Financial Planner Q&A: How Do I Maximize My Employee Benefits?

A commenter asked what financial planning questions you wanted to see answered. This week I answered the question, "How do I maximize my employee benefits?"

I love this question, because we would never say we want a salary cut, but if we don't take full advantage of our employee benefits, it's as if we're doing just that. To get the most out of what your employer offers, start by asking human resources for a benefit plan summary. They usually have a document they can email you or can provide you a company benefits website with personal login information. The benefit plan summary gives you an overview of what is offered.

Here are some of the more common benefits that might be available to you.

Health and Dental Insurance - This is a benefit most of us are familiar with. Many companies have healthcare optimizer quizzes. It asks you questions about your health, the medications you take, number of doctor visits a year etc., and matches you with a plan. Be aware of open enrollment periods (often in the fall). If you anticipate an elective medical procedure, plan ahead and pick the insurance coverage that is most beneficial to you.

Sick Days, Short-term Disability, Vacation Days and Other Paid Time Off - You want to have an understanding of when you'll be compensated even when you can't be at work, and how these days accrue. Be aware of whether or not vacation days are "use it or lose it" so you don't miss out.

Life Insurance - Many employers offer a minimum amount of life insurance. Make sure to choose a beneficiary. This will ensure the policy is properly paid out if something were to happen to you.

Retirement Plan - Most commonly, this is a 401(k). In most cases you will be required to contribute your own funds. However, if you leave the company, you can roll that money over into an IRA; in other words, take it with you! If a company offers a match to your retirement account, make sure to contribute the necessary amount in order to receive the full match. You'll also want to choose the appropriate investments within your 401(k) as well as the percent of your salary that you'll contribute each pay check. Be aware of IRS contribution limits. Although it's becoming less and less common, you might also be offered a pension. Be sure you know the qualifications and payout as they can be detailed and restrictive.

Stock Options - These give you the opportunity to purchase company stock. They are often misunderstood or valued incorrectly. There are a number of important considerations to take into account, including risk vs. reward, time value, diversification and taxes. If you don't feel you have the resources or time, work with a financial professional who can help create a strategy that is effective for you.

Sometimes even the benefit plan summary can be a long and intimidating document. I've reviewed summaries for clients that stretch over 100 pages. Ask HR to clarify how benefits work and if there are additional costs for those benefits. There are many other benefits that could be offered to you.

Here are some examples:

You might get a gym membership (or discount on one). A flexible spending account (FSA) is another one to look out for. Remember you need to spend the funds on qualifying expense within a specific time period. Some companies offer long-term care and/or disability insurance or additional life insurance at a discount. Free or discounted psychological and other counseling services or legal aid are other possibilities. You might find that some education expenses are covered, like continuing education in your field or even tuition assistance for the children of employees. Industry-specific benefits are another potential perk. Be aware of discounts on products or services offered by your company.

Benefit plans can vary widely, so be sure to request information on the specifics of what is offered to you.