Choosing HSA or FSA At Open Enrollment

September 05, 2017

In the past 7 months, my daughter has had two concussions, a bruised ankle, a broken elbow and a black eye from being accidentally hit by a friend. “Accident-prone” doesn’t quite seem to cut it anymore in describing her and our constant trips to urgent care.

In fact, she is so well-known at our local clinic that our conversations with the staff are now about updates on the staff’s kids’ sport and family activities. I am so envious of my colleague Michael, who mentioned that his goal is to have over six figures in his health savings account. With my family, I consider it successful if we have a nickel left at the end of the year.

The medical savings account we use these days

I currently have a Health Savings Account (HSA) where I contribute the maximum amount annually (along with the help of my employer), since if I do not use the funds (although this year, with my daughter’s track record, I probably will) they roll over to the next year indefinitely. I don’t have to spend any time figuring out how much I will be spending on medical expenses, since there is no deadline to spend the money on qualified costs.

One of the benefits I really like is that the funds can be used for medical expenses for me, my husband or my daughter, even though my husband and daughter are not on my healthcare plan. But if we happen to have a year of perfect health, I’m not out the money I put into my HSA because it’s mine to keep for future years, even if in the future, I switch to a plan that’s no longer eligible for HSA contributions.

If you have a Flexible Spending Account instead

When I had a Flexible Spending Account (FSA), I had to be a lot more thoughtful about how much I contributed, since I could only roll over $500 and only for one year. Nowadays technology makes it a little easier to help you decide how much to contribute, but you still have to be careful not to put too much in.

How to determine what amount to elect for your FSA

To determine how much to contribute, I did a search using online banking for any health-related costs like medical, dental, vision and prescriptions. I looked over the past two years to make sure I was getting a good average. I also accounted for unusually high expenses (like our two car accidents within 6 months of each other — so maybe my daughter’s accident proneness is hereditary) to average about how much I spent annually. Since I can rollover up to $500 if I go over, I usually rounded up a little.

Regardless of which type of account you use, make sure you take advantage of the ability to pay for qualified medical expenses tax-free. As my colleague Kelley likes to say, it’s perfectly legal (and totally advisable) to avoid taxes, it’s just illegal to evade them. Take advantage off all the ways to avoid taxes that you can!

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Don’t Let Open Enrollment Go to Waste

October 21, 2016

It seems like when I start hearing people talk about pumpkin spice lattes, open enrollment season is right around the corner. And in the last several weeks, I’ve talked to a lot of people going through the process of selecting benefits. Here are some quick thoughts regarding open enrollment that you may want to consider as you select your benefits:

Contribution rate escalator: This is a great time to sign up for the rate escalator feature of your 401(k). If you increase your contributions by 1% per year, you will be building ever increasing momentum toward a financially secure future.

Automatic re-balancing: While you’re in your 401(k) to enroll in the rate escalator, it makes sense to sign up for the re-balancing feature as well. There are lots of studies that indicate that re-balancing your portfolio can increase your rate of return anywhere from ¼% to 1% per year. I prefer it as a risk management tool, rather than a growth tool. By never allowing one asset class to run wild and dominate your portfolio, you stand a lower risk of getting devastated if the markets in that asset class collapse.

Life insurance: Most companies allow an increase of 1x salary without evidence of insurability. I’ve talked to a number of people who have developed some health issues that make purchasing life insurance either impossible or very cost prohibitive. It may take a number of years, but if you have any issues with securing life insurance, use every annual open enrollment to increase your company-sponsored insurance benefit by 1x salary.

Disability insurance: Disability insurance is, in my opinion, the single most important insurance coverage anyone can have. At each open enrollment, make sure that you have the absolute maximum disability insurance coverage allowed.

Pre-paid legal benefits. I’ve seen articles saying that between 50% and 75% of adults don’t have a will and advance healthcare directives in place. Pre-paid legal plans are becoming more common in benefits packages and for usually under $20/month, you can get coverage that would allow you to draft these important documents. If you sign up for one year and get your documents drafted, you will experience a tremendous return on the money spent for that benefit.

Your benefits are a key part of your total compensation. Open enrollment season is a great opportunity to make sure you’re taking advantage of them and getting your financial ducks in a row. Don’t waste it.

What I Did During Open Enrollment This Year

November 19, 2015

Well, it’s that time of year again. No, I don’t mean the holidays. I’m talking about annual open enrollment, the limited period when you get to make your benefits selection at work for the upcoming year. Continue reading “What I Did During Open Enrollment This Year”

5 Things To Know About Group Insurance Discount Programs

November 04, 2015

You may not view it as an employee benefit, but discount insurance programs could be a valuable part of your overall benefits package. Employers and other large groups are often able to negotiate much lower rates simply because the risk is spread out over a larger pool than if you just purchased the policy as an individual. Examples of discounted insurance policies you may be able to realize through work include homeowners or renters, auto, umbrella and even pet insurance. Here a few things to consider about these perks: Continue reading “5 Things To Know About Group Insurance Discount Programs”

Are You Ready For Open Enrollment?

