Employee Benefits: 5 Tips to Understand & Maximize ThemJuly 14, 2021
When it comes to your job, your compensation package is more than just your salary. The benefits your employer offers can add a great deal of value to your employment, making a job more beneficial than it may look if you only consider your pay stub.
Unfortunately, you may not be taking full advantage of the available benefits. According to a 2021 survey by Voya Financial, 35% of responding workers said they didn’t fully understand their employee benefits.
Not utilizing your benefits to their full potential is like leaving money on the table, so understanding your benefits packages and options is critical.
Understanding benefits packages as an employee
When you accept a new job or are promoted to another position, your employer’s human resources department will give you a packet or online access to information about the company’s policies and benefits.
If you’re like many people, you skip right to the sections on bonuses, raises, and paid time off. But there may be important benefits you aren’t using right now.
Here are some of the most common benefits offered by employers:
Many employees depend on their employers for health insurance. In fact, nearly half of all insured individuals get their coverage from their employers.
Your employer’s health plans can have a big impact on your finances. The type of coverage offered, the plans available, and your employer’s contributions towards your premiums can greatly reduce your costs. An employer with an excellent health plan can be a better financial choice than an employer with a poor or fair plan that pays a slightly higher salary.
Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs)
Some employers offer high-deductible health plans (HDHPs) that include the option of opening an HSA. Or, you may have access to an FSA. Both options give you a tax-advantaged account to set aside money for your health expenses, like medication, medical devices, or even glasses and contacts.
Your employer may offer life insurance policies for its employees. Typically, your employer will cover the cost of coverage up to a specified multiple of your salary. You can purchase additional coverage but will have to pay the added cost yourself.
Your employer’s life insurance plan may allow you also to purchase insurance for your spouse or children.
Employer-offered life insurance is especially valuable because it’s usually guaranteed issue up to a certain coverage amount, meaning you don’t have to undergo a medical exam, and you can’t be denied based on your health. That’s a major difference from traditionally underwritten policies that you’d get on your own; with those plans, you’ll have to get an exam, and the insurer can reject your application based on your health or medical history.
Whether you work for a non-profit organization, small business, or major corporation, you likely have access to an employer-sponsored retirement plan. If you’re lucky, your company may match some of your retirement contributions.
For instance, your employer may match 100% of your contributions, up to 5% of your salary. If you earn $60,000 per year, that means you could get up to $3,000 in matching contributions — essentially a cash bonus.
Unfortunately, many people miss out on this valuable benefit. According to Vanguard’s 2021 How America Saves survey, approximately one-third of retirement plan savers don’t contribute enough to get the full match.
Your employer may offer additional insurance options, such as long-term care, disability coverage, or critical illness insurance. Because these policies are sold to a group, you can often purchase coverage for less money than if you bought a policy on your own.
Student loan repayment assistance
To recruit and retain workers, some businesses offer student loan repayment assistance. They will match your student loan payments up to a specified maximum, typically a percentage of your salary. By utilizing this benefit, you can pay off your loans faster and save money.
How to get the most value from your benefits package
To take advantage of all of the benefits available to you, use these five tips:
1. Find out what’s available
To figure out how to choose employee benefits, you first have to see what’s offered. Check your employee portal or talk to a human resources professional to find out what benefits are available to you that you may not be using. A human resources representative can help you find out what you’re eligible for and how to sign up.
2. Contribute enough to your retirement to qualify for the maximum match
If you are eligible for a retirement plan with matching contributions, make sure you set aside enough money to qualify for the full match. Otherwise, you’re losing out on free money.
If your employer will make matching contributions, It’s worth making some cuts to the budget — for example, eliminating meals out or switching cell phone plans — to free up more of your paycheck for your retirement savings.
3. Use an HSA or FSA
If you have ongoing medical expenses, sign up for automatic paycheck deductions to deposit a portion of your paycheck into an HSA or FSA. It will reduce your taxable income and help you save for necessary healthcare costs.
Funds in an HSA roll over from year to year, but money in FSAs must be used within the year, or you’ll lose that money.
4. Make extra payments toward your student loans to get the full match
Employees with student loans should make enough payments to get the maximum amount of student loan repayment assistance. Doing this will reduce your balance, allowing you to get rid of your debt more quickly and cut down on the amount of interest that accrues.
If you have high interest rates, you may be able to make your employer’s assistance even more useful by first refinancing your student loans. If you have good credit, you could get a lower interest rate, and your employer’s contributions will help you chip away at the principal faster.
5. Pay attention to deadlines
Some of your benefits may have certain enrollment periods and deadlines. If you miss them, you may have to wait a whole year before you can enroll. Review your benefit deadlines and talk to human resources about enrollment periods if you’re not sure.
Employment and benefits
Your benefits make up a major part of your compensation package and provide you with significant value. By understanding employment benefits packages and how to choose employee benefits, you can take full advantage of the perks offered by your employer.