Open Enrollment at Work Is Coming. 3 Tips for Choosing Benefits

Here's how to make the right call on benefits for the upcoming year.

Fall isn't just the season of changing leaves and pumpkin spice; it's also the time when employees are given a chance to select their workplace benefits for the upcoming year. The decisions you make this fall could dictate what your budget and expenses look like in 2021. Here's how to navigate those choices.

1. Look at the big picture when choosing health insurance

Fall open enrollment is when you'll choose your health insurance coverage for 2021. That's clearly a major decision. Generally, you'll be presented with a few plan options that vary in terms of cost. Here are a few factors to pay attention to:

• Premiums: This is the fee you'll pay each month for your health plan.
• Deductibles: This is the amount you'll need to pay out of pocket before your insurer will start paying for your health services.
• Copays: This is the amount you'll pay for doctor visits and prescriptions once your deductible is met.
• Annual out-of-pocket maximum: This is the most you'll have to spend next year under your health plan.

All of these factors are important when choosing health coverage. While one plan might offer a lower premium, it could require higher deductibles and copays.

But higher deductibles aren't always bad. If you don't anticipate using your insurance all that much, and you have a healthy amount saved up for emergency medical expenses, you may be better off with lower premiums and higher deductibles. A high-deductible plan also means you may get the option to participate in a health savings account (HSA), which allows you to contribute pre-tax dollars for healthcare expenses that never expire, thereby lowering your tax bill.

2. Estimate your medical and childcare costs carefully when funding a flexible spending account

Many employers offer workers the option to sign up for a flexible spending account (FSA) for both healthcare and childcare purposes. If you get that option, you'll need to commit to an FSA contribution this year, and you won't get to change it unless you experience a qualifying life event next year, like marriage, divorce, or the birth of a child.

It's important to calculate your anticipated expenses in both categories accurately, because FSA funds, unlike HSA funds, work on a use-it-or-lose-it basis, so any extra money you put into your account and can't spend is money you'll risk forfeiting. On the other hand, you don't want to underestimate your expenses either. FSA contributions are made on a pre-tax basis: The more money you put in, the more you save on taxes.

Now, we don't know what the maximum allowable contribution for FSAs will be in 2021 just yet. In 2020, FSAs maxed out at $2,750 for healthcare and $5,000 for dependent care (which covers qualified childcare expenses like daycare centers, after-school care, and summer camp). Since the $5,000 dependent care limit has held steady for many years, it's fair to assume it could stay at $5,000 next year, whereas the limit for healthcare FSAs might increase by $50, since that's what happened between 2019 and 2020.

Calculate how much you expect to spend on healthcare and childcare in 2021. Looking at your past few years' bills is a good start. Also note how your spending may change next year due to the coronavirus pandemic. Because you generally cannot have an HSA and an FSA at the same time, you may need to decide which you prefer if you're eligible for both.

3. Figure out if you'll need a lawyer

Some companies offer a legal plan benefit. With a legal plan, you generally pay a modest monthly fee that gives you access to a network of lawyers for a full year. From there, you may have a number of services covered for free, including:

• Will creation
• Debt settlement
• Real estate closings

Review the specifics of your company's plan to see if it's worth the cost. Say your legal plan costs $80 per month, and you know you're planning to buy a home and create a will in 2021. The amount you spend on your legal plan could end up being much lower than the fees you'll pay to an attorney independently to handle these matters.

Take your time choosing your benefits

Selecting benefits for the year isn't something you should plan to do in an hour or less. Carve out a few nights to sit down, run numbers, and review your choices. With a little careful planning, you can start 2021 prepared for the year ahead.