A Quick Guide to Open Enrollment [Don’t Fumble Your Benefits]

Autumn is a stellar season on its own merits—cooling temperatures, changing of the leaves, seasonal foods like pumpkins and apples. But it’s also a big season for … well, seasons.

It’s football season. And the start of basketball and hockey season. And, come to think of it, the MLB and MLS posteasons. And for those of you who don’t care about sports (why?), it’s spooky season (Halloween!), Thanksgiving season, and the holiday shopping season!

And for most Americans, it’s also open enrollment season. 

And while open enrollment might not be the most enjoyable autumnal “sub-season,” it’s arguably the most consequential.

Open Enrollment: Why It’s So Important

When you’re a kid, the transactional nature of work seems so simple. Rake the yard, get five bucks. Show up for a couple of hours at Orange Julius, get a paycheck.

But for most, at some point in your adulthood, pay becomes more than just cash—it becomes compensation.

Your compensation includes your hourly or salaried pay, sure. But it also extends to include bonuses and, more often, benefits.

Young and the Invested Tip: Open enrollment typically doesn’t affect workplace retirement plans such as 401(k)s. But it’s still a great time to make sure you’re tending to your account properly.

Workplace benefits run the gamut—from paid time off and family leave to medical insurance to flexible spending accounts, and everything in between. They’re additional forms of compensation—more ways, outside of your paycheck, that employers use to ensure your eye is on the ball, and not wandering around on LinkedIn.

Your first experience with a company’s benefits will almost always be shortly after you’re hired. That’s when you’ll sign up for medical, dental, vision, and just about any other benefits your company offers.

However, most of these benefits work on a year-to-year basis—they might remain the same, they might not, but every year, you’ll be required to review all of the company’s benefits and elect which ones you’ll want to participate in. This process, which happens once a year, typically in fall for most folks, is called open enrollment.

These benefits are extremely consequential. Not only do they often represent thousands (if not tens of thousands) of dollars worth of compensation from your employer, but in many cases, they also represent some shared amount of money coming out of your own pocket.

Regardless, every year, more than half of Americans walk away from the process feeling like they didn’t make the most of it. 

Specifically, a recent survey by Equitable—a life insurance company that provides advice, protection and retirement strategies to individuals, families and small businesses—shows that 53% of Americans who are eligible for workplace benefits through their employer “regret their choices” made during last year’s open enrollment period.

The reasons were myriad, but the three most common were:

• Failing to adjust benefits to match their lifestyle changes (25%)
• Forgetting to make changes to benefit selections by the deadline (20%)
• Not understanding the options available or the benefits they selected (19%)

That’s a lot of unforced errors.

No one wants to get caught blindsided by open enrollment, of course—it just happens. So today, we’re going to help you prepare. Read on as we provide a quick guide on what to expect from the open enrollment process, ensuring that you make the most of your hard-earned compensation.

What to Expect During Open Enrollment Season

This week, we talked to Stephanie Shields, head of Equitable’s Employee Benefits Business, about preparing for open enrollment season.

And a big part of the preparation process is simply knowing what’s going to be put in front of your face.

The Process

While there might be small variations, most companies’ open enrollment processes go something like this:

Before the start of your open enrollment period

• Your employer provides you with materials outlining the various benefits you’re eligible to receive.
  • These materials often are in paper format, but alternatively, you might be directed to a website that lists your benefits for the upcoming year.
• Your employer or workplace benefits administrator holds a presentation to explain the process, provide a high-level explanation of your benefits (that the materials will supplement), and answer any questions employees might have. 
  • If materials have not already been distributed, they will be at this meeting.

Once open enrollment begins

• You have until the end of open enrollment to research your options, ask questions about your individual situation, and make benefits selections.
  • This will be performed either on a website or by submitting paper forms.
• If you don’t make changes, in most cases, what you selected last year will carry forward into the new year. However, in some cases, you might forfeit that benefit until the next open enrollment.

Young and the Invested Tip: HSAs are one of the most optimal savings accounts. Avoid these mistakes to make the most out of yours.

The Choices

What kind of benefits can you expect to have to make choices on when open enrollment comes along? Below is a wide list of benefits that cover most of the common bases:

