefit plans are coordinated properly to offer your family the optimal protection. Travel safe and sleep tight on your next adventure.
(For more from this author, see: Tips to Build and Maintain a Good Credit Score.)
This article was written by Peter Mu, registered representative and financial advisor of Park Avenue Securities LLC (PAS) 20 Bicentennial Circle, Suite 100, Sacramento, CA 95826. Securities products and services and advisory services offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Guardian, its subsidiaries, agents, and employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation. Links to other sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents, and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services, and make no representation as to the completeness, suitability, or quality thereof.