Open enrollment is an opportunity to review how your employee benefits fit your family’s needs and broader financial plan. In this video, Shane Tenny, CFP®, managing partner at Spaugh Dameron Tenny, explains four common mistakes to avoid—from automatically renewing benefit selections to overlooking disability coverage and beneficiary designations.
Benefit selections: Why carrying forward last year’s choices may mean overlooking changes in costs, coverage, or your family’s needs.
Health and dependent care accounts: How health savings accounts (HSAs) and dependent care flexible spending accounts (FSAs) serve different purposes.
Disability income coverage: Why high-income employees may want to review how much income their employer’s coverage would replace.
Beneficiary designations: Why it’s important to check who is listed on your life insurance and retirement accounts as your circumstances change.
Transcript:
[00:00:03.21]
Hi there, Shane Tenny with Spaugh Dameron Tenny, and I want to come to you during this open enrollment season when most employers are giving the employees a chance to sign up or alter their benefit selections.
[00:00:16.12]
There are 4 key mistakes that we see all the time, and I just want to bring it to your attention so that you can be more educated and prepared for this year's open enrollment season.
[00:00:25.29]
Now, number one, the biggest mistake we see is not paying attention to open enrollment season and then just auto-enrolling. If you do nothing, often your benefits choices from the prior year will just carry forward, and this is often not the best thing to do. The reason is that most employers are actively working to both make their benefits offerings competitive with the marketplace, and they're looking for ways to control costs, both for themselves and for you, the employee.
[00:00:53.23]
And so by auto-enrolling, or by not making a proactive election, you can certainly find yourself paying more for benefits than you might have intended or paying for benefits you no longer need, or you've missed the chance to sign up for something that would be useful or cost-competitive for your family.
[00:01:14.26]
Now, the second most common mistake that we see has to do with the savings accounts that are available in different circumstances. The first of these to pay attention to is the health savings account offering. Oftentimes, we see now employees signing up for a high-deductible health insurance plan because they tend to be among the least expensive. Many high-deductible health insurance plans make you eligible for a health savings account. This is a place where you can save money on a pre-tax basis that can be used towards healthcare expenses during the year on a tax-free basis.
[00:01:52.13]
However, a health savings account is different than a dependent care flex spending account, a dependent care FSA. This is a distinct and different type of savings program that allows you to save money on a pre-tax basis that can be used towards childcare expenses if you and your household meet certain criteria. You want to look through the benefits paperwork carefully for this, but if your employer offers a dependent care flex spending account, it is definitely worth looking into, especially if you have children.
[00:02:25.19]
Now, the third opportunity that gets overlooked is the ability to better protect your own income if you get sick or hurt.
[00:02:35.05]
Let me explain this. Many employers offer a base level of group disability income insurance. This means that if you get sick or hurt, the disability plan may replace a portion of your income. For high-income employees, this ratio is often a fairly small percentage of your income. And so most employers will also offer a supplemental or an optional additional level of disability income insurance to allow you to protect more of your income.
[00:03:08.20]
This is definitely worth looking into if your employer offers it. It's generally very cost-competitive and better protects you and your family in the event you get sick or hurt and can't work.
[00:03:18.27]
Now, the 4th thing to not overlook is your own beneficiary elections. During open enrollment, or really anytime during the year, you can update the beneficiaries of any group life insurance or your retirement plans. And this is really important to do because, number one, beneficiary elections supersede any directives you've put in your will in almost every case.
[00:03:44.13]
Secondly, our beneficiary intentions change more often than you might think. For example, if you find that you have an ex-spouse still named as a beneficiary, that's generally not a good idea. If you've gotten married and still have your parents listed as the beneficiary, that's generally not a good idea. If you have minor children who are named as beneficiaries, that's not a good idea. So take the time to review your beneficiary designations and make sure they're in line with what your intentions are and whatever guidance you've received from your financial advisor.
[00:04:19.19]
I hope this helps. And as always, if you have any questions, don't hesitate to reach out.