The Basics: What You Need to Know About Your Benefits
by Nayya Marketing November 8, 2021
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Benefits are supposed to be, well, beneficial. But if you didn’t major in medical, or grew up speaking fluent insurance, you might feel a little lost or overwhelmed reading through your employee package at “open enrollment” time.
Nayya is here to help.
Knowledge is power, right? But not if it’s not in a language you understand, or at a level that doesn’t serve your needs, it isn’t worth the digital page it’s printed on. So what do you actually need to know about the employee benefits your employer wants you to be so excited about? Let’s start with the basics.
First, benefits are intended to make your life better. They include any kind of compensation that’s given distinct from the wages or salary you earn. Some of these are partially or completely paid for by your employer. But your benefits may also include opportunities for you to purchase additional coverage, reduce your taxable income, or participate in programs that can save you money.
The most common benefits fall into four categories:
- Paid time off
- Additional compensation
Let’s take them one category at a time.
The big draw here is usually health insurance. There are often several types of coverage to choose from which serve the needs of different types of people. Generally speaking, you’ll be choosing between higher deductibles with lower premiums and higher premiums with lower deductibles.
- A deductible is the amount of money you are required to pay up front for medical care before your insurance kicks in.
- A premium is the amount of money you pay each month to have health insurance, whether or not you need medical care.
Lower deductibles offer more predictable costs. Higher deductibles (often $5,000 or more) can save you money, but only if you don’t end up needing much medical care. Most health insurance plans also have a preset limit to how much you’ll pay out-of-pocket during a coverage year. While these limits are high, they do protect members from astronomical medical expenses and debt.
More and more employers are offering health insurance plans that are aligned with HSA (Health Savings Account) and/or FSA (Flexible Spending Account) accounts. These enable employees to set aside pretax money for healthcare deductibles and other eligible expenses. Some employers contribute to these accounts. To make good use of HSAs or FSAs, it’s important to know which expenses are eligible.
Many employers offer dental, vision, life insurance, accidental death, and disability insurance as well. You may be able to increase the amount of your coverage by signing up for additional insurance at your own expense. That is, you can opt to take advantage of voluntary benefits.
Paid time off
Most of us think of this in terms of vacation, but it also includes holidays, sick and personal days. Vacation may or may not be available during your first year of employment, and instead, may accumulate over time. In some workplaces, vacation that isn’t used can be rolled over to the following year, but sometimes with limitations. In other places, unused vacation is paid out, or lost. Maternity and paternity leave often include a paid component, so if you’re planning to start a family or add to one, this benefit can be very helpful.
Now that most employers have replaced pensions with 401 (k) plans, you can begin building a tax-deferred savings account for when you retire. Employers often “match” an employee’s contribution up to a predetermined percentage or amount. Your contribution will reduce your taxable income. But don’t make the mistake of counting your chickens before they vest. Usually, the funds contributed by an employer are not available until after a vesting period has elapsed.
Who doesn’t hope for more? Sometimes, though, additional compensation comes in the form of tuition reimbursement, profit sharing, stock options or things like free parking, commuting, or mobile phone reimbursement.
Now that you understand the basics, it’s time to enroll. Open enrollment is the annual time period in which employees can elect to continue, discontinue, or make changes to their benefit selections.
And how do you decide which are the best choices for you? That’s what Nayya is all about.
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