The Employee Benefits You Should Use—but Probably Don’t
Nov 17, 2023
Many
workers don’t take advantage of such perks as 401(k) matches, medical spending
accounts and tuition assistance. It’s time they start.
Many employees are leaving company benefits on the table.
Maybe it’s simply inertia: Employees simply don’t bother to sign up
for all the financial benefits their employers offer. Or they are just
overwhelmed by all the choices.
Whatever the reason, nearly 1 in 5 employees are either
“not at all confident” or only “slightly confident” in their understanding of
the benefits offered by their employer, according to MetLife’s 2023 employee benefit trends study.
So, as open-enrollment seasons gears up, it pays for
employees to review their employer’s annual offerings, some of which may have
changed from previous years. “Make sure you’re building that time in to truly
understand what you are offered, whether you have to enroll in it or not,”
says Bradd Chignoli, senior vice president of national accounts and
financial wellness and engagement at MetLife.
Here are some of the most underused
benefits and what human-resources professionals say about them.
401(k) match
As surprising as it might be, many workers don’t
contribute to a company 401(k) plan. Employees sometimes feel as if they can’t
afford to save more, but they don’t realize what they are giving up in
potential savings—like the employer match on contributions.
Employers may contribute a portion of what the employee
contributes, or they may match the employee’s contribution, up to a certain
percentage. Many employees, meanwhile, if they contribute, don’t put in enough
to receive the employer-match maximum, and so they miss out on the ability to
save even more and reduce their taxable income at the same time. They may be
auto-enrolled, at the default deferral rate, which is usually about 3%,
says Julie Stich, vice president of content for the International
Foundation of Employee Benefit Plans, an educational organization focused on
employee benefits.
Whenever possible, employees should maximize their 401(k) options
because of the benefits of tax-free savings and compounding, says Tom
Gimbel, founder and chief executive of LaSalle Network, a Chicago-based
staffing, recruiting and culture consulting firm. For 2023, employees can contribute
up to $22,500 to their 401(k), or $30,000 if they are age 50 or older.
Medical spending accounts
Another common perk frequently overlooked: tax-advantaged accounts
for medical spending. For every employer that offers a flexible spending
account (FSA) or health savings account (HSA), only 2 in 5 employees use it,
according to the MetLife study.
With FSAs, employees can reduce their taxable income by the amount
they put aside, up to certain limits. Employers may even contribute on behalf
of an employee, though they aren’t required to, according
to Healthcare.gov. For
2023, an employee can contribute up to $3,050 to an FSA; spouses can also
contribute up to that amount to their own employer’s FSA plan, resulting in a
significant tax savings.
FSA money must be spent on qualified out-of-pocket medical costs.
These include medical copays, eye exams, contact lenses, prescription glasses
and sunglasses, dental care, certain over-the-counter products and even
sunblock.
Some employees fear losing unused FSA funds, says Jeff Faber,
chief strategy officer for Hub International, a Chicago-based insurance
brokerage. You typically must use all the money you set aside by year-end or
lose it. But there can be a grace period of up to 2½ extra months, according to
Healthcare.gov. Some companies allow as much as $610 to be carried over to the
following year.
HSAs, available to employees with a high-deductible health plan,
allow people to set aside money and use it tax-free to pay for qualified
medical expenses, such as deductibles, copays and coinsurance. With HSAs,
unused money can be carried over to future years, so workers can build up a
stash to cover large medical expenses that might come up later in life. In many
cases, employees can invest all or a portion of their HSA balance, which grows
tax-free.
For 2024, the
maximum HSA contribution will
be $4,150 for an individual and $8,300 for family coverage, up from the current
limit for 2023 of $3,850 for individuals and $7,750 for a family.
Student loan and tuition benefits
To retain
and entice younger workers,
some companies offer education-related benefits. These can include tuition
reimbursement or prepaid tuition—where companies foot the bill for high-school
completion, undergraduate programs, certificates or, in some cases, graduate
degrees. Program eligibility, tenure requirements, exceptions and other
particulars can vary widely by employer.
Some companies help with student-loan payments, a burden for many
younger employees especially now that federal
student-loan payments have resumed for many borrowers. One thing to keep in mind for employees
receiving education benefits: Anything above $5,250 will be considered taxable
income by the Internal Revenue Service.
Supplemental insurance
At open-enrollment time, employees often can buy supplemental
insurance policies at group rates, which can be considerably lower than
individual rates. Typically, employers offer additional life insurance, but
many increasingly also offer disability, long-term care, critical-illness and
even pet insurance.
Many employees miss these opportunities, in part because they tend
to check off the same boxes as they did the previous year, spending little time
and effort on what may be new. “People go in holding their noses to a certain
extent,” says Nate Black, vice president of health solutions product
at Voya Financial,
a New York-based health, wealth and investment company. This can be a mistake
since employer offerings can change from year to year.
Before buying additional coverage, however, employees should
research options on their own to ensure the rates and coverage being offered by
their employer are indeed more favorable.
Wellness programs and incentives
Employers increasingly offer a variety of wellness programs and
incentives to keep workers healthy and help keep healthcare costs down.
Programs include free or discounted access to vaccination clinics,
nutrition education, exercise programs and activities, fitness-center
memberships, health screenings, health-risk assessments, weight-loss programs,
smoking-cessation and stress-reduction programs, according to the Society for
Human Resource Management.
Some employers offer cash, gift cards or insurance-premium
reductions for participating in certain wellness initiatives like flu shots or
weight-management programs. Workers might not know about the benefits because
of poor promotion, says Stich.
Employee assistance programs
Alcohol addiction, substance abuse, stress, grief, family issues
and psychological disorders can be serious for many employees. Free and
confidential assessments, short-term counseling, referrals and follow-ups can
be offered through an employee-assistance program, or EAP. Such programs are
voluntary.
Employees might hesitate to use these services because they are
concerned their employer will find out, but these programs are confidential,
Stich says.
Some employers also offer free or low-cost advisory services for
retirement saving, estate planning, saving for college and even divorce. These
resources can get lost in the sea of other benefits, but they can be invaluable
for workers concerned about their finances.
Backup care
More companies are recognizing the care needs of employees, because
they know the high-cost of absenteeism. But there are subsidies and
reimbursements for child- or eldercare, and even pet care, that tend to go
unused. With so-called backup care, an employee can generally request care from
a vetted network through an app or online portal, and only pay for a daily or hourly
copay, according to Care.com, a service for families with care-related needs.
Other perks
Discount programs are a growing perk but aren’t always promoted during open
enrollment.
Employers often offer discount programs for retailers, restaurants,
movies and theater tickets, among other things. Some companies work with
providers such as Working Advantage, which offers employee discounts in travel,
entertainment and retail.
Employees who don’t proactively learn about and read employer
communications about benefits can miss out on something important, Stich says.
And, she adds, “it doesn’t hurt to ask.”
Source: Wall Street Journal