7 tips for a safe and tax-smart benefits open enrollment during COVID-19
Monday, October 19, 2020
For millions of U.S. workers, this month is the beginning of their benefits open enrollment period. This is your annual chance to switch, adjust or cancel usually tax-free company perks for you and your family.
The biggest employer-provided benefit is medical insurance. Health coverage has taken on new importance during the coronavirus pandemic. But companies offer many more options that help make their workers' lives a bit easier and less costly.
And many benefits experts expect COVID-19 considerations during this open season to alter the usual trend of workers simply letting existing coverages roll into the new year, which is what happens about half the time.
"I think we'll see different employee behaviors as a result of COVID-19," Sara Taylor, health product strategy leader the business outsourcing firm Alight, told WorldAtWork.com. "People are going to look closer at the benefits they get, the cost of those benefits and make some changes that they might not have otherwise, because of necessity and what's going on in the world around us."
Some things, however, never change. The key considerations of cost and coverage remain the same. Just make sure you understand them and select what's best for you and your family this open enrollment period.
To help you do that, here are seven open season preparation, selection and enrollment tips for some of the most popular workplace benefits.
1. Note enrollment dates and deadlines.
Even before COVID-19 forced many of us to URL work from home, most of our intra-company communications were electronic. So you probably got an email announcement about open season. It likely listed a special enrollment website where you could get information on your company's offerings and any changes for the coming benefits year.
You also might have received an actual paper packet of enrollment information. Companies, and usually the outsourced benefits providers they hire, like to make sure that folks get the word about their choices, hence the dead-tree duplication.
Check your email box and/or that stack of snail mail on the counter. Then review the official enrollment dates and, most importantly, the deadline you must meet. If you miss it and don't have insurance, you'll be out of luck for another year, or until you have a major life change that allows you to enroll or make adjustments. And if you have insurance, no action typically means that it will automatically carry forward to the upcoming plan year.
2. Check on any changes.
A rollover of coverage could be fine, since many workplaces benefits tend to be much the same year after year. But not always.
And depending on what's happening with you and your family, even your current coverage could be not enough or too much. You also could end up with higher premiums or different coverage that you didn't expect.
Personally, my workplace options for years have been three levels of coverage. That's the case this open season. However, one of those plans, I'll call it Plan C, has been converted to a high deductible health plan.
High Deductible Health Plan Dollars
If your employer offers a high-deductible health care plan, referred to in medical acronymese as HDHP, run the numbers. The lower premiums of these plans could be better for your personal medical and financial situation, especially if you are young and healthy.
If a high deductible is for you, you'll want to open and fund as fully as possible an associated health savings account, or HSA. This money helps you offset your higher deductibles. More on this in #5 below.
The dollars associated with these plans and spending accounts are adjusted annually for inflation. For 2021, the maximum deductible for a single policy holder is $1,400; it's a $2,800 deductible for family coverage.
Maximum out-of-pocket expenditures for a single HDHP enrollee is $7,000 and $14,000 for family expenditures.
Out-of-pocket expenses include deductibles, co-payments and other medical costs, but not the premiums you pay for the plan itself.
If I was enrolled in Plan C and wasn't paying attention to the upcoming change and let my coverage roll over, on Jan. 1 I would find myself facing a much larger portion of my medical expenses. So don't assume continuity. Read up on your coverage options.
3. Take a family point of view.
If you're married and your spouse also gets workplace benefits, coordinate your coverages. You need to examine which company plan offers what and the different costs if one of you is carried on the other's plan. It could be cheaper and better. Or you might find coverage and costs are better if you get your medical benefits separately.
If you have dependent children, make sure their needs are reflected in your (or your husband's or wife's) plan. Preventive care is covered by most plans, as are vaccines. Such routine medical coverage is important in normal years for school enrollment purposes. It's even more critical now we likely are looking at coronavirus vaccines in 2021.
Also double check your dependents to make sure they're eligible. The Affordable Care Act (aka Obamacare) provision that requires individual and group health plans to offer dependent child coverage to children through age 26 is still on the books. Some state laws may require plans to provide dependent coverage beyond age 26. For the first time in all the years I've had my company coverage, it is conducting an audit of employees' dependent enrollees to ensure that no one is pushing eligibility rules.
4. Investigate other insurance.
While health insurance is the main focus of open enrollment, more than medical is involved in workplace benefits. Some companies also provide life and disability insurance options.
A free or low-cost life insurance policy could be a good fit for many, either as their main policy or as supplemental life insurance. If you get or opt for this benefit, make sure you name your beneficiaries at enrollment time to avoid any delays in the claims process, if the unexpected should occur.
