There's a lot more to employee benefits than just filling out a form for health insurance. From the retirement plan, to health insurance, to even some newer, more unique benefits such as transportation reimbursement or flex time, all aspects of your benefits package should be taken into consideration.
When employees start a new job it can be all too easy to just let their excitement over a new opportunity take hold and not pay attention to the shiny new benefits package being offered. Even for employees who have been with the same company for years, it's important to reevaluate needs and make sure they’re getting the most out of your benefits. Here are some basic guidelines to share with employees:
Retirement plan
The employer-sponsored retirement plan is an extremely important and vital tool for helping workers save for the future. This is a benefit that everyone can use so it's important to educate new employees about your company's offerings.
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There are a variety of plans your employer could be using: 401(k), 403(b), TSP (for government employees), SIMPLE IRA, Roth provisions, and so on and so forth. While the retirement plan can be pretty complex, there are a few key areas to get familiar with when it comes to assessing the plan being offered:
- Employer matching, profit sharing or other contributions. Questions to ask: Does your employer offer a match? How generous it it? What is the matching formula? Is profit sharing offered?
- The "eligibility period" to get in the plan and the "vesting schedule," which determines when employer contributions become "yours." Questions to ask: How long do I have to wait until I can enroll in the plan? How long will it take to become 100% vested? When can I withdraw my money and are there any penalties?
- Investment expenses and other plan costs incurred by employees. Questions to ask: What is the plan really costing for you? What is the industry standard for retirement plan fees? How do these fees compare to your plan's returns?
- The quality of investments and suitable options to build a diversified mix that matches your specific needs. Questions to ask: Is there a diverse mix of investment options that include funds ranging from low to high-risk options? Are there QDIA options, such as Target-Date Funds? Which investment option has the lowest expense ratio?
Some of this information will be easy to find and some of it won't be as transparent. Since this is definitely a benefit that will be of the utmost importance to you later on in life, you need to know what you're getting yourself into and do the research. You should really take advantage of the tools and resources your employer offers and also speak with trusted, independent sources to help you measure the quality of your plan and how it can work best for you.
Health insurance
Besides your salary, this is probably the biggest benefit that potential employees are concerned about when accepting a new job offer. There are many personal factors that go into determining whether a health insurance plan is the right fit for you: Are you single or married? Do you have children? Does your spouse have health benefits? If not, will they be able to get covered on your plan and for how much? Is your spouse's health plan better than yours?
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Do you have a lot of medical expenses? Are there dental and vision insurance options? In order to determine how much value a health insurance plan holds in your total benefits package, you need to do a cost and benefit offering analysis based on your answers to key questions like those above.
Here are the key components you should pay attention to:
- Premium: how much gets taken out of your paycheck to cover the cost of insurance and how much your employer is covering
- Deductible: the amount you pay out of pocket before your insurance kicks in
- Co-pay: The price you pay for routine services, which don't apply to your deductible
- Co-insurance: What you must pay for care after you've reached your deductible
- Out-of-pocket maximum: The max amount you will pay annually. Once you reach this amount, insurance will cover the rest.
- Health Savings options (HSA and FSA): Savings accounts that allow you to save for your annual and ongoing health needs on a pre-tax basis.
Depending on you or your family's needs, all these factors are going to be at play and will come with different costs. If you are someone who goes to your doctor once a year and is generally healthy, the plan that gives you the most return bang for your buck is going to be entirely different than that of a family with two young children who constantly go to the pediatrician. Also, check to see if your employer has an independent insurance consultant who can help by guiding you on which options might be best for you and your family.
Sick and vacation time
This benefit is sometimes overlooked, but can end up being a significant bargaining chip. If your company is offering a generous amount of leave time, then depending on your preferences and needs, that may make up for other shortcomings in the benefits package. If they don't, you may consider asking if this benefit is negotiable.
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Some companies have even stopped restricting time off, allowing employees to take these at their own discretion. Make sure you know all these details before accepting an offer: how you accrue time off, if and when your vacation/sick days expire, are there floating holidays, what is the process for requesting time off, etc.
Stock options or profit sharing
Stock options or profit sharing programs can also be a component when judging the worth of your position in a company. If the company you are working for remains profitable, these options can provide you with a significant amount of extra income. With profit sharing, you will be given a set percentage or maximum dollar amount based on earned profits.
While stock options are typically reserved for executive-level employees wherein you have to purchase stock at set intervals at market price, some employers will offer ESOPs, or Employee Stock Ownership Plans. This allows employees to buy company stock at a discount. These benefits can really be a value-add to your total compensation package and also gives you an added incentive to make sure the company you work for performs well. Make sure to ask what the company has paid historically, review past performance, and rebalance your investments to reduce risk to your portfolio.
Alex Assaley is lead adviser, retirement plans, with
