As we transition to the final quarter of the year, a distinct season emerges…the time of open enrollment for employee benefits. It’s that period when eligible employees have the opportunity to initiate or make adjustments to their employer-provided benefits. In the absence of a significant life event, such as marriage or the arrival of a new family member, open enrollment serves as the sole opportunity every year to adjust your insurance coverage and spending-account contributions. This underscores the critical importance of taking time to thoroughly evaluate your options and choose benefits that best suit your particular needs.
Here’s the good news: There are many resources available to help you choose the best plan for you, including our compendium of common pitfalls during open enrollment. Below are five mistakes to avoid during this time.
1. Miss a deadline
If you’re employed, you’ve likely already received an email from your company’s human-resources team about reviewing the available benefit options; more than three-quarters (77%) of organizations that participated in an International Foundation of Employee Benefit Plans study said their open enrollment period begins in either October or November.
If you miss the enrollment period, you may not be able to enroll again until a year later—and you could be fined for remaining uninsured during the interim. Those who reside in California, District of Columbia, Massachusetts, New Jersey, and Rhode Island are subject to penalties if proof of health coverage isn’t submitted with their 2023 state tax return.
2. Assume last year’s coverage is the same as this year’s
If you’re already enrolled and want to review your coverage, keep in mind that insurers routinely make changes to what they offer, including in-network providers, deductibles, premiums, and out-of-pocket costs. Review the plan updates carefully to ensure that your preferred healthcare provider is still in-network and that you have an adequate amount of coverage for both current and anticipated needs. Consider whether a life change will occur in the coming year, such as birth of a child, surgery, marriage, or divorce. If you’re expanding your family or facing surgery, it might be a good time to step up your coverage.
In addition, if you’re a government employee, there are approximately 270 different plans to choose from. Sticking with the same plan for years can result in missed opportunities and increased costs. We’ve created a guide that’s specific to federal employees’ benefits, to help you evaluate the options.
3. Not taking advantage of available benefits
If your employer offers additional benefits—such as a health savings account (HSA), vision, dental, accidental death and dismemberment (AD&D) insurance, pet insurance, or life insurance—don’t ignore these options and leave money on the table in a marketplace where medical costs are rising, and interest rates are high. Also, if you have access, telehealth can be a cost-efficient and prudent way of receiving treatment for colds, fevers, and allergies and ordering prescriptions and refills, thereby saving you time and gas money as well as limiting your exposure to other sick people.
Open enrollment is also a good time to re-evaluate your 401(k). You should aim to contribute enough from every paycheck to take advantage of the employer match, if one is available. In addition, if you’re 50 or older at the end of the calendar year, you can make an annual catch-up contribution to bring you closer to your retirement goals.
4. Spend too much
It should come as no surprise that healthcare and rising healthcare costs are among the top concerns of most people. While it may seem that choosing a premium-level plan will save you money down the road, that isn’t always the case. If you’re healthy and don’t have chronic health conditions, a high-deductible health plan (HDHP) and corresponding HSA may be right for you. It’s important, however, to think carefully about the deductible: in the event of an emergency, can you afford the cost of an ambulance ride or a visit to the ER with the money that’s currently in your bank account? Also important is calculating out-of-pocket healthcare expenses for an entire year, such as co-payments and elective procedures.
5. Ignore potential tax savings
Did you know that you can buy many healthcare-related items with pre-tax dollars if you have an HSA? These may include staples such as ibuprofen, rubbing alcohol, bandages, and even Epsom salt. What’s more, spending for massages, yoga classes, vitamins, supplements, and food may also qualify (if your doctor provides a letter stipulating that the expenditure is for treatment of an injury, obesity, or other health condition). Whether you spend the money in your account or allow it to accumulate tax-free, having tax-advantaged savings for medical care is a worthwhile benefit. The 2024 HSA contribution limit is $4,150 for individuals and $8,300 for families. Those older than 55 can contribute an additional $1,000 as a catch-up contribution.
If you opt for a low deductible health care plan, you may want to consider opening a flexible spending account (FSA). An FSA can be used to pay for many of the same health care related expenses as an HSA and is also funded with pre-tax dollars. One advantage of an FSA is that funds are available to you on day one. For example, while you may elect to contribute $200 a month, the entire $2,400 annual amount is available for use the first day your insurance is active. Unlike an HSA, FSA funds are not invested, and you generally must (there are some exceptions) use the money within the plan year, or you lose it. For 2024, the contribution maximum for an FSA is $3,050.
Open enrollment can be a challenging time with a daunting array of options. If you need help evaluating your employer-sponsored benefitss and how they align with your financial goals, contact a Mercer Advisors wealth advisor. They’re dedicated to providing comprehensive support for all aspects of your financial well-being.
