Decision Time About Benefits

One of the rites of fall for most employees is the opportunity to review and revise their benefit options for the next year (the next benefits year could start in January or sooner). This is often referred to as the “open enrollment” period. Typically, all employees of a company or organization can make adjustments to their benefit options at this time.

Although the opportunity is there to make changes, many employees do little more than confirm the benefits they already have in place. Failure to act during the open enrollment period may represent a missed opportunity. For today’s worker, retirement plans, health care coverage and other important benefits represent a significant piece of overall compensation. More effective management of the benefits available to you can, in effect, represent a pay raise.

Changes in the law that impact your benefits:

The health care reform law that passed in March includes several changes that will begin to take effect with your employer’s new benefit year (after September 23, 2010). The biggest that impact employee benefits are:

  • Dependent health insurance coverage – parents with adult children no longer in school can now include them as part of their dependent care coverage up to the child’s 26th birthday. To qualify, children must not have access to coverage through another employer (either their own or their spouse’s workplace).
  • Flexible Spending Accounts (FSAs) — FSAs allow individuals to save pre-tax dollars in an account designed to reimburse them for out-of-pocket medical expenses. Beginning in 2011, purchases of overthe-counter medications will no longer qualify for reimbursement from an FSA, except in cases where a physician prescribes them. If you defer income into an FSA, you should consider what is an appropriate amount given the new limitations for over-the-counter medications. It is also a good time to begin preparing for a future change to FSAs. Beginning in 2013, the maximum that can be set aside in an FSA will be limited to $2,500/year. You may want to accelerate spending for costly procedures (such as dental or orthodontic work) in advance of this change. Accurate planning is critical with FSAs, because any money leftover at the end of the plan year is lost.

Given the important role that benefits play in your overall financial picture, the decisions you make should not occur in a vacuum. Your financial advisor can help assess what changes to your benefits might be advantageous for your overall financial position. An advisor can also provide perspective on how to plan for your long-term goals as they relate to your workplace compensation package.

Michael W. K. Yee, CFP®, CFS, CRPC® Senior Financial Advisor Ameriprise Financial, Inc. 1585 Kapiolani Blvd., Suite 1100 Honolulu, HI 96814, Tel: 808-952-1222 ext 1240 “This communication is published in the United States for residents of Hawaii only; and this advisor is licensed only in the state of Hawaii.” Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.


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