In the classic children’s fairy tale Goldilocks and the Three Bears, Goldlilocks wanders into the woods and has a set of adventures while sorting through a variety of options to find one that is “just right”.
In this day and age, one could make the case that employees in the middle of Open Enrollment wander into a benefits fair and then try to sort through different plan options to find one that is “just right”.
How can employees avoid benefits that are “too hot” or “too cold” to find the ones that are “just right”?
Avoiding benefits that are too hot or too cold
In some cases, determining how much to set aside in a tax free account can be difficult. Employees may end up in a “too cold” scenario where they under fund their accounts. This may leave them with health expenses that have to be paid out of pocket instead of with tax-free dollars. Or, employees may over fund their accounts and get burned (“too hot”) because of forfeiture mandates.
Neither scenario is one an employee wants to be in. So, how can employees find benefits that are just right?
Finding benefits that are just right
There may be no such thing as perfect benefits. But employees can use a few tips and tricks to come close to finding benefits that are just right.
Calculators
With the calculator tool, employees can assess both historical and anticipated needs for medical accounts. This provides a framework for how much to fund their account(s) this year.
Items employees should keep in mind as they go through their calculations:
One-time expenses. In certain cases, it might not be necessary to factor in one-time past experiences. For example, let’s say an employee had a skiing accident last year and it cost $3,000. If it is unlikely to repeat this year, it may be best to leave it out of the calculation.
Recurring expenses. On the flip side, if an employee is starting a new health routine they didn’t have last year (e.g. prescriptions), that should be included.
Employees will also want to consider items like family changes, including if they expect pregnancies or to have to care for an elderly parent. A Dependent Care FSA can assist with both child care and adult care, depending on the type of expenses.
In addition to calculators protecting employees from accounts that are “too hot” or “too cold”, employees with an Health Savings Account may have an additional tool at their disposal: the company match.
Take advantage of the company match
The first step is for employees to find out if their employer offers a company match for HSA contributions. If so, this can be an easy, fast way to grow funds in the account.
According to research from Kaiser Family Foundation, on average, firms in 2017 contributed the following amounts to employee HSAs:
- HSA Single Coverage: $608
- HSA family coverage: $1086
Regardless of what an employer offers as the company match for an HSA, it is a great tool to get employees started with funding an account. They can always increase their contribution later if they decide it’s the right health and savings vehicle.
Finally, as employees seek to find benefits that are just right, they need to make sure they understand what various accounts are for.
Understanding what the account is for
Employees are given a slew of information during Open Enrollment. Regarding pre-tax benefits, they may know that a Health Savings Account can be paired with a Limited Flexible Spending Account.
While this is true, and while having both accounts can save them money on the tax side, employees should be advised against signing up just because of the possible savings.
Why?
A Limited FSA can only be used to pay for certain types of medical care related to either dental or vision. So if an employee already has dental insurance or doesn’t wear glasses or contacts, it wouldn’t benefit them to sign up for this account. It would end up being “too hot” and they would get burned from not being able to use the funds.
However, if an employee understands what the account is for, they can enjoy the double tax savings.
Resting after a choice well made
If employees assess historical and anticipated needs, take advantage of the company HSA contribution, and know which accounts are best suited to their needs, they will increase the odds of finding (and funding) the benefits that are just right.
