Open Enrollment Benefit Guide for 2024
“Open enrollment” season is upon us for everyone! That includes employees of larger companies, Medicare beneficiaries and self-employed individuals. It’s easy just to push the “keep my benefits the same” button, but it’s important to review the offerings each year. The plans may change, and your situation will certainly change as your life evolves. Making the right benefit choices can be worth thousands of dollars each year, so spend a few minutes to get it right! Here are a few key areas to consider, which we cover in more detail below:
Sticker Shock
Healthcare Tax Savings + HSAs
Health Insurance for Business Owners and Self-Employed Individuals
Disability Insurance
Life Insurance
Executive Liability Insurance
Retirement Account Contributions
1) Sticker Shock
According to the Kaiser Family Foundation, health insurance premiums are set to rise 7% again for 2024. Yikes. So don’t be surprised when you see higher per-paycheck contributions for health insurance plans. Health insurers have multi-year contracts with providers so even though overall inflation is slowing, rate increases may last at least one more year to fully reflect higher prices. Review your coverage to make sure you are buying the right amount of coverage for you and your family, don’t pay for what you don’t use!
2) HEALTHCARE TAX SAVINGS and HSAs
Consider a high-deductible plan that is linked to a health savings account, especially if your health expenses are typically low. Keep in mind that deductibles only need to exceed $1,600 for an individual or $3,200 for a family to be considered “high.” In our experience, many corporate plans qualify for high-deductible tax treatment, which opens the door to Health Savings Accounts (HSAs). Health Savings Accounts are “triple-tax advantaged,” meaning that contributions are tax deductible, assets grow tax-free and withdrawals for healthcare expenses are tax-free. HSAs can be valuable for many individuals. Early in your career, you may have lower healthcare expenses and can save for when your family drives healthcare expenses down the road. When you are an empty nester and still relatively healthy, HSA contributions can be growing tax-free for expenses later in life.
3) Health Insurance for Business Owners and Self-Employed Individuals
Open enrollment for the ACA healthcare exchange runs from November through December 31st for benefits to begin on January 1st. The exchange works like many corporate benefit plans, you can choose an individual or family plan from major insurers like United, Blue Cross Blue Shield or Aetna. There is no company contribution so your personal cost will be higher than in an employer sponsored plan. I would budget around $24,000 per year for a family plan depending on the plan type and other choices. Remember that health insurance premiums are generally tax deductible for self-employed families and the total price may be reduced if you qualify for credits based on your taxable income.
4) DISABILITY INSURANCE
Far fewer people carry disability insurance than life insurance. However, according to the Social Security Administration, you are much more likely to become disabled (25%) before retirement than to die early (14%). Depending on your field and the disability, that may mean a significant income loss over the rest of your career. Many companies offer the opportunity to buy additional disability insurance, up to 75% of your base pay.
5) LIFE INSURANCE
Company benefits often offer the lowest cost life insurance around. Companies can pool the risk of their entire workforce together, which is an attractive proposition for insurance. Generally, the “standard” benefit is 1 or 2 times your salary. Meaning if you make $200,000, your life insurance benefit is $200,000 (1x) or $400,000 (2x). For professionals with families to support, often substantially more life insurance is required to cover the loss of your future income. Instead of going to a separate insurance company, look at your benefit package to see if low-cost options are available. We discussed how much life insurance to buy on the podcast earlier this year, here is the link to the episode if you would like a refresher.
6) EXECUTIVE LIABILITY
If you are an executive at your firm, or sit on the board of other companies, Directors and Officers Liability coverage is critical. These plans protect you in the event someone sues you or the company for mismanagement or financial related actions you took in your role. Remember, anyone can sue regardless of whether you acted inappropriately or not. The legal defense alone can be very costly. Typically, companies provide these plans for executives and board members, so be sure to check if you are in an executive role. Also, keep in mind that liability extends to public and private companies, so coverage is important regardless of the size or ownership structure of your company.
7) RETIREMENT ACCOUNT CONTRIBUTIONS
Make sure that you are contributing enough to the retirement accounts offered by your employer. At a minimum, contribute enough to receive the maximum match each year. That is usually between 4%-6%, but it could be more so check your plan documents to be sure. Matching contributions are the closest thing to a free lunch in investing, so make sure to take advantage of those opportunities! Additionally, you may be able to contribute to a ROTH version of your company’s 401k, often called a ROTH(k). While you will pay taxes on contributions now, the earnings grow tax-free, and withdrawals are tax-free in retirement. ROTH(k) savings can be especially valuable for individuals expecting their income, and therefore their taxes, to rise over time.
If you would like guidance on how to maximize your company’s benefits, schedule a short call here and we would be happy to discuss!