How to Choose Your Own Employee Benefits
By James O'Brien
A good job with great perks is cause for celebration, but sorting through all the options when it comes to choosing your employee benefits can take some careful decision making. It’s all in the details.
Benefits can help you save money in the long run, so it makes sense to spend some time learning about your options and the different types of retirement plans, stock programs, and health insurance available to you.
Most of us could benefit from a little expert advice on the best ways to pick and choose in these categories. Let’s look at some helpful approaches for doing just that.
Ask for specifics when it comes to 401(k) matching and profit-sharing plans.
Does your employer offer a matching contribution? A matching contribution means that the employer will match whatever you contribute to your own 401(k) typically up to a specified percentage of your base salary. So if you contribute 5% of your salary, your employer will contribute 5% bringing the total contribution to 10%. Employer contributions are a great supplement to your regular paycheck … essentially it’s free money deposited to your 401(k) account,” says Jamie Klang, employee benefits attorney with Dorsey & Whitney, LLP. “Some companies are more generous than others, however.”
How long do you need to work at the company before the plan kicks in? In some cases, firms offer options along the lines of how long you’ll need to remain with the company before matches and contributions can begin or when employer matches are fully your own. This is called vesting. Check with your human-resources representative about your company’s specific vesting schedule.
How much do you have to contribute to get their company contribution? Your employer may set a minimum before their full contribution amount is added to your account or set a limit to the amount they will match.
Does your company offer an employee stock purchase plan? Here’s how it works:
- Each pay period you designate a certain percentage of your pay that will go into an account. This account automatically buys you company stock at a discounted price.
- If your company’s stock has increased in price when it comes time to sell it, you could make a nice profit based on your lower purchase cost.
If you can afford to take a small reduction in your regular paycheck, an employee stock purchase plan can add up to more money in the long run.
Be sure to find out what tax rules apply to your situation before you sell the stock. Primarily, you want to know whether the proceeds of the sale will be treated as capital-gains or compensation-income. And this is often tied to how long you’ve owned the stock in the first place. Again, seek guidance from HR at your new company for the specifics that apply to your plan.
Health and Dental Benefits
When choosing an insurance plan, take a close look at some key details:
Monthly premium: the amount taken out of your paycheck each pay period.
Co-payments: the amount you pay at the time of a doctor’s appointment.
Prescription costs: if you are currently using prescription medications, what will that prescription cost you out of pocket?
Of course, choosing plans is also about considering networks. Check to see that your specialist or primary-care favorites are available within your new company’s package.
Voluntary Group Benefits
Beyond the basic benefits, many employers offer elective or voluntary benefits that provide an added layer of protection should you lose your job, experience a serious injury, illness or other unforeseen event. These perks are well worth considering. They are comparatively low in cost and could potentially save you and those you love from financial ruin should you be unable to work.
- Life Insurance helps protect the financial futures of those who depend on your paycheck.
- Accident Insurance helps protect against the financial burden that accident-related costs can create.
- Critical Illness Insurance (CI) offers a way to help you protect savings during treatment and recovery from a critical condition such as cancer, heart attack, heart transplant or other major illnesses.
- Accidental Death & Dismemberment Insurance (AD&D) pays a lump-sum payment in the event of a covered accident. This coverage helps protect you from the financial consequences of an accident.
- Long-Term Disability Insurance (LTD) covers injury and illness that occur outside of work and that keep you from working. Sprains, strains, heart attack, back pain and scoliosis are some commonly covered conditions. Others may include pneumonia, pregnancy complications and rheumatism
- Short-Term Disability Insurance (STD) plans provide coverage for injuries and illnesses that occur outside of work but that are of shorter duration. Covered conditions can include rehabilitation therapy, maternity leave, runner’s knee, whiplash, carpal tunnel syndrome and tennis elbow.
If you have a good job with great perks, get the most out of it! With the advice above and that of your company’s HR benefits expert, you’re on your way to picking employee benefits that help you do just that.