Kevin Oleszewski, CFP®, Senior Wealth Planner
It’s hard to fathom, but there are a lot of employee benefits that people aren’t using correctly — or aren’t using at all.
Why? I blame it largely on the failure of employers to educate in a coherent and easy-to-understand fashion. The employee benefits business has its own language and most workers — even if they read all of their onboarding documents — won’t necessarily understand the content. It doesn’t help that most high schools and colleges choose not to include personal finance in their curriculum.
Here’s an example, out of my own experience, of how a workplace benefit can be overlooked. I have two friends, both in education, who literally threw away their 403(b) enrollment forms because they didn’t understand what the tax-sheltered retirement plan was. I helped sort them out and they’ve been taking advantage of the benefit ever since.
5 Employee Benefits You Might Be Missing Out On
Here are five of the most often misunderstood workplace benefits that employees should take a hard look at.
1. Employer match on 401(k) plans. There’s not a lot of mystery surrounding the 401(k) retirement and savings investment plan. It’s been around for a long time. But things can go sideways when employees auto-enroll in the program at a contribution rate that’s lower than the company match. If you are contributing 3% and the company match is 6%, the employer is only required to match at your level. That’s missed opportunity. It’s a good idea to revisit your rationale behind the amount of your contribution on a routine basis.
2. Health savings accounts. The health savings account, or HSA, can be a great tool to boost retirement savings. Typically, an HSA is used by people with high-deductible health insurance plans to pay out-of-pocket expenses. When you contribute to an HSA, you get a tax deduction for the money you put in and it grows tax-free. If you don’t need to use the money early on, you can use it in retirement to reimburse for all medical expenses.
3. Employee stock purchase plans. Typically offered by a public company, these plans allow employees to buy stock at a discount. Discount rates tend to range from 10 to 15 percent. If used correctly, these plans can be a great investment, but you should consider your contributions to an ESPP in the context of your overall financial plan, as all investments have risk and the taxation rules on these plans can be complex.
4. Group disability and group life insurance. The plans offered by employers are generally the cheapest in the marketplace that you can buy. These low-cost plans can give financial stability to a family — yet they are often left on the table. On the insurance side, companies sometimes provide a certain amount of coverage— maybe two to three times your salary — with no physical exam required. It comes back to a lack of education. Also, there are a ton of insurance agencies that want you as customers and it’s their loud, loud marketing voice that you are going to hear first.
5. Commuter benefits. More and more companies are offering commuter benefits to help with expenses like train tickets, parking costs, tolls and ride-share programs. You don’t pay a tax on the benefit. The problem is there’s a tremendous lack of awareness about a perk that could save you hundreds of dollars over the course of a year.
Use It or Lose It
The bottom line? It’s important to maximize workplace benefits that are relevant and impactful to you. Ideally, set up a one-on-one consultation with your human resources contact when you start a new job. If you’re working at a big company, there should be some sort of power point presentation that’s offered during the onboarding process that outlines every benefit and how it works. Sometimes, the really large corporations will offer employee benefits workshops on routine basis.
This is a textbook case of “Use it or lose it.” Ask questions. Read the small print. And talk to your colleagues who have worked at the company for a while. Get educated.
Have Questions About Workplace Benefits?
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Kevin Oleszewski is not registered or affiliated with Cetera Advisor Networks, LLC.