What is Open Enrollment?
November is open enrollment season (a.k.a. “annual enrollment” or simply “open season”) – an important time of the year for employees to review their benefit elections. Open enrollment usually rolls around just once a year because it involves a ton of administrative work on behalf of employers to orchestrate. Employers like to have everything situated by the start of the new year, so open enrollment usually occurs within the October through December period. My employer’s open enrollment period is the first two weeks of November.
There are exceptions – if you start with an employer at another time of the year or you have a life changing “qualifying event” like a marriage, divorce, death in the family, or birth of a child. The urge to simply stick with the benefits you’ve had will be tempting, but it is extremely important to carefully review your employee benefits as they usually change every year. It will be to your… BENEFIT. Here are some open enrollment actions that you can take.
1. Review your Health Insurance Plans
First and foremost, always review your employer’s health insurance options every year. In a given year your employer could add or drop a new health insurance option or prices could go up or down for some of the options.
For example, my employer launched a new HDHP (high deductible health plan) that is paired with an HSA contribution that is pretty significant. I’m young and fairly healthy, so it was a good move for me. I haven’t crunched the final numbers yet on how much I saved over the year, but I will be doing that prior to making any changes.
Ironically, the company announced switching their HDHP plan provider, so there will be new considerations to look at.
There are other considerations than price, of course. Model out the cost in a best and worst case scenario for each plan before making your decision. If you plan on having children in the coming year or addressing a major medical ailment, a PPO plan might make more economical sense for you.
If you have a separate dental and vision plan, review these as well.
2. Review your Voluntary Group Insurance Options
Many employers offer their employees some sort of life and disability insurance coverage (e.g. 2X annual salary). On top of that, some will offer employees an option to voluntarily buy additional insurance coverage.
It is definitely worth looking at the group insurance rates to see if they are more competitive than what you can get on the open market.
If you do opt for additional coverage, the cost of the coverage is deducted from your paycheck.
3. Update your Beneficiaries
Ideally you will have updated your beneficiaries during a qualifying event. If you haven’t, however, open enrollment is a great reminder to do so.
4. Review your Withholding Tax Exemptions
Most employers allow you to update your taxes withheld, at any point in time. Who’s good at remembering to do that? Not me. Open enrollment offers an opportunity to update your exemptions.
If you have or will come across a big change in income during the year, it’s wise to review your number of exemptions to see if it makes sense to contribute more or less taxes throughout the year. You don’t want to get hit with a huge tax penalty or get too big of a refund come tax time.
5. Change your Retirement Savings Contributions
Another year will hopefully bring higher income, and as a result, potential for you to raise your retirement savings contributions. The 2024 401K maximum contribution will be $23,000 for individuals (+$7,500 if age 50+), presenting an opportunity to increase your contributions if you were already maxing out.
The 2024 maximum IRA contribution will be $7,000 (+$1,000 if age 50+). Just make sure you are taking advantage of your full 401K match before contributing to an IRA.
6. Elect your Annual FSA, HSA, or MSA Contributions
During open enrollment, you can elect what kind of contributions you would like to add to your FSA, HSA, or MSA for the year. These contributions will then be deducted from your paycheck.
Also, keep in mind that, if your employer’s plan allows, only a small portion of your FSA contributions can carry over. Otherwise, they are use-it-or-lose-it. Prescription eye-glasses/contacts are a big qualified medical expense that should be covered, but there are others now, including many OTC medications. Check out my post how how to buy glasses online if you have never done it and would like recommendations of where to do it.
Open Enrollment Discussion:
What changes did you make this open enrollment season. Why?