Make the Most of Employee Benefits During Open Enrollment

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Make the Most of Employee Benefits During Open Enrollment

One of your biggest decisions is to choose health insurance for the coming year, but don't overlook other important benefits your employer may offer.

In addition to choosing a health insurance plan, what employee benefits should I consider during open enrollment?

SEE ALSO: 7 Smart Uses for Your Flex Account Money

Many people focus solely on their health insurance choices. But there are other benefits at stake during open enrollment. Here are some important considerations to help you make the most of those extra benefits for 2014.

Understand the new flexible spending account rules. Setting aside money in an FSA can be a great way to lower your taxable income and provide tax-free money for medical expenses. Contributions to health care FSAs are now limited to $2,500 per year, but you may have more time to use the money. In the past, you’d generally lose any money remaining in the account on December 31 (some employers offer a grace period to March 15). The Treasury Department and IRS recently changed the rules so that employers may allow people to carry over $500 in their accounts from one year to the next. It’s up to employers to decide whether to implement this new option. Some will add the carryover as early as 2013 or wait until 2014; some will choose to keep the grace period (plans may not offer both the $500 carryover and the grace period); and some may still require you to use the money by December 31. Ask your employer which rules apply to your plan. See Big Change to Flexible Spending Accounts for more information.

Get tax-free money for child care. Although the contribution limit for health care FSAs shrank in 2013, the lower limit doesn’t apply to dependent-care FSAs. Many employers still let you set aside up to $5,000 per family in a dependent-care flexible spending account, which lowers your taxable income and gives you tax-free money to pay for care for children under age 13 or dependent parents while you work. The higher your income, the more you’ll come out ahead with a dependent-care FSA rather than claiming the child-care credit. See FSA or Child-Care Credit? for more information.


Take advantage of transportation benefits. Many people overlook pretax benefits that cut commuting costs. You could set aside up to $245 per month before taxes for qualified parking expenses and another $245 per month for qualified transit passes and vanpooling expenses in 2013. For 2014, the parking benefit will rise to $250, but the transit benefit is scheduled to drop to $130 unless Congress takes action to bring it back up to the same level as the parking benefit (Congress didn’t boost the transit-benefit limit for 2013 until January).

Review your 401(k) contributions. The contribution limit for 401(k)s, 403(b)s, 457s and the federal government’s Thrift Savings Plan remains $17,500 in 2014, plus an extra $5,500 if you’re 50 or older during the year. But that doesn’t mean you should leave your 401(k) on autopilot. If you haven’t been maxing out your contributions, see whether you can afford to contribute a bit more than you did last year. And boost your contribution level to make the most of catch-up contributions if you’ll have your 50th birthday this year. See Retirement Account Contribution Limits for 2014 for more information.

Look into long-term-care insurance, especially if you’re a single woman. Your employer may let you buy long-term-care insurance with a group discount of 5% to 10%, and you may be able to keep the policy even after you leave your job. You might get a better deal if you buy a policy on your own, especially if you’re healthy. But your employer’s plan may be a better deal if you have health issues or if you’re a single woman. Several major long-term-care insurers have switched from unisex to gender-differentiated pricing, causing single women to pay about 50% more than single men (married women often benefit from a couples’ discount). But you may still be able to get a policy with unisex rates through your employer during open enrollment. See How to Make Long-Term Care More Affordable for more information.

Supplement your disability insurance. Although most employers provide some disability insurance to their employees, it’s usually much less than you’d need to cover your bills if you were unable to work for an extended period. Calculate how much coverage you’d actually receive free from your employer, and see whether it’s worthwhile to fill in the gaps by buying extra coverage during open enrollment. See Better Deals on Disability Insurance for more information.


Buy your own life insurance. Employers generally provide up to one to two times your income in life insurance free, and they will let you buy extra coverage during open enrollment. But their supplemental policies generally cost more than you’d pay for a preferred-rate individual policy, and the rates typically go up every five years instead of staying fixed for 20 or 30 years. See 10 Insurance Mistakes to Avoid for more information.

Dental insurance: Do the math. Many employers are offering dental coverage as an add-on this year. But before signing up, compare the total premiums you would pay over the year with the annual coverage cap, which is often $2,000 or less. If your employer offers a subsidized plan as a fringe benefit, it could be a good deal. But otherwise it may be more cost-effective to add pretax money to your flexible spending account to cover dental expenses.

Still, one of your biggest decisions during open enrollment is to choose your employer’s health insurance policy for the upcoming year. See How Employees Can Save Money on Health Care Costs for cost-cutting strategies that can help you save money in 2014.

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