Breaking Down Your Employee Benefits

When you think about your job and its impact on your life, what’s the first thing that comes to mind? I’m willing to bet it’s your income — but you may have a great benefits package, as well!

In this day and age, employers are focused on attracting and retaining top talent; and they often accomplish that goal by offering benefits packages, in addition to competitive income. It’s important to make sure you fully understand the benefits available to you so you aren’t missing out on opportunities to enhance your personal and professional wellness. Here are a few considerations to keep in mind.

What’s in your benefits package?

The main question you should continue to ask yourself is, “what is available?” Here are some common benefits employers offer today.

401(k) Plan

One of the most universal employee benefits is a retirement plan — often, a 401(k) plan. I’ll sound like my father for a moment: if you are eligible to participate in a 401(k) plan, always contribute as much as you can reasonably afford. You won’t regret it later in life, when your small account grows to help support your retirement.

Here are the 401(k) contribution limits for 2017:

     — Employee contributions: $18,000

     — Employee catch-up contributions (age 50 or older): $6,000

Some 401(k) plans offer an employer match, while others may offer a discretionary profit-sharing component to employees. If you receive an employer match, you should at least contribute enough to your plan to get the full match. For example, if your company offers a three-percent match of your salary into a 401(k) plan, that means it will match your 401(k) contribution up to three percent of your salary. A 2015 report found that one in four employees misses out on receiving their full company match.1 If you don’t contribute enough to receive the match, you’re leaving free money on the table!

If your employer offers a profit-sharing component, you will receive a discretionary allocation based on a percentage of your salary. Since profit-sharing contributions are discretionary, your employer may not make a contribution to your 401(k) every year. The good news is that you are not required to defer into your 401(k) to be eligible to receive the profit-sharing contribution.

Are you new to your employer’s 401(k) plan? Check out this OneBite post for more tips and tricks.

Health Insurance

Health insurance is not something to be taken lightly; it’s important to do your research before finalizing your election. Make sure to compare benefit options to select the right fit for your situation. If you’re married, you should also research and consider your spouse’s health insurance benefits to utilize the best option for your family.

If you’re in a high-deductible health plan, you may be eligible to save into a health savings account (HSA). An HSA is a tax-advantaged account that can be used to save for future, qualified medical expenses. The account may be set up by an employer or by an individual in a high-deductible health plan.

Make the most of your employee benefits

In addition to saving individually, your employer can also contribute savings to your HSA so be sure to check out whether you’re eligible to receive that benefit. While many people keep their HSAs in cash-equivalent vehicles to immediately reimburse medical expenses, you may have the option to invest your HSA dollars, depending on the custodian holding the funds. If you don’t think you’ll need your HSA dollars in the foreseeable future, investing the account could be a great option. By taking this route, your account can grow tax-free, and the funds won’t be taxed when they are removed for qualified medical expenses. However, be aware that if you take money out of your HSA for a non-medical expense, the withdrawal will be taxed and may be subject to a 20-percent penalty.

The HSA contribution limits for 2017 are:

     — Single (employer + employee contributions): $3,400

     — Family (employer + employee contributions): $6,750

     — Catch-up contributions (age 55 or older): $1,000

You also may be eligible for a flexible spending account (FSA), even if you don’t participate in a health insurance plan. An FSA is another tax-advanced account you can use for medical expenses and is typically set up by an employer. Money will be directly deposited from your paycheck into your FSA before taxes are taken out. Unlike the HSA, dollars contributed to your FSA need to be used by the end of the year in which you contribute to the account — in other words, it’s a “use-it-or-lose-it” situation. Keep in mind that you may only use your FSA for qualified medical expenses; be sure to ask your employer for other rules you should keep in mind.

The FSA contribution limits for 2017 are:

     — Employee contributions: $2,600 (employer contributions can be in excess of this limit)

Some people don’t realize that they can use pre-tax HSA and FSA dollars for a wide variety of things — from bandages to weight-loss programs to sunscreen. To avoid issues down the road, make sure to do your research and find out if a particular expense is covered before using your HSA and FSA funds to cover it.

Additional Insurance

Many employers offer life and disability insurance as part of their benefits packages. If you opt-in, you may also be able to purchase extra coverage or coverage for your spouse at an additional cost. However, if you are healthy, be cautious about adding life or disability coverage to the group plan; often, group plans will be more expensive than the cost of separate, individual coverage. Consider consulting with an independent insurance professional to determine the best insurance rates and options for your situation.

On the flip side, you may find that you don’t need additional coverage. If you are young and single with little to no debts, it’s possible you won’t need more coverage than what is provided by your employer and can skip that expense. Work with a financial planner to decide whether you need additional life or disability insurance coverage, or can potentially discontinue some of your coverage.

Other Perks

Are you taking full advantage of every benefit your employer offers? Many employers provide additional benefits, on top of the standard benefits discussed above, to keep employees happy and engaged. These “perks” can be an allowance for tax prep or financial planning services; professional memberships; physical fitness/gym reimbursements; discounts at certain hotels or rental car companies; and many others!

If you don’t understand your benefits or know what is available to you, ask your human resources (HR) department! Be proactive and educate yourself on your benefits package — otherwise, you could be passing up valuable opportunities to enrich your life, both inside and outside of the office.

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional. Hewins does not provide tax, accounting or legal services.
Megan Olson
Megan Olson

CFP® | Financial Advisor

Megan Olson, CFP®, is a financial advisor serving clients in the Twin Cities.

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Breaking Down Your Employee Benefits

time to read: 5 min