How open enrollment improves financial health in these tough times
NEW YORK, Nov. 1 (Reuters) – Pop quiz for US entry season: What percentage of your total compensation is owed to benefits?
Since most Americans are so focused on pay, you might not realize that it’s a whopping 31%, according to the Bureau of Labor Statistics.
Indeed, the era of Covid-19 seems to have forced us to take a closer look at our services. 60% of people say the pandemic has made them think more carefully about benefits, and 68% say benefits will play a bigger role in job selection, according to a new survey from financial services firm Voya Financial. future.
This is all the more important as the benefits landscape is changing so rapidly in the Age of the Great Resignation. With a labor shortage, many companies are revising the range of benefits they offer, both to retain their current employees and to attract new ones.
Some examples of benefit offerings that are reaching record levels, according to the 2020 Society for Human Resource Management (SHRM) Benefits Survey: Critical illness insurance (48%), long-term care insurance (39%) , in vitro fertilization (28%) and mental health services (85%).
“Employees tend to focus only on medical coverage, but there is a whole range of additional benefits that can really protect you – and which aren’t that expensive when purchased through your employer.” says Mona Zielke, senior vice president of corporate client solutions at Voya. .
As the open registration season kicks off in November, what particular perks are underutilized? We asked financial planners how best to use the benefits to strengthen financial security in times of uncertainty.
HEALTH SAVINGS ACCOUNTS
The prevalence of health savings accounts continues to rise – up to 59% of companies surveyed, according to SHRM, 40% of which are paying an employer contribution to sweeten the pot.
“HSAs are a tax-free winning trifecta that you hardly ever find,” says George Gagliardi, a city planner in Lexington, Massachusetts. “Tax deduction for deposit, tax-free growth, and no tax when withdrawing to spend on qualified health funds.” In HSAs where funds can be invested in a variety of equity and income funds, this offers a much better advantage than the simpler flexible expense accounts – which only apply to a 12 to 15 period. months, during which the funds deposited do not return anything.
Anyone who has ever compiled critical estate documents knows how costly this can be. This is why some companies offer registration for a legal assistance benefit for these and other matters, which can be much more attractive than a typical attorney’s fee of $ 370 per hour.
“It’s becoming more and more common for employers to offer,” says Linda Rogers, a San Diego financial planner.
The benefit ranges from allowing clients to meet with a lawyer, to giving them access to software to complete their wills and powers of attorney.
“For those who can meet with a lawyer, they can save thousands of dollars by registering for the Legal Services Advantage for one year, getting their trust and other documents, and then unsubscribing the following year.” Rogers said.
LONG TERM DISABILITY
“LTD insurance is one of the least understood and potentially the most valuable benefits,” says Patrick Lach of Lach Financial in Louisville, Kentucky. “I’m constantly amazed at how much people are going to go out to insure a $ 20,000 to $ 30,000 car, regardless of how they secure their future earning capacity of $ 2-3 million.”
For example, Lach’s former employer offered LTD benefits that covered 50% of his salary for five years. For an additional $ 15 a month out of his own pocket, he increased that to 67% of his salary, tax-free, which would last until he reached full retirement age.
“For just $ 15 a month, this extra diet was a steal compared to all of my other perks,” says Lach.
This is the one that really kills financial planners. If you don’t contribute your employer’s maximum value, you’re essentially taking money and burning it.
One study found that 25% of employees are missing out on that total value, to the tune of $ 1,336 per year, or roughly $ 24 billion nationally. Top that up over many years with typical annual investment gains, and you can see why this can be a fatal financial mistake.
According to Brad Wright, founding partner of Launch Financial Planning in Andover, Mass., “If your business offers a match and you don’t contribute enough to your retirement account to receive the full amount, you forfeit the free money. “
Editing by Lauren Young, Peter Graff Follow us @ReutersMoney or on http://www.reuters.com/finance/personal-finance.
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