A Checklist for Crushing Open Enrollment

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If you’re in the workforce, you may have started hearing about open enrollment. It’s that time of the year when you can review all the benefits provided by your employer and choose the ones that align with your family’s needs for the coming year.

If this seems daunting, maybe a good checklist can help!

To assist you with the open enrollment process, we have compiled a comprehensive list of questions that you can ask yourself. This list covers areas like retirement plans, medical insurance, and other benefits. In certain areas, we have included additional resources to help you gain a deeper understanding.

While we can’t cover everything in one blog, we hope this can give you some momentum to crush open enrollment this year!

Checklist for Retirement Plans

While I’m starting with retirement plans, this is not necessarily an area you must address during open enrollment. You may have the flexibility to make changes throughout the year.

However, open enrollment is an opportune time to review your retirement plan, as it helps you understand your entire compensation package.

Additionally, it is a prime time to make decisions that can significantly impact your financial independence in the future. Here are some questions you should ask to ensure that your retirement planning is on track.

Do you need to change the investments in your plan?

It might be necessary if there have been changes to your financial goals or risk tolerance. Additionally, you might be interested in new investment options recently introduced to your plan that could align better with your investment strategy or present more favorable expense structures.

Sometimes you might not need to do much if you have already established your investment strategy. You might stick with your current investments but rebalance them to align better with the rest of your investment assets.

Are you aware of the contribution limits?

For instance, if you have a 401(k) plan, the maximum employee contribution limit for 2023 is $22,500. However, if you’re 50 years old or older, you can contribute an additional $7,500, bringing your total contribution to $30,000. If you have access to multiple retirement plans from different companies in the same year, it’s important to keep in mind the aggregate contribution limits.

Do you know how your employer contributions work?

It’s crucial to be aware of this, especially if there are vesting requirements. This means you may need to work for a specific number of years before having full access to the funds your employer is contributing. Additionally, it’s important to contribute enough to the plan to maximize the matching contributions made by your employer.

Do you have access to Roth options?

This can include more advanced options such as “in-plan” Roth conversions or “mega backdoor” Roth options. It’s important to consider these options carefully within the context of your tax planning. Depending on your specific situation, you may want to consider making Roth-style contributions instead of the typical tax-deductible contributions.

Is it time to consolidate your retirement plans?

If you have plans from previous employers, now might be a good time to roll those accounts into your current plan or transfer them into your own IRA. To find out if your plan allows outside accounts to be rolled in, you can refer to the Summary Plan Description. This information is usually available there.

Does borrowing from my plan make sense?

It’s important to approach borrowing from your plan with caution. However, there may be circumstances where it could be a sensible option. To determine whether this is the case, it’s important to review your plan’s rules regarding borrowing limits, repayment schedules, and interest rates.

Checklist for Medical Insurance

How do you choose the right medical insurance option for your family?

This can be a confusing and daunting task. The presence of multiple plans makes it difficult to determine the right choice. One way to start the process is by assessing the current health of you and your dependents.

If you and your family are generally in good health, you might consider a plan with a lower premium and higher deductible. However, if you have a lower emergency cash reserve, a higher premium plan with a lower deductible may be a better choice. Your overall income and cash flow situation also play a vital role in determining the appropriate balance.

Additionally, different plans may have different healthcare providers in their network. Your preferences may be the deciding factor in choosing a plan. While you’re choosing your medical plan, this will often be a chance to select vision and dental plans too.

Should you add or change dependents?

This can be a timely matter, and it is not always necessary to wait until open enrollment. For instance, having a new child is a qualifying event that allows you to establish health insurance coverage immediately.

However, when considering making changes to dependents, it is often more practical to consider whether you have a spouse and/or dependents who are covered by a different plan somewhere else. As you are evaluating the costs of different options, it is also important to review what costs your employer is paying on your behalf.

Should you utilize a Health Savings Account (HSA)?

If you opt for a high-deductible health plan that is eligible for an HSA, it might be a good idea to choose this. We have reviewed the benefits of HSAs in a previous blog post, “Do We Underestimate the Benefit of HSAs?“

In essence, HSAs offer a triple tax savings advantage, which is even more beneficial if your plan allows investment options. In that case, you will need to find the right balance between your retirement goals and the amount you may need to withdraw from the plan to cover your medical expenses in the coming year.

Do you know about any reimbursement-style accounts that are available for you?

One such account that you can consider is a Health Reimbursement Account (HRA), while another type is a Flexible Spending Account (FSA).

These accounts can be a great way to save on taxes. However, it’s important to note that FSAs usually have a “use-it-or-lose-it” policy, meaning that you need to make sure you don’t overcontribute. To avoid this, you’ll have to estimate your eligible FSA expenses for the upcoming year.

Additionally, if you have both an HRA and an FSA, you should carefully review your plan documents as you may be required to exhaust your HRA funds before using your FSA funds.

Checklist for Other Important Benefits

Should you purchase life insurance through your company?

When considering life insurance options, it is important to examine whether purchasing it through your employer is the best choice for you. One benefit of employer-provided life insurance is that certain levels of coverage may be available without requiring a medical exam. This can be a convenient option if you have pre-existing health conditions.

However, it is important to carefully review the portability rules with life insurance. If you leave your job, you may lose your coverage or be required to undergo a health assessment to maintain your existing policy. In many cases, it may be preferable to purchase a private life insurance policy instead.

For a deeper exploration, check out our earlier blog, Five Questions I’ve Been Asked Recently about Life Insurance.

Should you purchase additional Disability Insurance?

When it comes to disability insurance, you may wonder if you need more coverage in addition to what your employer provides. Usually, employers offer long-term disability insurance, which pays out for multiple years if you become disabled. This type of insurance may come at no cost or at a reasonable premium.

It’s important to note that long-term disability insurance may have portability issues, and you should check if the maximum coverage provided is sufficient. If that’s not enough, you may want to consider buying a privately owned policy. A significant advantage of private disability policies is that you pay premiums after tax and receive future tax-free benefits. In contrast, benefits received from employer-paid policies are fully taxable.

Most policies have an elimination period, which means that benefits won’t pay out for a specific duration. For example, if the elimination period is 90 days, you should have at least three months’ worth of living expenses in emergency cash reserves to cover your expenses.

Have you reviewed your stock plans?

It’s possible that a part of your compensation could be given to you in the form of company stocks, such as stock options or restricted stock grants. These programs come with different rules and considerations to keep in mind. One important factor is how the stocks affect your tax planning.

It’s a good idea to carefully review this area with your tax advisor or financial planner to avoid any surprises when it’s time to file your taxes.

Do any fringe benefits make sense for your family?

Some companies provide fringe benefits that can cover a wide range of areas. A few examples include legal, travel, fitness, fertility, student loan assistance, and mental health counseling.

One point on legal. I’ve seen several companies that provide legal services such as a free estate plan. Depending on the needs of your family, that might be a great way to get your first estate plan in place. However, I’ve also seen services that are quite limited. If a trust belongs in your estate plan, you may need to get this handled separately.

If you have comments or questions on this piece, please drop me a line at: [email protected]

References

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