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What to look for when choosing benefits for open enrollment

Autumn brings a slew of welcome holidays—and open enrollment season for workplace benefits and coverage. Here’s what you need to know this year.

Open enrollment basics

When you can make changes: Generally once a year, unless you have a major life event such as having a baby, getting married, or losing a spouse’s health coverage.

Changes required: None unless you need or want to. “Think of open enrollment as an opportunity to make decisions that affect your overall financial picture, rather than a checklist of action items,” says Ashley Maher-Widen, manager of the life/disability team at Principal®.

Think of open enrollment as an opportunity to make decisions that affect your overall financial picture.”

Ashley Maher-Widen, manager of the life/disability team

Open enrollment plan options to review

Open enrollment offers you a chance to change (or keep) health, dental, and vision plans along with life insurance policies, and contribute to a health savings account or a flexible savings account.

Health insurance plans

“Benefit enrollment is a great time to do a side-by-side comparison and think long-term. Ask yourself two questions: What is the right amount of coverage to protect my loved ones? and What is the best way for me to get that coverage?” Maher-Widen says.

An out of pocket (OOP) cost comparison should include:

  • premiums,
  • co-pays, deductibles,
  • OOP max, and
  • prescription coverage.

A comparison between your plan and a spouse's plan should consider:

  • OOP costs,
  • your family’s health and financial situation, and
  • coverage for children (if you have or plan to have).

Graphic of a thumbtack. Tip: Use this time to double-check beneficiaries on accounts and policies, including retirement and life insurance.

Health savings accounts (HSAs)

Why people use an HSA:

  • You can save for OOP medical expenses, particularly if your insurance is a high-deductible health plan (HDHP).
  • You can roll over unused funds each year.
  • You can carry forward funds for health costs—which could be helpful in retirement.
  • The plans are triple tax advantaged (you contribute on a pre-tax basis, earnings can grow tax-free, and withdrawals are tax-free if used for qualified medical expenses).
  • You decide how much money to contribute.

Learn more about HSAs and ways to save for the cost of health care.

Graphic stating that $387,644 is how much a healthy, 65-year-old couple will need to pay for health care costs.

2022 HSA contribution limits:2

Self-only$3,650
Family$7,300
Age 55 or olderCatch-up contribution: $1,000
Employer HSA contributionNot treated as taxable income, but it counts toward your annual contribution limit.

There are lots of rules around HSAs, so visit the IRS website to learn more.

Dental and vision insurance

Use open enrollment to plan for likely health events. Maybe the kids need braces, or you’re squinting harder than usual as you read this.

Flexible spending accounts (FSA)

Why people use an FSA:

  • You can contribute some of your pay on a pre-tax basis to an account for reimbursement of qualified health care and dependent care expenses.
  • Because they’re pre-tax, FSA contributions lower your taxable income.
  • FSAs for dependent care may include elder care in some instances.

Learn more about FSAs.

How an FSA differs from an HSA:

In an FSA, what you don’t use in the coming calendar year, you lose.

2022 FSA contribution limits:

Changes to limitsTypically announced in October of each year
Current existing limits$2,750 per year, and a dependent care FSA limit of $5,000 per year
Employer limitsMay be lower

Life insurance

Open enrollment considerations:

  • You may be able to buy more life insurance coverage through your employer.
  • Premiums are deducted from your paycheck.
  • If you lose or change jobs, you often lose employer-provided life insurance.
  • The younger you are, the cheaper life insurance is (generally).

Open enrollment benefit options to review

Your workplace may also offer more benefits that you can update during open enrollment.

Disability income insurance

“Buying more coverage outside the workplace means you’ll have disability insurance even if you change jobs, and you can increase your coverage as your income grows,” Maher-Widen says. Here’s what to consider:

  • Do you have disability coverage through work?
  • Is it short- or long-term, or a combination of both?
  • If so, would the coverage replace all or most of your income if you’re unable to work due to injury or illness? (Most cover about 60% of pre-tax income, which equals about 40–50% of your income.)
  • If you become disabled while out of work, how would you cover your expenses?

Do you have enough insurance? Our disability income calculator helps you do the math.

Retirement plan savings

Use these key questions to make sure you’re on track with your retirement savings.

  • Are you contributing enough to get an employer match?
  • Does your asset allocation still reflect your risk tolerance?
  • Do you need to increase your contributions to catch up and stay in line with your retirement goals? IRS contribution limits are generally announced in October or November. The current maximum is $6,500 for those age 50 or over.

Our Retirement Wellness Planner can help you gauge how you’re doing.

Graphic of a thumbtack. Tip: If you participate in a retirement plan with services from Principal, have one of our IRAs, or have life insurance through your employer, you and/or your spouse have access to free online resources to prepare your own standard will, power of attorney, power of attorney for health care, living will, and more. To get started, create an account with ARAG.

Additional benefits/Employee Assistance Programs (EAP)

Your workplace may offer a variety of options including childcare assistance, education assistance, or mental health benefits, sometimes called employee assistance programs (EAP). An EAP is a voluntary program that offers free and confidential assessments, short-term counseling, and referrals for work or personal problems. It may also be available to other members of your household, depending on your plan.

For more details, check your employer’s intranet site, connect with human resources, or talk to the benefits administration department.

Next steps

  • Have you changed jobs this year? You have options for your retirement funds. Read more about the pros and cons of each choice.
  • Want to talk to a financial professional about life and disability insurance? Check with your human resources contact to find someone through your employer’s retirement savings plan. Or, we’ll help you find one.

1 HealthView Services

2 https://www.irs.gov/pub/irs-drop/rp-21-25.pdf

Principal® does not make available products related to Health Savings Accounts.

The Retirement Wellness Planner information and Retirement Wellness Score are limited only to the inputs and other financial assumptions and is not intended to be a financial plan or investment advice from any company of the Principal Financial Group® or plan sponsor. This calculator only provides education which may be helpful in making personal financial decisions. Responsibility for those decisions is assumed by the participant, not the plan sponsor and not by any member of Principal®. Individual results will vary. Participants should regularly review their savings progress and post-retirement needs.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Increasing your 401(k) contribution does not guarantee you put yourself in a better spot.

Disability insurance has limitations and exclusions. For costs and coverage details, contact your Principal Life representative.

Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker/-dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392.