In this blog, I’ll share with you some thoughts to help blast through the barrage of benefit choices, cutting to the core of what’s important to think about when making decisions during the University of Illinois at Urbana-Champaign’s benefit Open Enrollment for eligible full-time employees.
Open Enrollment is a period where you elect to enroll or change the benefits offered to you via your employer. This is generally offered annually or when you’re first hired. Some benefit choices, which I’ll cover later, can be added or changed at any point in time. With Open Enrollment choices being made online, it is oh-so easy to just click-click-click your way through the process, so let’s slow down and talk through some of the major decisions you’ll need to make. For more in-depth details and resources, I highly recommend that you visit https://www.hr.uillinois.edu/benefits.
Health Insurance
Everyone’s favorite question—what health insurance choice is right for me? Brace yourself for everyone’s favorite answer—it depends. Okay maybe favorite isn’t the right adjective, but we can at least agree on important, right? The State Employees Group Insurance Program (SEGIP) offers a few options for coverage:
⠀⠀⠀· Quality Care Health Plan (QCHP): Offers a nation-wide provider network.
⠀⠀⠀· Managed Care Plans: Depending on your location, you may have a choice of Health Maintenance Organizations (HMOs) or Open Access Plans (OAPs).
⠀⠀⠀· Consumer Driven Health Plan (CDHP): High-deductible health plan as defined by the IRS.
⠀⠀⠀⠀⠀⠀⠀⠀⠀o Health Savings Account (HSA): Companion to CDHP enrollment only.
For brevity, I won’t go into the details of coverage, but you can find out more about the plans and their coverage details and availability map here. The main takeaways are:
⠀⠀⠀· QCHP is generally the more expensive plan and offers the greatest value when using its nation-wide “in-network” providers.
⠀⠀⠀· The CDHP (high deductible) is typically a better fit for those who expect to have low healthcare usage and plan to take advantage of the companion HSA account, which has tax-free growth and withdrawals for qualified expenses both now and in the future. Meaning that tax-free growth can compound for covering future expenses or reimbursements of past expenses. The State funds your HSA with one-third of your CDHP deductible each year. You have the option to contribute more on top of that.
⠀⠀⠀· Another large consideration that often goes unnoticed in choosing the CDHP plan is whether you want to view health care decisions through this constant loop of cost-benefit analysis in weighing expected usage and coverages against the tax savings and growth of an HSA account. If this sounds like a headache for you, perhaps the CDHP may not be a good fit.
Flexible Spending Accounts: Medical (MCAP) and Dependent Care (DCAP)
These programs allow you to contribute pre-tax money into an account, which can then be used for certain qualifying expenses; the MCAP for medical expenses and the DCAP for dependent care expenses. For both plans, you’re limited to the number of unused benefits that you can carry over from year to year.
Both plans also have limitations on the timing of when qualified expenses must be submitted for reimbursement. Eligible out-of-pocket expenses must be incurred during the plan year (July 1 – June 30) and submitted for reimbursement by September 30 following the end of the plan year. This adds a bit of administrative burden to the process. In fact, we’ve had clients who have forgone these programs simply due to the headache of constantly submitting receipts!
That said, there can be tax benefits of using these plans. Assume you are in the 24% federal tax bracket, pay 4.95% IL income tax, contribute the maximum of $2,850 to the MCAP, and fully use the balance in a year. You have saved $825 in taxes ($2,850 x (24% + 4.95%). Your savings will depend on your tax situation but be sure to ask yourself if the savings are worth the hassle of reimbursement.
The DCAP program is a bit more complicated. Dependent care expenses reimbursed through your DCAP cannot be filed for the dependent care tax credit, and vice versa. Depending on your tax situation, number of dependents, qualified expenses, etc., the DCAP may be more or less valuable than simply claiming the dependent care tax credit. I found that Allegiance® has a useful comparison tool between the two here. Again, compare the potential DCAP savings against the dependent care tax credit saving and see if the benefit is worth the hassle of reimbursement.
Other Voluntary Benefits
The other types of coverage that warrant discussion are those that you can enroll and change coverage for at any time during or outside of open enrollment:
⠀⠀⠀· Supplemental retirement savings via: University Supplemental 403(b) Retirement Plan, State Deferred Compensation 457 Plan, and SURS Deferred Compensation 457 Plan.
⠀⠀⠀· Supplemental Optional Life Insurance (employee, spouse, and dependent).
⠀⠀⠀· University Supplemental Long-Term Disability (LTD) Insurance.
The Optional Life and Supplemental LTD insurance coverages may require submitting evidence of insurability to add/change coverage before enrollment is accepted. Generally, for these plans, enrollment is only guaranteed within the first 60 days of employment.
When it comes to deciding if the Supplemental LTD insurance is right for you, the short answer is that it depends on your situation: your age, proximity to retirement, your income, SURS service credits, and the list goes on. We recently wrote a short summary of the University Supplemental LTD Insurance here, where you can learn more about whether the coverage might be of interest for you.
The same can be said for how much life insurance would meet your needs; it depends on a variety of factors – too many to make any sweeping generalizations in this article. If you are interested in Supplemental Optional Life Insurance coverages, you may want to compare the costs against a private policy. Private Term policies can be set up to have fixed premiums for the duration of the coverage term, while the supplemental life coverages have premiums tied to your age and become more expensive over time to retain.
Other Coverages
There are other coverages that we consider to be more ancillary and, in most cases, not cost effective when compared to alternative means of protecting yourself against risks or mitigating losses. Nine times out of ten, choosing these coverages boils down to whether the premium provides sufficient peace of mind. There are three offered through “MyBenefits Plus” which fall into this category that I will highlight below:
⠀⠀⠀· Identity Theft – We feel that the best ways to protect yourself from identity theft are free but do require some effort. The single best thing you can do for yourself is to regularly review your free credit reports and monitor bank and credit card activity. Another significant protective step is to employ safe cybersecurity practices (using secure passwords/password manager, having vigilance against phishing attacks, being prudent with divulging private information, etc.).
⠀⠀⠀· Pet Insurance – We love our furry friends too and hate to see them ill. Instead of paying for pet health insurance, consider setting aside cash for potential pet cat-astrophes and stay purr-ent on regular vet checkups (I’m sorry, there is no insurance to protect against bad puns, so please bear with me).
⠀⠀⠀· Legal Services – While we don’t always know when we may need a good lawyer, you can generally anticipate when you will need to update estate documents. Outside of those specific years, this coverage is likely unnecessary. Plus, in an unexpected legal need, the “in-network” attorneys may limit your choices of who you can work with, so you may end up “out-of-network” anyways. If you do choose to enroll, be sure that you first inquire about what local attorneys are considered “in-network.”
Conclusion
We know that these Open Enrollment decisions can be onerous, involving many aspects of your financial life. These are decisions that we help guide our clients through on a regular basis, if you want to learn more about the benefits of partnering with a financial planner, click here to contact us today!
For Further Reading:
University of Illinois System, HR Resources, Benefits - https://www.hr.uillinois.edu/benefits
State Employees Group Insurance Program, FY 2023 Health Insurance Plan Details & Availability Map - https://www2.illinois.gov/cms/benefits/StateEmployee/Pages/BenefitsBooks.aspx
Allegiance® Dependent Care Credit Tax Calculator - https://www.askallegiance.com/Resources/DependentTaxCalculator