SALT LAKE CITY — As the year comes to a close, many people are trying to decide what changes, if any, to make to their benefits at work.
For many employers, open enrollment is the time to figure out how best to organize their health and retirement benefits for the coming year.
An open enrollment period for health insurance is typically offered for a few weeks or up to two months a year by companies to allow employees to make changes to their insurance and/or benefits coverage. Open enrollment usually happens once annually toward the end of each calendar year, and employers are required by law to give sufficient notice regarding the exact time and duration of the enrollment period.
Those who miss the annual period may forgo the opportunity to enroll in the employer-sponsored health plans or make other key changes until the following year.
Generally, employees need to consider their contributions to their flexible spending account or health spending account. FSAs and HSAs are tax-advantaged financial accounts that can be set up through a "cafeteria plan" of an employer. Such plans allow employees to choose between different types of benefits.
An FSA allows an employee to set aside a portion of earnings to pay for qualified expenses, most commonly for medical expenses, but often for dependent care or other qualified expenses. Money deducted from an employee's pay into an FSA or HSA is not subject to payroll taxes, resulting in substantial payroll tax savings.
However, one significant disadvantage to using an FSA is that funds not used by the end of the plan year are lost — known as the "use it or lose it" rule. On the other hand, funds in a health savings account are not lost when the plan year is over. The funds are owned by the individual but are available for high-deductible health plans only.
"(Individuals) can elect at the beginning of the calendar year to have a certain amount of money taken out of their paychecks pre-tax (using FSAs and HSAs)," said Shane Loftus, sales and marketing director for South Jordan-based human resource administration firm ISIhr. "They can use those funds for anything medical related."
However, FSA funds cannot be used for over-the-counter purchases such as eye drops or store-bought medications, Loftus said.
"If an individual knows that (a qualifying family member or) they are going to have a medical procedure, they can have some set money aside pretax … and it will help lower the (overall) health insurance cost," he explained.
Another advantage of FSAs and HSAs is they can also help lower an individual's or family's income tax bracket, Loftus added.
Among the other key open enrollment issues are retirement plans, as well as dental and vision plans. For instance, many 401(k) plans only allow changes during the open enrollment period, he said.
"If you haven’t had a qualifying (exceptional) event — like a job loss or death in the family – that changes your status, you have to wait until (open enrollment at) the end of the calendar year to make those changes," Loftus said.
When choosing investment options for retirement plans, Loftus said, most administrators employ licensed advisers who can help individuals select an appropriate option that best suits their needs.
"That adviser can ask questions about how the 401(k) fits into the big picture of their retirement," he said. "Then they can advise based on that information."
Loftus said employees have great control over their benefits, but they need to be aware of the limited time period when changes and adjustments can be made.
"Open enrollment is the employee's time to attend information meetings, speak with the benefits providers and their human resources team to make educated decisions on their benefits selections," he said.