❚ AZ Economy: Lesson-known benefits can make a big difference.
Pay attention during open-enrollment season
During a remodeling job in 1996, Steve Gearhart fell off a ladder. The 22foot plunge resulted in 24 operations over the next 13 years on his legs, knees, back and elsewhere.
“The accident pretty much ended my working career,” said Gearhart, who owned a remodeling business at the time. “But I didn’t go broke.”
Gearhart had purchased a disability insurance policy about five years before the accident, and the steady flow of income it paid over the next 12 years allowed him and his wife to maintain their lifestyle.
“Buying that disability policy was one of the best financial decisions I made,” said Gearhart, now 76, retired and living in Mesa. “Getting checks all those years was a real life-saver.”
As employees are given the opportunity to select workplace benefits during open-enrollment season, many should take the time to ponder options such as disability insurance, which provides monthly income for people unable to keep working.
Medical and dental insurance, and perhaps 401(k) retirement plans, likely garner most of the attention during open enrollment. But many employers also offer other benefit options that deserve a close look.
Many choices available
The array of workplace benefits can be extensive at some companies and nonprofit organizations. Some employers offer these perks automatically, without requiring workers to select them. These include paid days off for sickness/vacation/personal reasons, paid days off to volunteer and onsite fitness centers. Others require workers to enroll in a plan and possibly foot some or most of the bill.
Long-term care insurance, offered by 52% of 1,100 employers surveyed by Fidelity Investments, is one popular benefit. This insurance pays the costs of caring for someone with a chronic illness or disability (unlike disability insurance, which provides income replacement).
Other popular benefits include employer matching funds to Section-529 college savings plans (cited by 38%) and employer contributions toward student debt (28%).
“It’s not uncommon to see an employer making 30 to 50 benefits and perks available,” said Pearce Weaver, a senior vice president at Fidelity who focuses on benefits and workplace consulting.
That means employees should take the time to evaluate their choices, though many people don’t bother. Respondents to an AFLAC study released last year said they spent just 32 minutes on average researching benefit choices during open enrollment. Nine in 10 said they selected the same benefits as in the prior year.
Many of these products can be purchased outside of work, but eligibility might be easier and prices lower through a group plan, Weaver said. Also, paying for benefits through payroll deduction makes it convenient. Here are some other less-prominent options:
Tax-sheltered health plans
Health savings accounts are a type of account into which employees can contribute pretax dollars to pay for medical costs, either as they occur or down the road, including in retirement. The money comes out tax-free, assuming it’s used to meet qualifying medical expenses, which includes many items.
While people often use HSAs to pay for current expenses, the money in these accounts can accrue over time and come in especially handy during retirement. For example, because distributions are tax free, they won’t boost your taxable income enough to make Social Security benefits potentially taxable.
Many people don’t enjoy employerprovided health coverage during retirement, so HSAs can help fill the void, said Weaver.
The accounts “offer better tax advantages than 401(k)s, individual retirement accounts and 529 (college savings plans),” said researcher Morningstar, referring to the combination of pre-tax contributions, tax-sheltered growth and untaxed withdrawals.
However, HSAs are tied to high-deductible health insurance plans, so make sure that option works for you. For 2020, individuals may contribute up to $3,550 into an HSA, or $7,100 for married couples. People 55 and older can sock away an extra $1,000.
Disability coverage important
Based on his own experience, Gearhart became a big advocate of disability insurance, noting that people are more likely to collect on this type of coverage during their working years than on a life-insurance policy.
Young adults face about a one-infour chance of missing work for at least a year sometime in their careers, yet relatively few debilitating injuries or illnesses happen while on the job, according to the Council for Disability Awareness.
A disability policy typically would provide benefits as a result of non-occupational situations, while workers compensation (which Gearhart didn’t have) would kick in for on-the-job injuries.
The Social Security Administration also offers disability payments but usually with more restrictions and eligibility hurdles than private insurance policies.
Disability insurance comes in shortterm and long-term varieties, which differ in terms of how long they pay. Policies also vary in terms of when they kick in following illness or injury, what percentage of working income they replace, which health issues are covered and other factors. The average duration of disability claims paid by Mass Mutual, to cite one example, is about four years.
“Disability insurance is one of the cornerstones of building financial wellness,” Weaver said. “Income protection is so critical.”
Financial-assistance programs
Programs designed to encourage healthy lifestyles have been around for many years.
A more recent wrinkle are efforts to help workers manage their financial lives beyond just planning for retirement, recognizing that money stress can lead to absenteeism, lower productivity, more withdrawals from 401(k) plans and other problems.
Newer programs include those that help workers manage their student loans, budget and build up emergency savings, according to a survey of employers conducted this year by the Employee Benefit Research Institute.
Four increasingly common initiatives include tuition reimbursement, financial-planning help, various employeeassistance programs and basic moneymanagement education. Some programs offer helplines, coaching, wellbeing assessments and goal-focused challenges.
Student-loan help includes loan subsidies paid by the employer and 401(k)style matching contributions tied to workers’ own loan payments. Other, general assistance includes employerprovided payroll advances and emergency funds to meet hardships.
Employees facing financial stress, including younger adults with hefty student-loan balances, should check to see if help is available through one or more of these workplace benefits.