You know your salary off the top of your head, but do you know how much your benefits are worth? The U.S. Labor Department says benefits make up about a third of an employee’s total compensation package.
And those benefits are something you can choose to expand: Supplemental or voluntary benefits are meant to fill gaps in the core coverage your employer provides, at some cost to you. Fringe benefits may or may not be negotiated and tend to include smaller benefits, such as use of a company car or membership discounts.
But you have to understand them to use them and get the most out of them.
“Don’t wait until your employer’s open enrollment period to inquire about benefits,” says Gene Lanzoni, assistant vice president of thought leadership at Guardian Life Insurance.
Talk to your HR representative to find out what your options are, and work with a financial adviser to determine the best fit for your needs.
Here’s what you need to know about fringe benefits:
They Can Enhance Your Core Benefits
Even if your job provides generous health insurance coverage, it won’t cover everything. Enter voluntary benefits. A 2016 report by Aflac said about 26% of employers offered voluntary benefits; the most common offerings were short-term and long-term disability insurance, accident insurance and life insurance. These products are meant to fill gaps that employees may have in their core health insurance, especially those with high-deductible health plans.
High-deductible plans can cause financial hardship for people who are unable to easily absorb the cost of serious medical problems, Lanzoni says. Accident insurance, critical illness insurance and hospital indemnity insurance can play a large role in filling these gaps in coverage for those in high-deductible plans, he says. In addition, disability insurance can help provide more paid time off for maternity leave.
They Can Help You Save a Lot of Money
Sure, supplemental benefits cost money, but they go a long way toward protecting your assets. Life insurance can provide a large cash benefit to survivors if you die; tuition benefits or relief can save money on education; and access to financial planning and fringe benefits such as discount programs can save you money on services you’d buy anyway, says Josh Lavine, president of Capitol Benefits.
While once mostly limited to large companies, discount perks have been embraced by smaller companies as well.
“Just recently many of the discount programs have lowered their minimum size requirement, so we are seeing more and more small businesses participating in them,” Lavine says.
These offerings may include discounts on entertainment options, such as movie tickets or restaurants, or on gym memberships, travel programs or home and auto insurance, Lavine says.
But They May Be Taxed
While compensation through core benefits such as health insurance is not taxed, some of these supplemental or fringe benefits may be, and experts say it’s important to understand what you’re on the hook for when tax time comes.
According to Steve Hoffman, a tax consultant, taxable fringe benefits include:
- Cash awards or prizes, except for safety or length-of-service awards.
- Gift cards, which are treated the same as cash.
- Reimbursed meals that did not require an overnight stay.
- Personal use of an employer-provided vehicle; commuting is considered personal use.
Expense reimbursements that don’t have the proper documentation and moving expenses that are reimbursed may also be taxed. Employers report taxed benefits at tax time, and you will see this information on your W-2.