Don’t Leave Valuable Workplace Benefits on the Table

Key Takeaways  

• Many employees underutilize workplace benefits. That’s why we review them with you during our semi-annual meetings together.  

• Make sure you understand the pros and cons of your employer’s health savings account (HSA) and flex spending account (FSA) if offered. No two situations are the same.  

• Hybrid long-term care insurance provides death benefits if unused, making it more attractive than traditional LTC policies. 

One advantage of working for a large company is that you typically have great benefits. But we’ve found many of our clients aren’t aware of all the benefits to which they’re entitled, whether they qualify for them, what the tax implications may be, and how each may play into their overall financial picture.  

Most human resources (HR) professionals are responsible for making employees aware of their benefits. But they don’t know each employee’s financial or health situation. And they usually aren’t qualified to advise them on tax, financial, or estate planning. That’s why we’re here to help. 

Open enrollment for benefits typically happens in the final quarter of the calendar year (October-November), but sometimes it’s in April or May. That’s why we make employee benefits an agenda item during our semi-annual meetings with clients.  

For instance, while most employees are aware of their traditional 401(k) options, many don’t know whether their employer also offers a Roth 401(k) option for after-tax retirement savings. If you’re still working full-time and you’re a “high earner,” you may be better off making pre-tax contributions through a traditional 401(k) than through a Roth 401(k) because your income in retirement is likely to be lower than it is now. Thus, the tax benefits will be greater in your working years than in retirement. However, if you are not necessarily a high earner, it may be more beneficial to maximize tax-free growth over the long-term versus the immediate tax deduction you would receive for contributions to a traditional 401k now. This is the type of analysis we do for our clients on a regular basis.  

HSAs and FSAs  

Health savings accounts (HSAs) and flexible spending accounts (FSAs) are other valuable benefits that employees often overlook or misunderstand. We do a lot of analysis in this area for clients depending on the type of healthcare plan they have and how much they typically spend on medical expenses. Both FSAs and HSAs are tax-advantaged accounts that you can fund with automatic payroll deductions to help you pay for anticipated medical expenses.  For FSAs, maximum contributions in 2025 are $3,300 individual and up to $6,600 per couple if your spouse also has an FSA. For HSAs it’s $4,300 for individuals and $8,550 for families. FSAs can’t be rolled over or taken with you if you change jobs and the contribution limit is smaller than with an HSA. However, FSAs are available to all employees, regardless of income or type of health plan they have. HSAs are only available for employees who have a high-deductible health plan (annual deductible of at least $1,650 for an individual or $3,300 family).  

Another key difference is that funds in an FSA must be used before the end of the year, (i.e., use-it-or-lose-it), but funds in an HSA can be rolled over indefinitely, even into retirement. That’s often the better option for clients who are younger and/or very healthy – but not always. 

Employee Stock Purchase Plans (ESPPs) 

ESPPs allow you to purchase stock of your employer at a discounted price, typically 10% to 15%.  As long as your company’s stock doesn't plummet, you're pretty much in the money from Day One. Just be careful, because you don't want to be too concentrated in one company stock. 

See my colleague, Ryan Vogel’s post for more about ESPPs 

Hybrid Long-Term Care Insurance 

Traditional long-term care (LTC) insurance, which helps you pay for long-term care expenses later in life, is no longer feasible for most of our clients. It has simply become too expensive. But we have 80- to 90-year-old clients who have amazing LTC policies, because they took advantage of LTC insurance decades ago when they were healthy and the premiums were reasonable. Today, you’d have to pay tens of thousands of dollars a year for a policy that you may never use if you die before needing long-term care. Since there’s no residual value to a traditional LTC policy, you’ll end up wasting all the money you’ve paid into it if you don’t use it.  

However, there are new “hybrid” long-term care policies that you should consider. We have been working with clients to acquire these types of policies for long-term care needs. Most are structured so you (and your heirs) get some type of death benefit if you pass away before ever using any of the LTC benefits. Typically, you get all of the premiums back and sometimes a little more. Clients have been very receptive to these hybrid LTC policies because they don't feel like they're just throwing money away for something they may never use. And the insurance company is happy because they get to keep all the appreciation on the money that policy holders have paid in. This is a newer benefit that we have recently seen and it has been offered through some larger pharmaceutical companies in the Princeton area.  

The advantage of getting hybrid LTC insurance through your company, rather than on the open market, is that it will usually be a group plan. With a group plan, you don’t have to go through the underwriting process like you would as an individual. You just enroll and you’re good to go – even if you have an underlying condition. You pay for the insurance out of payroll deductions and the policy goes with you if you leave the company.  

Conclusion  

Don't miss out on great benefits that your company is offering. Since we know your financial situation well, we’re happy to see if any of the new or longstanding offerings make sense for you and your family. If you or someone close to you has concerns about workplace benefits or health coverage, don’t hesitate to reach out. I’m happy to assist.  

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 BRENDEN LEESE, CFP® is a Wealth Advisor at Novi Wealth Partners