insurance

6 employee benefits that help you save

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Highlights
  • Consider stashing cash in two types of flexible spending accounts.
  • A health savings account comes with high-deductible medical insurance.
  • A new trend: Employers give incentives for workers to stay healthy.

Nearly 90 percent of all workers plan to maintain or increase their employee benefits in 2010, despite the fact that more than one-third reported a decrease in discretionary income in 2009, according to a new MetLife survey.

Signing up for cash-saving "bennies" can save you serious money. Consider these employee benefits that your company may offer.

Flexible spending accounts

A flexible spending account comes in two flavors. One type gives workers a tax break for child care expenses or for the care of a qualified dependent. Another type can be used to pay for health care expenses like co-pays, deductibles and many over-the-counter medications.

"The accounts allow employees to set aside pretax dollars to cover these expenses," says Joseph McGinty, vice president of employee benefits consulting at Philadelphia-based The Graham Co. A dependent care flexible spending account has a federally mandated $5,000 annual limit, but the cap on a health care FSA is at the employer's discretion, often ranging from $3,000 to $5,000, according to McGinty.

Before signing up for these employee benefits, estimate your expenses for the upcoming year. Be warned that a use-it-or-lose-it rule applies to both accounts. If you estimate spending more than you actually do within a set time frame, you lose the difference. Generally, an equal proportion of your estimated expenses gets deducted from each paycheck during the course of the year.

"The major difference between the two plans is that under a dependent care FSA, employees can only access funds that they have already accrued. Under a health care FSA, the employee has their full annual health care FSA election amount available to them on the first day of the plan year," says McGinty. If the employee quits after accessing health care funds but before accruing the money, the company eats the loss.

Health savings accounts

This benefit has two parts: a high-deductible medical insurance policy and a health savings account at a financial institution.

"An HSA compatible policy costs substantially less than traditional health insurance coverage," says Robert Lehrer, an independent insurance broker in Tarzana, Calif. They also pay out less than a conventional health insurance policy.

The dollars saved on premiums can be deposited into the health savings account on a pretax basis, Lehrer says. The funds can be used to pay for qualified out-of-pocket medical expenses, and they can accumulate year after year. In 2010, an individual can contribute up to $3,050 in an HSA; the limit is $6,150 for families.

Health reimbursement accounts

These employee benefits are similar to HSAs, but with a major difference. "Health reimbursement accounts are funded by your employer. If you leave your employer, the funds belong to your employer, not you," says Lehrer. Conversely, all HSA money belongs to you whether the account is funded by you or your employer.

HMO, POS, PPO plans

Many employers offer more than one health insurance plan, often a "high plan" and a "low plan." McGinty recommends taking a look at the way you've used insurance in the past few years to determine which type of plan makes sense for your family. Look at everything -- prescriptions, co-pays, visits to specialists -- keeping in mind that even healthy individuals are at risk of serious illness or injury.

A high health insurance plan costs more in premiums, but the out-of-pocket expenses are lower, so calculate if the savings for the low plan outweigh the increased expenses. If you and your spouse are both employed but the household doesn't qualify for the family rate, look at the tiers of coverage -- employee only, employee plus spouse, etc. McGinty says that depending on each company's contribution and how the rates are structured, it may be cost-effective for each spouse to get insurance through their respective employers and, if there is a child, determine which spouse can insure the child at the best rate.

401(k) plan

If you're eligible to enroll in a 401(k) for retirement but haven't done so, think again about this employee benefit. CFP Paul Ahern, executive vice president at WealthTrust-Arizona, routinely advises his clients to participate in their employer's 401(k) plan. "The tax advantage and the employer match, if offered, make the 401(k) something you can't afford not to do," he says.

"If somebody is making $40,000 a year and they want to contribute 10 percent of their income -- or $4,000 -- at the end of the year they are going to be taxed on only $36,000 and the $4,000 will grow tax deferred," he says.

Health incentives

Healthy employees cost less to insure, and the number of companies offering wellness incentives to curb costs is on the rise. Chicago-based Radio Flyer, makers of the classic red wagon for kids, reimburses employees up to $300 annually for participating in weight-loss counseling or running marathons as part of its employee benefits. Denise Mallison has worked at Vought Aircraft Industries in Stuart, Fla., for about three years and earned $220 in cash and gift card incentives in 2009 by partaking in wellness assessments, health screenings and weight management incentives.

You can compare health insurance quotes on Insureme.com, a Bankrate company.

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