Put focus on fringe benefits
- By Milt x_Zall
- Sep 15, 2000
Fringe benefits are in the forefront of discussion lately. Fall is the traditional
time employees can sign up for or change benefit plans. And with the tight
labor market, private-sector employers are offering generous fringe benefits
to attract workers.
Despite this emphasis on fringe benefits, many workers — particularly
younger ones — don't pay as much attention as they should in this area,
according to Dennis Filangeri, a certified financial planner in San Diego,
Calif. So here's a guide to reviewing your options carefully, especially
if you're being tempted by the private sector.
If a private-sector employer you're considering switching to offers
a company-sponsored retirement plan such as a 401(k), snap it up. Social
Security won't provide much of a retirement life all by itself, and pension
plans like the Civil Service Retirement System or the defined benefit portion
of Federal Employees Retirement System are harder to find in the private
sector. Building your retirement nest egg is up to you. Smaller employers
don't always offer 401(k) plans, but most midsize and large employers do.
Your contributions and earnings are tax-deferred, and company plans that
match your 401(k) contributions are an especially good deal.
The vast majority of employers offer some kind of health care coverage.
You may have a choice of plans. Review major life changes over the past
year, such as getting married or having a child. A different plan than you
had last year might be a better choice. Before switching, though, see if
your doctor is covered under the new plan and find out how other employees
fared under the plan.
Flexible spending accounts
FSAs can be used to pay for medical or dependent care expenses on a
tax-favorable basis, but many employees fail to take advantage of them.
Here's how they work: You tell your employer how much to deduct from your
paycheck each month for deposit in the account. When out-of-pocket expenses
occur — for medical bills, for example — you withdraw money from the account
to cover them. The money set aside in the account is not subject to income
or Social Security tax, so the government in essence helps underwrite your
expenses. The only tricky part is that if you don't spend all the money
in the account for legitimate expenses by the end of the benefit year, you
forfeit the leftovers to the employer. Still, "With careful planning," Filangeri
said, "FSAs are an excellent benefit."
Although dependent care accounts are used most commonly for children,
they sometimes can be used to cover expenses for anyone you claim as a dependent
on your income taxes, such as an aging parent or a disabled spouse.
You're more likely to be disabled during your working years than to
die. Even if you already receive some disability coverage at work, you probably
should have additional coverage, which you may be able to buy through your
employer's benefits plan, Filangeri said.
You'll want this if people depend on you financially. You also may be
able to buy coverage for your spouse or children. Plus, group coverage is
often easier to get than buying on your own.
Employers increasingly are offering valuable benefits you might not
even be aware of. For example, one-third of large employers offer adoption
benefits, according to a recent study by the management consulting firm
Hewitt Associates LLC. Such benefits pay for your expenses when adopting
a child up to an average maximum of $3,100, according to Hewitt.
Elder care programs also are on the rise. Besides dependent care accounts,
companies are providing such assistance as referral services and counseling
and the option of buying long-term care insurance. However, many planners
suggest comparing company-sponsored long-term care insurance with outside
sources. You may find better deals.
Though numbers remain small, some companies provide financial planning
programs, such as seminars on retirement, specific personal advice or hotlines.
Prepaid legal advice for basics such as wills or telephone advice on specific
issues also is on the rise.
Companies offer other "small print" benefits too numerous to discuss
here, such as frequent flyer miles, discounted airline or hotel fares, cell
phones and computers, and concierge services. To find out what benefits
are offered, read the benefits information from your new employer and question
the human resources department.
As for choosing which benefits make the most sense for you — such as
which health care option to choose — talk with a certified financial planner.
These benefits can be worth thousands of dollars.
—Zall, Bureaucratus columnist and a retired federal employee, is a freelance
writer based in Silver Spring, Md. He specializes in taxes, investing, business
and government workplace issues. He is a certified internal auditor and
a registered investment adviser. He can be reached at firstname.lastname@example.org.