• Medical insurance: Covers items like doctor’s visits, prescription medications, hospital stays, and other medical services and products.
  • “Medical insurance is the 800-pound gorilla in the room,” Shields says. “Most major medical plans have some level of employer dollars contributed, then employees kick in some amount per paycheck and share the cost.” Regardless, this benefit often represents the most significant cut from your paycheck.
  • Major medical tends to have the most choice involved. While some employers only offer one plan, you might be able to choose from anywhere between two and 20 plans, all with different levels of premiums (monthly costs), deductibles (money you must pay before insurance kicks in), copays (money you pay at time of service), and out-of-pocket maximums (the most you will be required to pay in unreimbursed expenses before all expenses are covered at 100%).
  • You will also have to choose who will be covered under your medical insurance. Typical choices are yourself, you and a spouse, and your family.
• Dental insurance: Covers items like dental check-ups, cleanings, fillings, and other dental services and products.
  • Similar to medical insurance, but there’s usually a cap on the amount of benefit each year. So, for instance, a dental plan might only cover up to $5,000 in costs. 
• Vision insurance: Covers items such as vision exams, eyeglasses, and contact lenses.
  • May or may not have benefit caps.
• Disability insurance: Provides you with some compensation in the event you cannot work because of an injury or illness. The compensation is usually some percentage of your wages, often 40%-70%.
• Short-term disability insurance typically covers three to six months of work.
• Long-term disability insurance typically kicks in after six months of not working and can last for years.
  • “Non-medical products like disability protect your savings, earnings, and financial future,” Shields says. “Wealth and health really go hand in hand.”
• Supplemental health insurance: Supplemental health insurance pays for out-of-pocket expenses that aren’t covered by major medical plans. If you have a serious event, your insurance pays your doctors and facilities a certain amount—anything left over is what you’re responsible for. Shields notes that in addition to direct costs, like medical bills, it can also be used for other costs you’ll incur related to your event, such as child care and transportation. Shields says there are three primary types of supplemental health insurance plans:
  • Critical illness is “centered around major diagnoses such as heart attacks, strokes, and cancer,” Shields says.
  • Accident is for unforeseen events such as auto crashes or sports injuries Hospital indemnity.
  • Hospital indemnity handles costs related to covered hospitalizations.
• Life insurance: This pays a predetermined financial sum to your beneficiaries in the event of your death.
  • Employer-sponsored: Your employer may provide a certain amount of coverage—say, your salary, or a fixed number for every employee—at no cost to you.
  • Supplemental: Your employer may offer additional life insurance at a discounted cost to you.
• Savings/spending/reimbursement accounts: Tax-advantaged accounts that an employee must use for specific purposes.
  • Health savings account (HSA): HSA funds can be used to pay for various eligible expenses, such as copays, prescription drugs, even some over-the-counter products. Employees can contribute funds on a pre-tax basis. Employers can contribute funds, too. Employees keep their funds from one year to the next, and can even bring funds with them when they leave for another job. Funds can also be invested, so they can grow over time. You must be enrolled in a qualified high-deductible health plan (HDHP) to have an HSA.
  • Health reimbursement account (HRA): HRAs are similar to HSAs, but employers own the account, and only employers can contribute funds. Money in these accounts usually doesn’t roll over from year to year, but an employer can allow it. Does not require an HDHP.
  • Flexible spending account (FSA): Similar to an FSA, but employers own the account. Money in these accounts does not roll over from year to year. Does not require an HDHP. FSAs commonly are meant for health expenses, but certain types of FSAs can be used for other expenses, such as dependent care or child care expenses.
• Commuter benefits: Allows you to put pretax money toward commuter expenses such as subway cards, bus passes, and parking garage fees.
• Tuition reimbursement: Your employer might pay some or all of your educational expenses (up to $5,250 per year without a tax consequence for you). Can include traditional education, like tuition at a college, but also can include certification exams and other programs.
• Childcare benefits: Can include on-site day care, dependent-care assistance, school program assistance, and more.

Your Responsibility

Benefits aren’t always free—yes, your employer might fully sponsor some of your benefits, but you might have to share some of the financial responsibility or foot the whole bill for others.

Typically, then, benefits are broken down into three flavors:

1. Employer-paid (employer pays 100% of financial responsibility)
   Example: Life insurance at no cost to you
2. Employee-paid (employee pays 100% of financial responsibility)
   Example: Commuter benefit where you can contribute earnings on a pretax basis to, say, subway fares or garage parking
3. Shared (employer and employee split the cost)
   Example: Medical insurance where your employer covers 50% of your monthly premiums

“Whenever the employee is making a selection that involves an investment from their paycheck, there’s always a choice involved,” Shields says. “If the employer pays, they’ll communicate to you about what’s available [free of cost to you], and what you might have to pay. For instance, an employer might automatically provide short-term disability insurance, but you would have to invest some of your paycheck to get long-term disability insurance.”

That said, even if a benefit is completely employer-paid, you still might need to elect into it. If there aren’t multiple options for that benefit, electing into it might be as simple as clicking a “yes” button on a website.

Learning About Your Options

Equitable’s survey also shows that American workers are increasingly turning to social media for education about their workplace benefits. It found that 24% use social media platforms for this purpose, and unsurprisingly, this trend was highest among younger generations—43% for Gen Zers, and 37% for Millennials.

Young and the Invested Tip: Thinking about investing in an HSA? You’ve got great fund options from Vanguard, Schwab, and Fidelity.

But the wisdom might not be with that growing crowd.

“I tend to lean toward employer-driven materials first because carriers who offer the plans do provide support to employers for communications,” Shields says. “If an employer is offering a choice between three different plans, they’ll have comparisons either within the website or the materials that help the employee make decisions specific to what the employer is offering. Copayments, deductibles, etc., can vary across the board.

“The more you go outside of your employer materials, the more you get general information, which might or might not be helpful.”

That said, you might do well spending at least as much time on selecting your benefits than you do browsing social media. 

Many people don’t.

“On average, employees spend just 30-60 minutes selecting their benefits—a sharp contrast with the two hours they spend on social media every day,” Equitable’s survey says.

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