What to Review During Open Enrollment
Plan Ahead for Your Health Coverage
If you’re employed by a company that provides benefits you might be receiving a reminder in the fall about your upcoming open enrollment period. Many companies do this in the fall so that the new benefit elections take effect at the start of the new year, although your open enrollment period may be different. The open enrollment period is important because it is one of the few times you can make changes to many of your employer-provided benefits. Here's what you need to know to make the most of it.
What Is Open Enrollment?
Open enrollment is usually a few weeks to a few months, which allows employees to make changes to their various benefit plans. These changes usually cover benefits such as health insurance, vision, dental, and life insurance. You may also have benefits such as disability and health savings accounts that would be eligible for changes during the open enrollment period as well.
During open enrollment, employees have the option to enroll in benefits for the first time, change their current plans or coverage amounts, or to drop coverage completely. These decisions have a significant financial impact, so it’s important to weigh your options carefully.
Why Open Enrollment Is Important
With most types of benefits, once you select an option, you are bound to that option for an entire year unless you meet a few exceptions. For example, if you sign up for the health plan with a bi-weekly premium of $100, you’re going to be stuck with that plan until your next open enrollment period or a major qualifying event.
The IRS defines these qualified events as:
If you don’t have a qualifying event listed above, you can’t make changes to your current coverage options until the next open enrollment period. Obviously, choosing the wrong plan can be costly if you’re forced to stick with your decision for an entire year, and you don’t qualify for a change.
When Is Open Enrollment?
Things to Consider During Open Enrollment
For most people, the largest component of their benefits package is health insurance. You need to carefully examine your health insurance options and costs when you enter your open enrollment period. Companies regularly change plans and premiums to keep up with the times, so the coverage and premiums you had last year may not be the same this year.
Beyond examining your coverage options, be sure to look at what your spouse’s insurance may provide. Just because you utilized your employer’s plan last year doesn’t mean that’s the best course of action this year. It might make sense to switch to your spouse’s plan. Or alternately, it might make sense for your spouse to enroll in your plan instead.
Be sure to take into account all aspects of the coverage and not just the cost. You’ll want to compare premiums, deductibles, co-pays, and total out-of-pocket limits. A lower premium may seem like big savings, but you could end up paying even more if the coverage is not as good.
A lower premium for insurance coverage typically means paying a higher deductible and vice versa.
Another Consideration—HSAs and FSAs
A health savings account or HSA can be a good way to help offset some of the higher costs of health care. With an HSA, you’re allowed to put pre-tax money into a separate account that can be used for paying for medical expenses.
To qualify for an HSA, you'll need to be enrolled in a high deductible health plan. If you're unsure whether your current plan qualifies, that's something you'll want to consider before the start of open enrollment. If your employer does offer a high deductible plan with an HSA, check to see if they also offer employer contributions to match the money you're saving in your account.
HSAs offer triple tax benefits: contributions are tax-deductible, contributions grow tax-deferred, and withdrawals are tax-free when used for eligible health care expenses.
Medicaid and Medicare Open Enrollment
A Good Time for a Financial Check-In
Even though you’re going to use this time to change your benefits available through open enrollment, it’s also a good time to examine your other work-related financial issues.
Now is a good time to take a look at your tax withholding. As you know, your employer withholds taxes from your paycheck. Then at the end of the year, you get a W-2 that outlines how much you earned and how much was paid in taxes. Withhold too much in taxes, and you'll get a refund. Withhold too little, and you may owe taxes in April. By examining your withholding, you can make sure you’re paying the right amount in taxes. Learn how to determine your W-4 exemptions for tax withholding.
Second, use the open enrollment time as a reminder to check your retirement benefits. Most 401(k) plans allow you to make changes at any time, but since you’re already examining your other benefits, this will be a good time to look at this as well. Make sure you’re contributing to the plan if you have one, and if your employer offers a company match, be sure you’re getting all of the free money to which you’re entitled.
Also, pay attention to the fees you're paying in your employer's retirement plan. High fees can nibble away at your investment returns. Beyond that, look at your investment mix and performance and make sure your portfolio is on the right track to help you reach your goals.