It's that time of year again. Open enrollment season for health insurance and other employer-sponsored benefits is quickly approaching.
If you're feeling overwhelmed this time around, you're not alone. Amidst all the chaos and uncertainty of 2020, the last thing you need is a list of confusing insurance and benefits options to navigate. So to help you prepare to make your coverage decisions, here are 7 must-ask questions that need answers heading into this year's open enrollment period.
The IRS has raised the contribution limits on Health Savings Accounts (HSAs) used in conjunction with high-deductible health plans (HDHPs). The annual limit for individuals will increase by $50 to $3,600. It will go up by $100 to $7,200 for family coverage.
The 2021 contribution limits for flexible savings accounts (FSAs) used for health care and dependent care have not been announced. This information should be available at the time of open enrollment. In 2020, you could put away up to $2,750 for a healthcare FSA and $2,500 for dependent care accounts ($5,000 for workers who are married, filing jointly). The IRS also allowed account holders to make mid-year adjustments because of the pandemic, provided their employers allowed it.
It’s important to remember that the cost of a COVID-19 test is a qualifying expense for FSAs.
Contribution limits for 401(k) and other tax-advantaged retirement plans are also not available for 2021 at this time, as they are determined by the rate of inflation. Experts predict the 401(k) contribution limit will not increase from the $19,500 limit in 2020.
In some ways, everybody’s life is different today than a year ago. You can thank COVID-19 for that. The realities of the pandemic should prompt you to think more carefully about the benefits you sign up for rather than just choosing the same ones as the year before.
Besides the pandemic, other life changes often require benefits changes. These include:
- Getting married or divorced
- Having a child
- Being diagnosed with a condition that requires regular treatments or prescription drugs
Many employers offer multiple plans for health insurance. You can also shop for coverage at HealthCare.gov, the online marketplace created by the Affordable Care Act (also known as Obamacare). The open enrollment period lasts from November 1 to December 15.
Employers may provide a choice of a low-deductible plan with higher premiums, an HDHP with lower premiums, and an in-between option. Now would be a good time to look at how much you spent on premiums and out-of-pocket costs this year and determine if you would save money with a different plan next year.
For example, if you signed up for a low-deductible plan and had few medical expenses, you probably paid too much in premium and may be better off with an HDHP.
Your coverage may need to change if you got married, added dependents, or have fewer dependents than a year ago.
Open enrollment is a good time to add insurance protection your employer offers but that you haven’t taken advantage of.
It’s also a good time to strongly consider whether your group insurance is enough to adequately protect your family.
If your employer offers group policies for disability insurance, critical illness insurance, and/or life insurance, you should strongly consider signing up.
At the same time, consider also having your own individual policies. This can ensure you have enough coverage for your needs. It also ensures you have coverage in the event you leave your employment.
The types of insurance you should strongly consider that can help through the current pandemic and beyond include:
- Disability insurance. In the event you can’t work for an extended period due to injury or illness, a disability insurance policy can protect you by replacing a portion of your income.
- Critical illness insurance. COVID-19 may lead to long-term damage to a person’s vital organs, which can result in critical illnesses later. Treating critical illnesses gets expensive, and health insurance may not cover the entire balance. Critical illness insurance (CII) is a type of supplemental insurance. that pays a lump sum benefit if you are diagnosed with a covered illness.
- Life insurance. Although the risk of dying for COVID-19 is relatively minimal, it does happen. And there are dozens of other ways you can die unexpectedly. Life insurance can protect your family and loved ones from losing your income by paying a death benefit to those beneficiaries.
To compete for top talent, companies enhance their benefits packages regularly. Make sure you look over the entire benefits portfolio to see if there are any you’re not taking advantage of. Beyond insurance and retirement plans, common company benefits include:
- Health and wellness discounts
- Student loan assistance
- Tuition reimbursement
- Employee assistance programs
- Identity theft protection
- Legal assistance
- Emergency access to funds between paydays
- Pet insurance
Depending on your situation, that may be a difficult question to answer for 2021.
If you’ll be working from home much of the year, you may not need money for child care next year. On the other hand, if you have school-aged children who can’t stay home alone but won’t be going to class full-time because of the pandemic, you may need to find child care.
You may want to talk with human resources or your manager to see what plans your company has for bringing people back to the office next year.
It may be challenging to think about the future when you’re trying to weather a pandemic.
But it’s important to keep saving. The more you can set aside today and the longer it accumulates, the better off financially you will be when retirement arrives. And though it may seem years away, it will be here before you know it.
If you’re not contributing to your employer’s 401(k), now is the time to sign up. Try to make a level of contributions that trigger your employer’s maximum matching funds.
If you’ve been contributing to your 401(k), look for ways to increase your contributions in 2021, especially if your employer has decreased or eliminated its match due to COVID-19.
Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.
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