Then there's disability insurance. Many younger workers often think they don't need to worry about disability coverage because they are in good health. That may be true now, but life has a way of changing, often quickly. The Council for Disability Awareness says that more than one in four 20-year-olds today will be out of work for at least a year due to a disabling condition before they reach normal retirement age. Another 5.6 percent of U.S. workers experience on average a short-term (six months or less) disability due to illness or injury every year.
And now we're dealing with COVID-19. The disease's immediate and potential long-term aftereffects are prompting more people to explore disability coverage for the first time.
Many who can ride out the virus at home instead of hospital find it can take months, not weeks, to fully recover. Plus, there are long-term implications. Research suggests that some who contract coronavirus will suffer future serious health issues, such as diabetes and liver, heart and lung problems. A disability insurance policy could be crucial in helping meet personal and/or family needs during recovery from COVID-19 or associated ailments.
5. Add or adjust any additional accounts.
Companies that offer medical coverage often also give workers a chance to enhance their insurance with a medical flexible spending account, or FSA. This tax-favored account — you put in pre-tax money each pay period and use it to pay qualifying out-of-pocket medical expenses, it goes back to your medical expenses — is popular but often wasted.
People put in too little and end up covering excess costs without any tax benefit. Or they put in too much and if it's not used by the end of the benefit year (or, in some cases, by the mid-March grace period deadline). So even though it's tough to estimate what your next year's medical costs might be, you need to carefully evaluate those potential costs and open or adjust any FSA amounts. For 2020, the maximum you can put in an FSA is $2,750. The Internal Revenue Service should announce any inflation increase in the next month or so.
There's no use-or-lose worry for a health savings account, or HSA. This is the account that works in conjunction with high-deductible medical coverage, mentioned in tip #2. Your HSA money helps offset your larger medical expenses. Even better, it is totally yours, not your employer's, even if it's offered via your workplace. An HSA rolls over from year-to-year and if you change jobs, it still belongs to you.
HSA contribution amounts are adjusted annually for inflation. In 2021, you can put up to $3,600 in an HSA if you have individual HDHP coverage. Family HDHP coverage will let you put up to $7,200 in your HSA next year. Policy holders who are 55 or older by Dec. 31 can sock away an additional $1,000 for the tax year. Take your total family medical needs into account in deciding any spending account amounts.
Many companies also offer another family- and tax-friendly savings vehicle, a dependent care account. You can put up to $5,000 in this account, again with the money going into it before your pay period's taxes are calculated. You then use this tax-free money to pay the cost of child care needed so you can work. Note, though, that even if both parents' jobs allow them to contribute to a dependent care account, tax law says the combined total for both is limited five grand. Don't make the mistake of over-contributing to this benefit.
Other workplace accounts, such as employer-assisted ways to save for emergencies and pay off student loans, also are getting some attention as companies get creative in order to attract and retain workers. These options are still new, both from benefits and IRS perspectives, but don't be surprised to see more of them show up during open enrollments.
6. Plan for retirement.
One long-standing and popular workplace benefit is the company-offered account that let you sock away cash for your post-work years. Most are tax-deferred 401(k) plans, where you put in pre-tax money each pay period. The savings and investment earnings are taxed when you withdraw funds once you turn 59½ years old.
Some businesses also offer a tax-free Roth 401(k) option. Like the similarly named Roth IRA, your pay period contributions are made with already taxed money. That means you don't owe Uncle Sam anything on that money or its earnings in retirement.
In both types of 401(k)s, employers usually match at least a portion of their workers' contributions. If you can, put in at least that amount to get the full benefit of your boss' match.
Your annual 401(k) contribution limits are set each fall. For 2020, you can put in up to $19,500. As with the FSA amount, the inflation adjustment will be announced soon by the IRS. And if you're at least age 50, you can put in extra. That's $6,500 more this year. Again, any increases in tax-related retirement savings will be part of IRS adjustments coming soon.
7. Use the best enrollment method.
Benefits changes and open season enrollments have been online for a while at most workplaces. That's good. It means this routine will be the same under these extraordinary COVID-19 circumstances.
If, however, you find you need to speak in person to a benefits specialist, make sure they and you take appropriate precautions. Benefits counselors who meet with workers should be screened daily according to Centers for Disease Control (CDC) guidelines. This includes the taking of advisers' temperatures, a procedure that also should apply to employees coming in for benefits advice.
Counselors and employees also should wear face masks at all times and maintain physical distancing of 6 feet as much as possible. Where possible, shields should be installed in the meeting area.
Preview, review and enroll: Yes, workplace open enrollment is sometimes intimidating, especially when you're trying to decipher the often-arcane language some providers use in their benefits explanations.
But it's definitely worth devoting the time needed to thoroughly review your plan options and your and your family's needs. If we've learned nothing else from dealing with COVID-19, it's been that we need to be as prepared as possible for any eventuality.
Your workplace benefits can help you do that.
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