Open Enrollment: Consider the Entire Benefits Menu
As we wrap up our three-part series on open enrollment benefits (see links below for the preceding two blog articles), our last blog article will cover the “extras” that employees may elect. It’s important to consider these lower-profile benefits because their collective impact may help strengthen your overall finances.
Flexible spending accounts (FSAs)
FSAs allow the employee to contribute pre-tax dollars for medical, dental and vision expenses they might incur during the year. In 2024, the FSA contribution limit is expected to be $3,200.1 The FSA is meant to be used for expenses that you incur during the year. In IRS Publication 502, you can find a full list of items for which you may use the FSA.
Depending on your employer, you may have the ability to roll over a small amount (projected to be $640 in 2024)2 to the following year or have a grace period until March 31 of the following year to use your benefits. Check your employer’s plan, since not every plan allows for this flexibility.
Health spending accounts (HSAs)
If you’re part of a high-deductible health plan, you likely have the opportunity to contribute to an HSA. The total HSA contribution limit for 2024, which includes employer and employee contributions, is expected to be $4,150 for an individual and $8,300 for a family.3 If you’re over 55, you may also contribute a catch-up contribution of $1,000. You can use your HSA for the same medical expenses as listed in IRS Publication 502.
The difference between an HSA and an FSA is that you’re not required to use the bulk of the HSA within the same calendar year. Also, the HSA is portable, which means you may take the account with you if you change employers.4 In my opinion, the HSA can be a wonderful savings vehicle because your contributions are tax-free, your distributions are tax-free if used for qualifying medical expenses, and earnings are tax deferred if also used for eligible medical expenses.
Dependent care FSAs (DCFSAs)
A dependent care FSA allows an employee to contribute pre-tax dollars for care of their children under 13 or an elderly adult relative who lives in their home. While subject to change, the current maximum contribution in 2023 is $5,000.5 Think carefully about how much you contribute because the intent is to use it in the year you contribute. Much like the healthcare FSA, you might have the option to roll over a small number of unused DCFSA dollars to the next year. However, it takes planning to make sure you don’t forgo any dollars. Also, remember that overnight camps are not eligible for this account.
Commuter benefits/pet insurance/legal benefits/identity theft
If your employer plan offers additional benefits like the ones listed in the section heading directly above, be sure to consider your specific needs. If you can contribute to the commuter benefit on a pre-tax basis, and you know you’ll use it, it’s worth considering. For pet insurance, legal services and identity theft coverage, it’s important to analyze the cost of the program versus the need and likelihood that you’ll use this coverage.
As we approach open enrollment, it’s time for you, the employee, to “mise en place.” Don’t wait until the deadline to make important decisions on your health, life and disability insurance. Use the time now, perhaps with support from your Corient Wealth Advisor, to determine how to best maximize the employer retirement plans offered to you. Think ahead about the possibility of needing legal or pet insurance services. Procrastination could lead to a half-baked benefits strategy. Just like a good meal can become a great one with the right preparation done ahead of time, your employer-offered benefits can more positively serve you and your family if you devote enough forethought ahead of the open enrollment deadline.
The decisions you make during the open enrollment period may impact your long-term wealth. This is the final article in a three-part series on open enrollment. Click the links below to read the first two articles:
ABOUT THE AUTHOR
Abigail Rosen, MS Financial Planning
Abby is a Partner, Wealth Advisor in our Morristown, NJ, office. She is a CERTIFIED FINANCIAL PLANNER™ professional with over 17 years of experience in the financial industry. Prior to her career in finance, Abby was an officer in the United States Navy. Abby specializes in working with corporate executives to help them take full advantage of their available benefits, implement with respect to employer stock concentrations and manage their stock option strategies. She has a designation in Global Financial Planning. Previously, she served at legacy firm RegentAtlantic as a Wealth Advisor and Co-Head of the Corporate Executives Group.
She graduated with a Bachelor of Arts from the College of the Holy Cross and received a Master of Science (distinction) in Financial Planning from Bentley University. She was 2020 Citizen of the Year for her work as treasurer of the New Jersey Psychological Association Foundation and is treasurer of the Harding Township Educational Foundation (HTEF) and a Girl Scout troop leader.