Usually, the changes are minimal. Not this year.
“Open enrollment for a lot of people is typically something that is on autopilot,” said Christina Gamache, a financial adviser with Audax Wealth Management. “This year is different. A person’s financial situation at the beginning of 2020 likely looks very different than it does today, and it may look even more different from 2021.”
Plus, your employer’s plan options might change, too, she said. “The costs may have increased, there may be added benefits for mental health or more flexible childcare benefits.”
That’s why everyone needs to check on whether their offerings have changed and revise their benefits to better suit their current situation.
Here’s how to approach open enrollment this year.
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Do you expect to have high health care costs next year — like prescription costs, care for a chronic health issue or expect to have a baby — or do you just need preventative care? If you don’t anticipate big costs, a high-deductible health care plan may be a better fit, said Misty Guinn, director of benefits and wellness at Benefitfocus, a benefits management provider.
Next, she suggests asking yourself: “How much can I pay when I get care?” Some people prefer to pay more for insurance knowing they will pay less when they go to the doctor. Others, particularly those who rarely seek medical care, would rather save on premiums and invest the difference in a retirement account or a Health Savings Account (HSA), Guinn said.
Also, said Guinn, people are looking for extras that provide a safety net for health issues that might not be covered by regular health insurance.
She said she’s seen an increase in interest in supplemental insurance or gap coverage. For example, critical illness insurance helps pay emergency costs your insurance doesn’t cover, hospital indemnity insurance that is designed to pay for a hospital stay not covered by other insurance, or accident coverage that helps cover the out-of-pocket costs following an accidental injury.
“People are looking at those gap coverages differently, now,” Guinn said.
Chances are, in some way you’re spending money differently now than you were this time last year, said Eric Levy, executive vice president of AIG Retirement Services. Ask yourself, will that last? Is there an opportunity to put more money toward your retirement this year? Or are you looking for savings?
“If you’re working from home, you’re spending less on transportation,” said Levy. “Overall, people are spending less on travel, vacations and going out to eat. I’d encourage people to find that as an opportunity to increase their contributions into a retirement fund.”
While 401(k) contributions can often be adjusted at any time during the year, open enrollment presents an opportunity to take stock of your personal balance sheet and look for extra savings, said Levy.
“This is truer today more than ever given how Covid-19 is reshuffling financial demands and priorities,” Levy said. “People only have so much they can tuck away for tomorrow so prioritization is key when thinking through where each dollar from your paycheck will go –be it toward your health care, retirement plan or emergency savings.”
Younger, healthier employees have shown an interest in high-deductible health insurance plans with an HSA, said Dan Herron, a certified financial planner with Elemental Wealth Advisors.
Not only does the HSA have the tax benefits — pretax contributions, tax-free growth and tax-free distributions for eligible expenses — money in the account can be invested and used as an additional retirement vehicle.
“People are more inclined to invest the funds through an HSA provider and allow those funds to utilize the 8th wonder of the world — compound interest,” said Herron.
Perks: out with transportation benefits, in with legal services
Benefits you once appreciated daily may now be unusable. Working from home may have made commuter benefits a relic of the past, at least for the foreseeable future.
Many families felt stuck midway through 2020 with pre-tax funds they saved in a child dependent care Flexible Spending Account (FSA) that could not be used because there were no childcare services available.
Unlike HSAs, FSAs must be used by the end of the year or the funds are lost.
“Be very careful to match your needs to those special FSAs,” said Levy. “You never want to over fund those to where you can’t use them, when it is use-or-lose it.”
On the other hand, there are overlooked benefits that people are picking up on more this year, like legal services. Some companies offer access to legal plans for relatively low paycheck deductions — usually under $20 per month.
“They are starting to think about estate planning if something does happen to them,” said Guinn. “Being able to have legal resources for $18 a month is good, and unlike other benefits, those benefits are only available during open enrollment.”
A previous version of this story misidentified Eric Levy’s division. He is the executive vice president of AIG Retirement Services.