October 27, 2015

It’s open enrollment time…that time of the year when you get this huge booklet or email of benefits and have to wade through all of the papers and links to figure out what to do while planning for the holidays at the same time. Remember to take time to really think about how you used your benefits last year so you can make the best decision. Here are a few things to consider: Continue reading “Are You Ready For Open Enrollment?”

The Hidden Costs Of Overlooked Benefits

July 29, 2015

August is an overlooked month. Every other month of the year has a holiday or is associated with an exciting beginning, but not August. Many of us try to sneak in one last summer weekend or some back to school shopping but other than that, August is usually a lull in the calendar. A great way to make August productive is to examine the employee benefits programs that you aren’t taking advantage of so that you know which options you do want to sign up for during open enrollment this fall. A few minutes now can help you be prepared to maximize your benefits and possibly save thousands of dollars instead of rushing through a decision or just doing what you did last year. Continue reading “The Hidden Costs Of Overlooked Benefits”

The Changing Landscape of Health Insurance

October 29, 2014

Now that we are in the midst of open-enrollment season, this is a great time to start looking at how the trends in health insurance may impact you and your family. In the last few weeks, Wal-Mart has announced that they will no longer offer health insurance to certain part-time employees. Other large employers are rolling out new plans that will either charge a steep premium to cover spouses that have coverage available at their employer, or they are not offering coverage to those spouses with their own option at all. In addition to all of this, there is an undeniable trend towards high-deductible health plans paired with a Health Savings Account (HSA). Continue reading “The Changing Landscape of Health Insurance”

Do You Know the Difference Between an HSA and an FSA?

September 03, 2013

Fall has arrived, and that means open enrollment is just right around the corner. For many employees, this provides the window of opportunity to sign up for either an HSA or FSA in order to set aside pre-tax dollars for your out-of-pocket healthcare costs. Not quite sure what the difference is between these 2 types of accounts? Well, you are not alone. In a recent Fidelity survey, two-thirds of those surveyed said they simply do not understand how an HSA works and “a full 73 percent of respondents said an HSA is pretty much the same thing as a health FSA or were unsure, and the ‘use it or lose it’ provision of FSAs was one of the most commonly misunderstood differences between the account types.” Continue reading “Do You Know the Difference Between an HSA and an FSA?”

Going for the Gold Can Be Taxing

August 07, 2012

As the Olympics come to an end, I’m proud of how many medals our American team is coming home with, but not quite as thrilled with the tax bill they’ll face for winning. It’s not the value of the medal itself that the IRS wants its share of, it’s the prize money that comes with a gold, silver or bronze that is taxable. The U.S. Olympic Committee rewards Olympic medalists with cash honorariums: a gold medal brings $25,000, silver medals get $15,000, and a bronze is worth $10,000. As calculated by the Weekly Standard, the IRS will take $3,500 of a bronze athlete’s winnings, silver medalists will owe $5,385 in taxes, and winning the gold (which is priceless) will set Ryan and Michael each out $8,986 per race. Continue reading “Going for the Gold Can Be Taxing”

Are You Ready for Open Enrollment?

July 31, 2012

The temperature isn’t the only thing rising this summer – our group health insurance is going up over 14%. So, as part of my role on our benefits committee, I reviewed several different health carriers to see if there were any more affordable options. Luckily for us, there was one. However, this will now involve having all the employees fill out enrollment applications within the next few weeks to make the September 1 deadline to replace our existing plan. While we are going through the hassle of changing health plans, we also decided to switch to an HSA custodian that offers more competitive investment options. With these changes coming up pretty quickly, it made me wonder if there was a secret to a successful open enrollment – instead of the yearly rush to communicate any changes to our small group of employees. Continue reading “Are You Ready for Open Enrollment?”

Benefits Planning: Employee Misconceptions

February 08, 2011

Over the past several months, I have observed quite a few common misconceptions that employees have voiced while we discussed their financial situation during a worksite financial coaching session. The first, and most surprising, is how unaware employees are regarding how their benefits compare to other companies, and that many think that the grass would be greener if they switched employers for a new job offer. Simply benchmarking your level of benefits to your specific industry can be a real eye-opener for your workforce and can be easily accomplished by communicating this information during open enrollment or at a benefits planning workshop. Continue reading “Benefits Planning: Employee Misconceptions”