Navigating Insurance and Benefits as a New EmployeeNovember 11, 2020
Starting a new job can be an exciting experience. However, after you begin, there’s a good chance you’ll be confronted with a bunch of paperwork detailing types of employee benefits and asking you to make decisions about insurance and retirement plans.
Understanding job benefits is an important part of making sure that you get more from your employment. Here’s what you need to know about how to choose the right benefits for you.
The first rule of employee benefits is to sign up for the company retirement plan. Many workplaces offer a 401(k), but you might also see a 403(b) or 457(b) plan. Smaller workplaces might offer to help you contribute to an IRA.
No matter what this plan is called, however, a retirement plan is one of the most important types of employee benefits because it allows you to receive a tax benefit as you save for your future. Some employers offer a matching contribution. If your company will match a portion of your contribution, it often makes sense to adjust your paycheck so you get the maximum match.
For example, let’s say your company will match 100% of your contribution, up to 3% of your income. If that’s the case, you want to try to have 3% of your income withheld from your paycheck each month in order to take full advantage of this benefit. You can increase your contributions later, but if you’re just starting out, it can make sense to at least get your full match. As your finances improve, you can increase your retirement contributions or start investing in other ways.
When considering the importance of employee benefits, health insurance is at the top of the list. The cost of healthcare continues to rise, and a company that provides access to less-expensive health insurance can be very valuable.
Review your own health needs and situation as you look at different health plan options. When deciding how to choose the right benefits for healthcare, it has a lot to do with cost, as well as your individual needs. If you don’t have a lot of need for medications or a chronic condition that requires ongoing treatment, you might be able to get a lower-cost plan with less coverage and higher out-of-pocket requirements.
On the other hand, if you have more healthcare needs, employer health insurance can help. You might need a more expensive plan, but it’s likely to be more affordable than trying to get coverage on your own.
Health Savings Accounts (HSAs)
In recent years, more companies are offering health insurance plans that come with HSAs. An HSA allows you to save for health care costs over time. You can have some of your paycheck set aside in a special account that allows your money to grow tax-free. You do have to meet certain requirements to qualify — including a plan that has a high deductible. If you can afford to pay more out of pocket due to a high deductible, one of these plans can be useful.
For those who might not be able to get a high-deductible plan, a Flexible Spending Account (FSA) can be a good health-related benefit. It, too, comes with tax benefits. However, the main drawback to the FSA is that you might have to use the money or lose it, while HSA funds always roll over from year to year.
Some companies also offer other insurance benefits that can be valuable as an employee.
- Life insurance: If you’re looking for an affordable way to protect your income on behalf of your loved ones, life insurance can make sense. However, not everyone needs to get life insurance through work. Carefully consider your needs. There are many term life companies that offer low-cost plans that might meet your needs.
- Disability insurance: Check to see if your company offers this employee benefit. If you’re hurt or have a long-standing illness, this type of insurance can help you pay your bills. This is different from Workers Compensation insurance, which covers you if your injury or illness is directly related to your job. Consider if you’ll be able to pay your bills if you’re temporarily or permanently unable to work.
Look at your own needs. In some cases, you get a certain amount of coverage for free, so take advantage of that. Then, see if you need additional coverage on top of what’s already offered for free. Compare prices to see if it makes sense to buy additional coverage.
Student Loan Benefit
An increasingly popular employer benefit is a student loan repayment benefit. While Congress has yet to provide a tax break for this type of employee benefit, it can still be valuable. If your company offers to help you pay a portion of your student loans, or offers a matching repayment option, you could end up getting rid of student debt a little bit faster. Having someone else help you pay off a portion of your student loans can be a big relief, and help you better position your finances for the future.
Just make sure that you weigh your matching retirement contribution against your student loan matching repayment benefit. In many cases, it might make more sense to get your full retirement match first and then put the remaining toward taking advantage of a matching student loan repayment benefit. Run the numbers to see what makes the most sense for you, keeping in mind the power of compounding returns on investments.
Other Types of Employee Benefits
Finally, you might have access to other types of employee benefits that can be useful to you as you move forward, depending on your situation.
- Child care: Some employers offer to help you pay for child care, including a special Flexible Savings Account aimed at covering daycare and preschool costs.
- Health stipend: In addition to health insurance, some employers offer a stipend for gym memberships, healthy meal delivery plans and more. Check to see if you can get help with these items through an extra benefit.
- Education: You might have access to tuition reimbursement for continuing education or a stipend for courses or certain books.
- Financial literacy: Some employers offer access to financial planning services that can help you navigate your benefits as well as make progress in other areas of your financial life.
Speak with your human resources representative to help you with understanding job benefits, then take some time to think about your individual situation and needs so that you put together a job benefits package designed to work best for you.
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