Monday, November 17, 2008

Tip of the Day: Five questions to tell your employees to ask at open enrollment

When brainstorming ways to better educate your employees about the decisions they need to make at open enrollment, it's often imperative that benefits professionals put themselves in an employee's shoes.

Andy Smith, Senior Partner with Cornerstone Financial Partners, believes that by not investing the time to make informed choices, workers may be leaving money on the table and putting their future at risk.

Take Smith's five questions and ask yourself one more: Am I educating my workers to make a proper decision about this topic?

1. Is the 401(k) account properly allocated? "For most workers, the 401(k) will be the primary source of income in retirement, so it's important for investors to review their portfolio and rebalance when necessary," says Smith.

According to the Financial Engines National 401(k) Evaluation, 69% of the nearly 1 million 401(k) participants surveyed have portfolios with inappropriate risk and/or diversification. Additionally, 36% hold high concentrations of company stock, and 33% fail to contribute enough to receive the full company match, leaving money on the table.

2. How much is in company stock?

The Pension Protection Act of 2006 has made it easier for employees to diversify out of company stock. The act gives employees the right to sell publicly traded company stock received as a matching contribution in a retirement plan account after three years of service for original matching contributions, and immediately for employee contributions.

3. Is there a better choice for health insurance?
Spend time educating employees about CDHPs and HDHPs in such a way as to inform them of which choice will most benefit them health-wise and financially.

For 2009, the maximum annual HSA contribution for an eligible individual with self-only coverage is $3,000. For family coverage, the maximum annual HSA contribution for 2009 is $5,950. Individuals age 55 and older can also make an additional "catch-up" contribution of $1,000 in 2009.

4. Are Flexible Spending Accounts being fully utilized? In addition to visits to the doctor, the cost of eyeglasses, dental work, psychologist visits, even cough syrup can be run through the plan.

Some companies also offer a dependent care Flexible Spending Account (FSA) which allows contributions up to $5,000 a year.

5. Is long-term care coverage necessary? According to the American Association for Long-Term Care Insurance roughly one-third of men and one-half of women age 65 and over will require some form of long-term care.

Smith advises married couples to review both spouses' benefits to find any gaps or overlaps in coverage. "It's possible to save money or improve coverage simply by moving the family to a spouse's heath plan," says Smith.

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