Understanding Your Benefits Package

Description

Understanding your potential or current employer's benefits package can be daunting. Sarah Machin shares need-to-know information on everything from perks to pensions.

What should always be included in my employee benefits package and what is just sometimes included? What’s negotiable? What are the perks some employers offer but others don’t?

If these are some of your questions, then here's a helpful guide to understanding your benefits package during your job search and after you've secured a position:

Standard and Legally Required Benefits

  • Withholding FICA taxes that fund Social Security and Medicare
  • Paying unemployment taxes
  • Complying with FMLA: Giving employees leave for medical and family reasons, and giving time off to vote, serve jury duty and take military leave.

Health

  • Medical (Non-Negotiable)
    • There are generally 3 Types of Health Plans* to choose from:
    • High deductible: Pay less per paycheck now, but pay a higher amount in the form of a deductible (up to around $5,000 per year) when expenses occur.
    • Balanced plan: Pay a bit more up-front out of each paycheck and pay around 1,000 per year when expenses occur.
    • Premier plan: Pay significantly more out of each paycheck now and only pay around $250 when expenses occur.

*Names will vary from company to company, but this is the basic idea for most health plan options. Amounts listed are estimates, not actuals.

  • Short-Term Disability,(Non-Negotiable) Employers aren’t legally required to offer short-term disability, but they often do. Short term disability provides 60-90% of your income for up to 6 months after an incident. This is also what many employers and women use to provide some compensation during a maternity leave (during a typical pregnancy, short term disability will often pay women for up to 6 weeks).
  • Long-Term Disability, (Negotiable), Long-term disability kicks in 6 months after the incident, after short-term disability stops. Like short-term disability, long term disability plans typically provide 60-90% of your income, and depending on how long your injury or illness lasts, may provide compensation for between 2 and 10 years after a disabling incident.
  • Dental, (Negotiable), Around 70% of employers provide a basic dental plan which typically covers routine cleanings and some routine procedures.  Unlike medical plans, there is typically NOT an out of pocket maximum that you can depend on in the case of major dental problems.
  • Vision, (Negotiable), less than 50% of employers provide
  • Ask: What health plan options they offer, how much the deductibles, co-pays for visits, and prescription medications are, and if they offer long-term disability, dental or vision coverage
  • If applicable, ask: Is domestic partner coverage available?  Are pre-existing conditions covered?

Tip: Think about what health plan works best for your age, lifestyle, budget and health condition. If possible, look back at what you have spent over the past few years to gain an estimate on past expenses.

Retirement

Ask your employer about your retirement plan options. Some options you may have are:

  • 401(k): A 401(k) is a defined contribution plan where you designate a certain amount of your paycheck to be automatically deposited into this fund. Oftentimes, the employer matches a percentage of what the employee contributes. Most employers offer a 50% match up to approximately 2% of your salary, some more and some less. Make sure you’re contributing at least as much as you need in order to receive your full employer match so that you get that “free money.”
  • Pension Plan: A pension plan is a defined benefit plan which promises the employee a designated amount upon retirement. Pension plans are declining in popularity, so it’s increasingly likely you won’t see this in your benefits package..

Some employers offer both, but it’s rare.

Ask: How much will they give you in matching funds?  How long before you're 100% vested in the plan (meaning the money is yours, even if you leave the company)?

Tip: When you receive a salary increase, put the majority of the increase towards your retirement savings.

Additional

  • Life Insurance (Negotiable), 70-80% of employers offer this.
  • Accidental Death Compensation (Negotiable), 70-80% of employers offer this.
  • Ask: If they offer either of these benefits and if they do, at what level?
  • Note: Most of the time the Life Insurance and Disability Income Insurance coverage your employer offers is only partial coverage.  Make sure you understand exactly how much is included, so you know how much supplemental coverage you should purchase to feel comfortably covered.

Perks

Look for perks that demonstrate that the employer cares about its employees’ whole lives. Pick a benefits package that has perks which benefit your lifestyle. Some examples of perks include:

  • Work life balance programs
  • Flexible schedules
  • Ability to telecommute
  • Paid volunteer time
  • Fitness centers
  • Fitness counselors
  • Life coaches
  • Weight-loss programs
  • Assistance with: birth of a child, childcare, adoption, tuition reimbursement, caring for aging parents, supporting moms that are returning to work
  • Time off for life events: funerals, maternity and paternity leave, personal leave of absence
  • Smoking cessation programs and incentives
  • Paid Time Off (PTO) for illnesses, vacation and personal time
  • Monetary bonuses to share in the company’s success as a result of a job well done

Tip: Only discuss benefits after receiving a job offer, never in an interview. It may seem presumptuous.

Ask: What is my timeline to sign up for various benefit programs? Usually you have 2 weeks to 30 days to sign up.

Written By Sarah Machin


This blog post is from the Author's perspective and doesn't speak for brightpeak financial. Contact brightpeak if you want to know more about brightpeak products, and keep in mind that they are not available in all states and there are some limitations (some exclusions and restrictions may apply).

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