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.
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, in 2012 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 (i.e. 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 withholding tax allowances, or exemptions, 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 2017 401K maximum contribution will be $18,000 for individuals, presenting an opportunity to increase your contributions if you were already maxing out.
The maximum IRA contribution will be $5,500. 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 FSA contributions do not typically roll over from one year to the next, so make sure to use it or lose it! Eye-glasses/contacts are a big expense that should be covered. 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?
This year’s open enrollment I changed to a less expensive dental plan. It only covers 60% instead of 100%, but it cost $250/yr less. I haven’t had any dental work in at least 5 years. I’d have to have an average of $625 per year of dental work (aside from cleanings) in order to justify the cost of the 100% plan. That’s never happened.
I added life insurance for my husband. Because I’m a SAHM with a 1 yr old we got quite a bit. I’ve already enrolled in a private plan covering myself earlier this year.
This is our second year with a HDHP and an HSA. The “traditional” plan offered is $3000/yr more (the same as the deductible on the HDHP). Last year we contributed the difference, $3000, to the HSA. This year we’re reducing the annual contribution to $2000. I was a little concerned about switching to a HDHP at first, but so far it’s been great. I’ll feel even better once we have our annual out of pocket max ($6000) saved. The HSA is a wonderful tax shelter.
Awesome. I think once people get over the fear of switching away from the traditional, they’ll find that they probably could be saving some money. I crunched the numbers on the HDHP and even worst case scenario (birth of a child, emergency room visit, multiple doctors appointments) the additional risk was only $400 with the out of pocket maximums. Best case, I will be pocketing $1,000 a year.
Switching away from my employers dental plan and will purchase one on the open market this year.
Will stick with my employers HDHP w/ HSA for the third year. Noticed that my employer is raising premiums on all health plans except for the HDHP this year. And no, I do not like the HDHP, it is just the better choice from a set of bad (more expensive) alternatives. The only reason the HDHP is the better choice is the tax avoidance in the HSA.
BG – that’s a great point. It’d be easy to just go with your employer’s offerings and not even take a look at the open market, but often times, you might actually end up paying less for a non-employer sponsored plan.
The biggest difference with the dental plans is that the employer’s version charges a premium per child, whereas, I’ve found some (on the open market) that have a family premium regardless of number of children. Plus the non-employer one is a DHMO, which seems to fit our needs better for 2012 (big dental expenses coming up for the wife).
This is going to be my 3rd year in the HDHP w/ HSA, and I’m increasing my maximum monthly contribution since the maximum went up $100 more a year. I’m going to be putting in $240+ instead of $236+ a month.
The employee life insurance now offers 4x salary but I elected to pass on that, sticking w/ the 3x salary I have plus outside life insurance (which unfortunately costs more).
Great post. I just got my first job with benefits so I have nothing to change, but this is great for future reference. Also, I was looking at not getting the optional vision plan and just paying completely out of pocket when a deal came around (they are everywhere) but chose to just go with it this year. Next year will probably be different.
The interesting thing about vision is that you can get cheap glasses online (see link in the post) for under $20 that will be at least as good in their quality as what you might get at an optometrist – at a fraction of the price of your premium.
Ok, I get that you love and promote the HDHP or the CDHP, but for me, insurance of any kind is much more about the UNplanned expenses rather than the planned ones. My husband and I haven’t had major health problems, and we’re not planning on kids yet, but it’s the unknown that’s the issue. That random accident at the pool, slipping on some ice, or you find out that you inherited some rare family disease. The unknown is one of the key purposes of insurance. I get that you have to weigh the risks associated with that, but I also don’t want to be left high and dry. I stuck with the PPO again this year.
Also, just wanted to point out the changes to the FSA. I believe the max is now only $2,500. And you probably pointed it out last year, but it’s worth repeating–FSA funds can’t be used on basic things like asprin or OTC heartburn medicine unless you have a prescription, which makes it much harder to spend the money.
I didn’t realize the HSA contribution limits increased this year (they probably go up every year) so I am maxed out for the 2012 year and will be a bit short (maybe $100) of the 2013 year.