Year-End Planning Tips: Employee Benefits

October 24, 2018  | By Kevin Smith

If you have open enrollment between now and the end of the year, here are some important considerations.

• Health insurance – if your employer offers a high-deductible plan with an HSA account and matching funding, this may be worth strong consideration. There are factors that can tilt your decision one way or the other. Let us know if you would like further perspective.
• Flexible Spending Accounts (FSA) – make sure to check your balance year-to-date and try to spend all available dollars before the end of the year.
• Disability coverage – short term disability can be particularly helpful if your family is planning a pregnancy in the next year, and long term disability is a very important component of financial security. Be sure to sign up if it applies to you.
• Supplemental life insurance – this can be a good value, depending on your need and your ability to receive a favorable rating in the open market. Keep in mind that employer-sponsored life insurance may not travel with you to another job and the price may increase substantially as you get older.
• Employee Stock Purchase Programs – if your employer offers a plan to purchase company stock at a discount, it is worth considering. The discount rates used to be 15%, but we are seeing more plans at 10% these days, which is less compelling. The financial benefit is clear if the stock price remains stable or increases, so the volatility of your company’s stock price will play an important role. We encourage participants to establish a disciplined plan in advance. For example, either a) sell all shares immediately after one year to secure long term capital gains treatment and limit exposure, or b) limit your total exposure to the stock to no more than 10% or up to 20% of your total liquid net worth, then sell the excess amount. This will help prevent you from being an Enron example for the next generation. I prefer that our clients have established ample liquid reserves and maximize 401k savings before using this option.