By: AnnaMarie Mock, CFP®
What is Open Enrollment?
Open enrollment is a short period of time, usually occurring once per year, when you can add or drop their health insurance, or make changes to other coverages. Open enrollment ranges from a couple weeks to a couple months prior to year-end usually in November to December. This allows employers to provide a comprehensive overview of benefits offered, which allows you to make well informed changes to your benefit elections. Benefits may vary from very limited to comprehensive lists that range from medical insurance, life insurance, and other ancillary benefits like legal services and pet insurance.
Existing employees are able only during open enrollment to enroll for certain benefits for the first time, change current plans and amounts, or drop current coverage entirely. Employees who become eligible for benefits during a plan year, like new hires, typically are able to make their elections during an initial enrollment period.
Usually any benefits that are elected are fixed for an entire year, so these decisions can have financial impacts over the next twelve months. The IRS identifies a few qualified events that allow you to modify your selection and coverage mid-year, which includes life events like marriage, divorce, a birth/ adoption, or death.
Health Insurance Plans
One of the largest components of open enrollment is health insurance. Plan coverage and premiums can change from one year to the next even if the provider is consistent with prior years, so review all of the material available to ensure that you are enrolled in the optimal plan.
You should also examine your spouse’s coverage to compare benefits. If you were already enrolled in a plan, look at your utilization and past health care expenses compared to the premiums, copayments, and deductibles of other plans. Typically, a lower premium means that you will have a higher deductible and vice versa.
In the 2019 News Release through the Bureau of Labor Statistics, private industry employees pay about 21% of medical premiums while employers pay 79%, but you should review all aspects of the coverage and not just the cost. Every benefit provider has a different network of healthcare providers, so if you may switch plans, confirm that your current doctors are in network for the plan you are contemplating.
Health Savings Accounts (HSAs)
A health savings account, or HSA, is a savings vehicle available only for individuals participating in a high deductible health plan.
HSAs offer many benefits and are often said to be “triple tax advantaged” because contributions are tax deductible, earnings and interest grow tax free, and withdrawals are tax-free if used for qualified medical expenses. Please refer to an earlier article that goes in depth on the benefits of HSAs.
Cafeteria Plans
Employers can also provide access to cafeteria plans under Section 125 of the IRS Code during open enrollment. Cafeteria plans are guidelines set by employers on certain benefits that will be offered to employees on a pre-tax basis, essentially allowing employees to increase take-home pay.
There are four basic plans employers can offer based on company size and tailored to the needs of the company. One of the most comprehensive plans is the full cafeteria plan. Under a full cafeteria plan, the employer makes contributions for eligible employees, often called “flex credits,” to purchase any of the benefits offered within the cafeteria plan. In addition, the employee may contribute pre-tax dollars to purchase additional benefits beyond the employer's contribution.
Below is a list of the most common benefits offered through cafeteria plans, but the list can be much more expansive depending on the employer.
There are a multitude of additional benefits that may be provided during open enrollment. You should read any literature or participate in any education programs to fully take advantage of the benefits offered.
Everyone's situation is different and determining the benefits that fit your needs is the first step. If you have any questions, please do not hesitate to reach out to your HIGHLAND team.