Keeping track of what your company’s employee benefits cover and how they can work for you can be a challenge, but it is vitally important. Your employer provides benefits as part of your compensation, and if you’re not taking advantage of them, you can miss out on some important savings and coverage.
Here are five things all employees need to understand about their benefits.
1. Your Health Insurance Costs
You need to understand what your health insurance costs are, including how much of the premium you pay each month, any co-pay and the annual deductible, says PJ Wallin, CPA and CFP at W Financial. “Employees should know what their benefit options are, as well as for their family and who pays the costs for each. Many employers may cover a larger portion of an individual, but then subsidize less of their family.”
If your employer offers a choice of different levels of coverage — such as a higher deductible plan with lower premiums for healthier people or an expensive plan with more inclusive coverage — you need to go over those options carefully and find out which one is right for you, Wallin says.
2. That You Have the Right to a Health Insurance Summary Plan Description
Health insurance benefits can be hard to understand — that’s why employers are required to provide a summary plan description if you ask for one. “Get it and make someone (even if it is at the 1-800 number) explain the terms and conditions,” says Penny Miller, owner of Venture HRO LLC, an independent human resources consulting company.
“Although these summaries are supposed to be written in plain English, there are often specialized terms that aren’t explained well, but can have a huge impact on your out-of-pocket expenses,” she says. In addition, there may have been changes from last year, so don’t make assumptions about what’s covered.
3. How a 401(k) Works
If your company offers a 401(k), it’s important to know how to get the most out of it. “What employees need to know about their 401(k) is that it’s not managed for them,” says Chris Costello, co-founder of Blooom, a finance consulting agency. “They have to take an active role.”
Costello describes the 401(k) as a “great benefit” that can go a long way to helping employees hit their financial goals, but they need to know how to select investments and ensure they’re putting enough money away.
If you aren’t contributing at all when your company has a match, that’s a mistake because you’re leaving money on the table, Costello says. For example, if a company matches 50 percent of employee contributions up to 6 percent of their annual salary, and an employee is making $30,000 a year, then the company will contribute $900 to her 401(k), assuming the participant is contributing at least 6 percent of her annual salary, Costello says.
4. The Value of Disability and Life Insurance
If your company offers disability or life insurance, it’s vital that you know what those policies cover and when they might kick in, Wallin says, and that you know before you need those benefits. For example, you may be told that you’re covered by disability insurance, but it may only be for a percentage of your salary, and benefits may not be paid out until after a certain time.
If your company offers group life insurance, it may be cheaper to lock in term insurance independently, Wallin says. “When you leave an employer, it’s often expensive to take the life insurance from the group policy and make it independent,” Wallin says. Look into all your options before you join your employer’s group life policy.
5. That You Could Be Entitled to Benefits You Don’t Even Know About
Your employer may offer benefits you don’t even know about, such as discount programs with vendors or partners, or major savings at a gym as part of a wellness program. “Look for little-known benefits that can save you money, like tuition reimbursement programs,” says Miller. Read the benefits communication your HR department provides, and ask questions if you need clarification.