Salary is the primary employee benefit to consider when searching for a new job. A great salary can sometimes compensate for mediocre benefits. Employee benefits are indirect, non-cash compensation. Both cash and non-cash benefits are an important part of your financial package, so it’s a great idea to get in the habit of evaluating all your potential benefits when deciding whether to remain at your current workplace or move to a new opportunity.
Insurance
One of the primary benefits most people look for when choosing to work for an employer is insurance coverage. The offering varies but might include health, dental, vision, disability, life, and long-term care.
Health insurance is the most expensive and frequently used insurance benefit offered by employers, and there is usually more than one option available. Cost should also be considered, both in terms of employee contribution and out-of-pocket insurance costs. Before determining which health insurance package best meets your needs, look back at your healthcare expenses over the previous year or two. Check what was covered and how much you paid out-of-pocket.
Types of health insurance plans
Insurance plans are based on provider networks, which are the group of doctors, hospitals, and other healthcare providers who have agreed to take a pre-negotiated rate in order to participate in the plan and have access to the enrollees in the plan. Insurers negotiate with providers in order to keep costs down. Employees benefit from the reduced costs but need to be aware of the restrictions.
Health Maintenance Organizations (HMO)
In an HMO plan, you typically work with your primary care provider. They will act as your point of contact for health needs. They will provide any necessary referrals to see a specialist or have a special procedure. HMOs require you to stay within your network to keep costs down, with some exceptions, such as emergencies. The benefit for you is low to no deductible and generally lower premiums.
Preferred Provider Organization (PPO)
You can go outside your network with a PPO (always check your individual plan), but it is typically cheaper to see in-network providers. In most cases, you do not need a referral to have a procedure or see a specialist, though you may need to have pre-authorization. Premiums tend to be higher for PPOs because there is typically at least some coverage for out-of-network providers.
HMOs and PPOs are the most commonly offered plans. Some employers also offer Exclusive Provider Organizations (EPO) and Point of Service Plans (POS). These plans combine the features of HMOs and PPOs.
Health Savings Accounts (HSA)
If your employer offers a high-deductible health plan (HDHP), you may be able to contribute to a health savings account. HSAs can be used to pay for deductibles, copayments, coinsurance, and all qualified medical expenses. The 2021 contribution limits are $3,600 for single coverage and $7,200 for family coverage. Any unused balances roll over to the next year and can follow you from employer to employer. Your contributions are tax deductible, and your distributions are tax-free as long as they are used for medical expenses.
Flexible Spending Account (FSA)
Flexible savings accounts must be offered through an employer. You cannot get one if you are self-employed. FSA funds can be used to pay deductibles and copayments, but not insurance premiums.
The maximum contribution for 2021 is $2,750. FSA funds must be used within the same year, even if the account is not fully funded. Your employer may allow up to $500 to be rolled over to the next year. In most cases, you will lose your FSA funds if you leave an employer. Contributions to your FSA are made pre-tax and qualified distributions are tax free.
Dental Insurance
Dental plans vary in both coverage and the size of the network. In most plans, preventative dental care is fully covered. However, only about half of employers offer dental benefits. If your employer does offer coverage, consider your personal dental history to estimate your potential costs. Then consider out-of-pocket costs such as deductibles, co-pays, and annual maximums.
Vision Insurance
Vision insurance can cover regular eye exams, prescription lenses, frames, and contacts. The coverage varies widely, so it is a good idea to check before getting services to ensure they are covered.
Disability Insurance
Short-term disability is a benefit to provide some income replacement if you are sick or injured in a non-work-related injury. The benefits can cover childbirth, extend your maternity leave, or provide recovery time after major surgery. The coverage may vary, so it is important to read through the plan details to see what your plan covers. Also, check to see how pre-existing conditions are handled and how disabilities are defined.
Long-term disability is coverage that comes into effect after short-term disability expires.
Life Insurance
Life insurance is designed to ensure your family is financially cared for and any outstanding debts you may have are paid. If you do not have children or anyone financially dependent on you, life insurance may not be a relevant benefit.
Retirement Plans
Your employer may offer a range of retirement benefits, including qualified plans such as a 401 (k), profit-sharing plans, or employee stock purchase plans.
Besides the option to enroll in these plans, your employer may offer a percentage match. For example, employers may offer to match the first 3% to 4% you deposit into your account. This is a great benefit, as it essentially doubles your savings up to the threshold contribution.
Check to see how your plan vests. The vesting schedule will describe how long you must work for an employer to keep the full matching contribution they provide.
Your employer may also offer a Roth 401(k). These plans allow you to deposit money that has already been taxed. These plans are a great option for people who are at lower tax brackets now and who expect to earn more money and move to a higher tax bracket as they get closer to retirement age.
Other Benefits
Other benefits to consider when evaluating potential jobs include paid leave, parental leave, dependent care, and flexible schedules or telecommuting options. When comparing options, add up all the paid time off you are eligible for, as different employers may call the time off benefits by different names.
Your potential employer may also offer lifestyle benefits, such as gym memberships, free parking, free lunches, legal assistance, tuition reimbursement, and professional development programs. These benefits are only valuable if you plan to use them, but should still be considered.
Employee benefits are an important part of your financial planning. Consider these benefits in terms of your desired career path to see if they meet your long-term goals.
