Which Employee Benefits Should I Review, Change, or Update Now?
It’s quite an understatement to say the last few months have not turned out as we expected. The COVID-19 pandemic has impacted almost every aspect of our lives. As our day to day routines change many have found that they are spending less or perhaps spending in a different way. Many are also concerned with the health and wellbeing of their families. Now is a great time to be asking yourself what’s changed and what can I take advantage of when it comes to employee benefits?
Here are a few benefits you may want to consider reviewing:
Flexible Spending Account (FSA) and Dependent Care FSA Contributions
These accounts allow you to save for eligible health care and dependent care expenses in a tax-preferred way but come with a few strings attached. Funds are contributed before tax, and if used for qualified expenses are withdrawn tax-free. However, generally, any funds contributed must be used within the plan year. Those that aren’t used are forfeited. When you were making the decision about how much to contribute to your FSA for 2020, you likely didn’t anticipate two months of canceled doctors, dentists, and eye exam appointments, or a scheduling backlog as health care providers open back up.
Dependent Care FSAs allow you to save up to $5,000 per year for eligible dependent care expenses such as daycare, summer camp, and even adult daycare. They must be used for a dependent of yours that is under the age of 13 or disabled. Just like the FSA, funds contributed must be used within the plan year. With many daycares closed and summer camps canceled, money designated for your Dependent Care FSA can be better spent or saved elsewhere.
Fortunately, the IRS has eased rules to allow more flexibility for employers. You may be able to reduce, stop, or increase payroll contributions to your FSA accounts. Note that your employer is not required to adopt these changes but can adapt their plan documents to take advantage of the newly provided IRS flexibility. Likely, most employers will adopt this change. Now is a good time to see if your employer offers a grace period or rollover of funds to the 2021 calendar year. For more information on your employer’s specific policy, contact your HR department directly.
For more information on the tax benefits of FSAs and Dependent Care FSAs check out this blog post.
For more information on grace periods, and the use it or lose it feature check out my video.
Perhaps you are concerned about healthcare costs related to COVID-19 and wish you had enrolled in a more comprehensive plan. In light of the new circumstances, consider reviewing your options and anticipated out of pocket costs this year. Has anything changed? The IRS has also allowed for flexibility when it comes to health insurance this year. Normally, employees enroll in a plan one time per year unless there is a major life change (birth, death, marriage, or divorce). However, some employers are allowing employees to switch plans mid-year. Contact your HR department directly to find out if this option is available to you.
Mental and Wellness Benefits
Many employers also offer mental and wellness benefits. These are often the benefits that are often overlooked and buried at the very end of your benefits enrollment guide.
Here’s what you should be looking for:
Employee Assistance Programs- These programs often provide access to emotional, legal, financial, and substance abuse counseling benefits. During a time when many are stressed and stretched thin, these often-overlooked counseling benefits could be invaluable.
Fitness- If your gym is closed, check your benefits package to see if your employer offers access to virtual on-demand fitness classes.
Some employers offer access to free or reduced-cost legal document preparation. This often includes the drafting of documents like wills, powers of attorney, and healthcare directives. If you get sick you want to make sure your dependents are taken care of and someone can make healthcare decisions on your behalf. If you don’t have these documents in place, now would be a great time to start the process.
It’s a great time to take advantage of these one-time opportunities as well as overlooked benefits. When reevaluating your finances and priorities consider updating your employee benefits to align with new spending patterns, needs, and routines.
Interested in learning more? Read more about my firm, and check out my service options.
Christine Centeno, CFPⓇ, MS is the founder of Simplicity Wealth Management. She has over 12 years of industry experience as a financial advisor and is a member of several professional organizations including NAPFA, FPA, and the XY Planning Network. She also holds her Masters in Financial Planning. In 2019, after years of working for large firms, she founded her own firm. Simplicity Wealth Management provides clarity to the complicated nature of financial planning and investing by delivering comprehensive advice without hidden fees and unnecessary jargon that leaves you in the dark. The goal is to deliver transparent, easy-to-understand guidance to help clients achieve their financial goals and remain informed every step of the way.
The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Simplicity Wealth Management LLC (referred to as "SWM") disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose. SWM does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall SWM be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if SWM or an SWM authorized representative has been advised of the possibility of such damages. In no event shall Simplicity Wealth Management have any liability to you for damages, losses, and causes of action for accessing this site. Information on this website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.