Benefit enrollment takes preparation, homework

When it comes to enrolling for benefits, the increasing number of choices can be daunting. "Employees are facing more choices than ever before in making their benefit selections," said Wendy Rhodes, benefit communication consultant with Hewitt Associates LLC.

"Employees need to take the time to understand their benefits, since the enrollment decisions they are making now will affect their health, well-being, and financial security for the upcoming year," she said. To help employees better select and get the most out of their benefits, Hewitt Associates has come up with the following "top 10" mistakes employees make at enrollment:

1. Not rethinking your medical plan choice.

The enrollment period provides an ideal opportunity for you to evaluate your medical plan.

When rethinking your medical plan choice, you may find it helpful to ask yourself questions including:

?Is my spouse covered?

?Am I satisfied with my current medical plan?

?Am I comfortable with my current primary care physician (PCP)?

?Has my health plan changed over the past year to include additional benefits, such as vision coverage?

Only if your family circumstances have stayed the same and you are satisfied with your existing coverage should you consider automatic re-enrollment in your existing medical plan.

2. Not taking advantage of your health care spending account.

Consider setting up a health care spending account, even if your tax savings won't be large. A spending account helps employees pay, in a tax-effective way, for dependent care expenses or for predictable health expenses not covered by their medical plan.

Employees elect to contribute a portion of their before-tax income to a spending account, enabling them to stretch the dollars available for services and lower taxable income at the same time.

Many people overlook routine or small expenses in tallying what they spend, or are overly concerned about the "use-it-or-lose-it" requirement.

Evaluate what you spent last year for health care, including deductibles and copayments, and what your expected expenses will be for next year. Consider your family health care expenses for routine physicals, well-baby care, immunizations, eyeglasses or contact lenses, hearing exams, hearing aids, prescription drugs, copayments and orthodontia expenses.

This will help you to determine whether a spending account can lower your out-of-pocket costs. Or, if you already are taking advantage of a spending account, you can determine the appropriate amount to contribute to the account for next year.

You may want to consider whether you can lower your costs by using your employer's health care spending account for routine medical expenses and choosing a medical option with a higher deductible.

Remember, if you have a spending account, you will need to act to keep it in force, since your employer cannot continue a spending account from one year to the next without your consent.

3. Not using a dependent-care spending account.

Some employers offer dependent-care accounts, which help employees pay for child care and other dependent expenses in a tax-effective way. Employees make a before-tax contribution to their dependent care account directly out of their paycheck.

If your employer offers this benefit, you'll want to assess whether you have dependent-care expenses for a child under age 13, or a dependent adult. If so, how much do you anticipate spending for day care for the year?

In some cases, the federal tax credit for dependent care may provide greater tax savings than a spending account. In general, if your family's total gross income is $24,000 or below, you may benefit by using the tax credit.

If your family's income is more than $24,000, reimbursement through your dependent-care account probably would offer higher tax savings. You may wish to contact a tax adviser for other considerations that might affect you.

4. Not participating in your 401(k) plan, or

not contributing enough to receive all of your company's matching contribution.

Many companies make matching contributions to their employees' 401(k) plans. In order for you to reap the benefits of this "free money," figure out how much you need to contribute to get the maximum employer contribution.

5. Not recognizing the tax saving potential through your benefits.

Many of the benefits offered by your employer can lower your taxable income, putting you in a lower tax bracket and saving you dollars come April 15. Some of these benefits include:

?401(k). Contributions lower your taxable income. Money grows tax-free until you withdraw it. Any employer contribution is also tax-free.

?Health care spending account. Money is taken out of your paycheck before tax. Contributions lower your taxable income.

?Dependent-care spending account. Money is taken out of your paycheck before taxes. Contributions lower your taxable income.

6. Not realizing the importance of disability protection.

Most people are more likely to be disabled than die at a young age. If you were disabled and couldn't work, think about how you would meet your expenses. Do you have savings or other income sources? If so, how long would they last? Long-term disability protection would help you with your expenses after six months of disability.

7. Not assessing your life insurance needs.

Most employers automatically provide some life insurance benefits for their employees. However, this is a good time to assess whether your circumstances call for additional life insurance, either through your employer's plan or through another carrier. Questions you may want to ask yourself include:

?What is your family situation? Who is dependent on your income?

?Would your personal savings provide adequate protection for your family if you died?

?Do you have a need for life insurance on your spouse or dependents?

Sometimes, if you or your dependents are young and in good health, outside coverage can be more cost-effective, but there may be some restrictions on your ability to re-enroll in your employer's plan.

You'll want to find out about any limitations that may apply should you choose your company's coverage at some later date.

It's possible to be over-insured, too. You may want to talk to your employee-benefit expert if you're unsure about "how much is too much."

8. Not considering long-term care coverage when you're young.

Long-term care coverage is intended to provide services and care, as opposed to income replacement, in the event of a serious injury or illness. Since most people are more likely to be disabled than die at a young age, this coverage is worth considering if you're young.

How would you pay for services and care in the event of a long-term injury or illness? Evaluating your needs will help you determine whether this coverage is appropriate for you.

9. Not doing your homework.

Today, a multitude of resources are available for you and your family to make smart choices about your benefit coverage. Learning all you can about these benefits will enable you to take full advantage of what's available. Resources include:

?The Internet. Many employers have made benefit information available via the Internet, enabling you to obtain this information quickly and easily.

?Hot lines.

?Benefit fairs.

?Printed material.

?Benefit centers.

?Meeting your primary care physician (PCP). If you're signing up for a new health care provider, you'll probably be asked to designate a PCP. Choosing a PCP can be a difficult decision. In order to make an educated choice, take the time to meet your prospective PCP and visit his or her offices.

?Spouse coverage. If your spouse has benefit coverage, you can maximize the two plans to get the coverage you want.

10. Not enrolling on time.

When you receive your enrollment packet, pay attention to the deadline for submitting your enrollment choices.

If you fail to enroll on time, you automatically will be assigned coverage that you may not want ... and you won't be able to take advantage of a health care spending account or a dependent-care account.

Plus, if you wait until the last minute to enroll, you won't be able to do your homework to get the most out of your benefits.

(The preceding article was provided by Hewitt Associates LLC, a global management consulting firm specializing in human resource solutions.)

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