10 Fundamental Things You Must Know About Employee Benefits
Employers develop benefit plans to attract top talent. It then becomes your responsibility to understand what those benefits are and how to get the most out of them. Larger employers often offer extensive benefits packages that can add immense value if you take the time to understand what is available. An estimated 60 million Americans enjoy employee benefits, adding an average of $1,340 per month in monetary value.
Here are potential benefits that may be offered by your employer and why you want to take advantage of them.
Health Care Coverage
Health care tops the list of the most valuable benefits offered by employers. It is one of the most frequently offered and the one most employees seek out when it comes to employment perks. Health benefits, however, can go well beyond providing health insurance options.
Health Insurance. Employers with over 50 employees must provide health insurance or pay steep penalties, based on the Affordable Healthcare Act. Insurance coverage must also cover higher levels of services than were seen in the past. As a result, many employer policies have seen dramatic increases in premiums over the last few years. Rising insurance costs and a decline in employer contributions to supplement those costs are the primary culprits. Don’t automatically assume your work policy is the best option. Check rates and coverage on the Health Care Marketplace and any available spousal plans.
Vision and Dental care are not typically covered in a general health plan, leading employers to offer discounted pricing on separate policies. For those with glasses/contacts, or requiring dental care, these policies can save a lot in out of pocket expenses. While the plan benefit may appear to cover most costs, verify coverage with your dentist or optometrist to determine actual payment amounts or what plans in which they work. Plans typically cover customary charges which may be very different than actual charges. Providers are familiar with policy coverages and can help you evaluate its true value.
HSA or Healthcare Savings Accounts are available to cover health care costs if you purchase a high deductible health insurance plan. Healthy adults who only visit the doctor for an annual physical can benefit from high deductible plans. Setting aside the premium difference in an HSA account will provide money in the event your health care needs change in the future. HSA accounts offer three levels of tax benefits. Contributions are deductible, accounts grow tax-free, and withdrawals are tax-free as long the funds are used to pay for healthcare needs. Balances roll over from year to year, allowing you to build a health care nest egg. Up to $6,750 in contributions is allowed for a couple and $3,350 for singles.
The FSA or Flexible Spending Accounts are a pretax way to fund health care or child care expenses. The maximum contribution to an FSA account is $2,550. Employers may allow you to roll over up to $500 per year, but doing so impacts FSA contributions. Those without a rollover clause lose any remaining balance at the end of the year. Spreading costs over the course of the year and pretax payments are the top benefits of participating in an FSA. Child care expenses for children under 13 can pay for daycare, after school care or day camps. Health care expenses can cover deductibles, co-pays, and expenses not covered by insurance policies. NOTE: Using an FSA to pay for child care will eliminate the child care tax credit.
Wellness Incentives may be offered in the form of gym memberships, smoking cessation programs, or health coaching. As companies work to get health care costs under control, wellness incentives encouraging employees to improve their health, are becoming more popular. Employees benefit from discounted or free services for participating in healthy activities or taking steps to improve your health.
Retirement and Investment Benefits
401K, 403B, 357 and 457 are retirement plan options available, depending on the industry you work. Corporate, non-profit, and public employee plans go by different names, but offer similar features. The plans reduce taxable income and allow you to set aside up to $24,000 if you are over 50, and $18,000 per year for those under 50. Companies usually offer an employer match, which adds to your contributions in the form of ‘free money,' helping build retirement balances faster.
Employee Stock Plans are an often overlooked benefit which allows you to purchase company stock at a discount. Some programs require a holding period before you are ‘vested,' where others allow you to buy and resell immediately for a profit. Stock plans are a common form of compensation for highly paid executives, but may be extended to all levels.
Insurance Beyond Health
Beyond health insurance, many companies offer a range of policies that are available in pretax and post-tax dollars.
Life Insurance in the form of a term or whole life policies is a common benefit. Companies frequently pay for a policy equal to one year of compensation. Additional coverage is available for those wanting to add additional protection for family or loved ones.
Disability Insurance comes in either long term or short term coverage. Short term policies require a waiting period of around two weeks before activation and cover surgeries or unexpected illnesses that take you out of work. Short-term policies usually recover 100% of pay.
Long term policies usually kick in after four months and only cover 60% of base pay (not including overtime, bonuses or commissions). Accidents resulting in a long-term or permanent disability will protect your family from your loss of income. Sometimes supplemental policies are also available which can bump up long term coverage to 100% income replacement.
PTO or Paid Time Off
Paid time off can include more than just vacation time. Paid holidays, volunteer time off, family time, sick days, jury duty, military service, and personal days might be included. PTO is an important benefit because it helps you create a healthy work-life balance.
Rules around PTO include when you can ask for time off, the approval process, and seniority factors related to approvals. PTO policies will vary by company and determine what activities away from work qualify. While PTO is at the top of the list when evaluating the quality of company benefits, it is estimated that 169 million vacation days go unused each year.
Other Benefits
Transportation and Parking may be funded with pre-tax dollars if your employer offers this benefit.
Legal Policies cover legal fees such as attorney costs required when buying a home or estate planning and created a will or trust. These policies are funded with after-tax dollars, but offered at a discount through the employer.
Taxes and Benefits
For the most part, employee benefits are paid using pre-tax dollars, resulting in lower taxable income for you. Some benefits such as whole life insurance or legal services may be funded with after-tax dollars.
It is possible to save a significant amount of money by taking advantage of the employee benefits provided by your employer.