Our second article in this series is focused on company benefits in your first job offer. What do all the ‘things’ even mean??
Congratulations on the new job! Nothing says “welcome to the company!” like a 40-page benefits guide that feels like it’s written in a different language.
While it may be tempting to skim your benefits, pick the cheapest option and move on, your benefits package is actually a massive part of your total compensation. Choosing correctly now sets up “Future You” for success.
Let’s break down the essentials so you can choose with confidence.
Understanding the Company Benefits Lingo
Before you pick a plan, you have to know how the math works. Health insurance is a trade-off between what you pay every month and what you pay when you actually get sick.
- Premiums: The “subscription fee” for your insurance. This is taken out of your paycheck every month regardless of whether you see a doctor or not.
- Deductible: The amount you pay out-of-pocket for care before the insurance company starts chipping in.
- Note: most plans cover “Preventative Care” (like an annual physical) at 100% from day one, meaning you pay $0. For everything else, sick visits, X-rays, or prescriptions, you are the primary payer until this is met.
- Out-of-Pocket Max: The “Safety Net.” This is the absolute maximum you will have to pay in a year. Once you hit this, the insurance company covers 100% of your remaining qualified medical costs.
- Example: If you have a $5,000 out-of-pocket max and a hospital bill for a necessary surgery comes back at $30,000, your spending is capped at that $5,000. Once you hit that ceiling, the insurance company covers the remaining $25,000 in full so you don’t have to.
HDHP vs. PPO: Which one is best for you?
Most companies offer two main choices.
- PPO (Preferred Provider Organization): Higher premiums, but lower deductibles. You pay more upfront to have more predictable costs when you visit the doctor.
- HDHP (High Deductible Health Plan): Lower premiums, but you pay the full cost of care until you hit a higher deductible.
- The Game Changer: A HDHP plan allows you to open an HSA (Health Savings Account). For those who are young and healthy, the HDHP + HSA combo can be a powerful long-term strategy, though the right choice always depends on your unique medical needs and budget.
Should I Stay On My Parent’s Health Plan?
Maybe! (Isn’t that always the answer?) Federal law lets you stay on a parent’s health insurance until age 26, even if you’re married or living in a different state. If your parents are willing to cover the cost, it’s a huge gift. However, here are 4 considerations before you decline your own employer’s offer:
- Location: If you moved to a new city for work, your parent’s insurance might not have a local network. Going “out-of-network” for anything other than an emergency can turn a simple $100 doctor visit into a costly bill.
- Privacy: As the “Policyholders,” your parents usually receive the Explanation of Benefits (EOB), which shows which doctor you saw and what it cost. If you want 100% medical privacy for things like mental health or reproductive care, you need your own plan.
- Children: If you plan on starting a family before age 26, remember that the “stay until 26” rule does not extend to your children.
- Full Coverage: Although it’s not common, if your company offers a $0 premium plan and gives you a $500/year+ contribution to an HSA, you may be leaving free money on the table by staying on your parents plan.
The “Must-Have” Employer Benefits
Beyond health insurance, look for these “free money” opportunities:
- 401(k) Match: If your employer matches your contributions, now is the time to contribute at least up to the match percentage. If you don’t contribute enough to get the full match, you’re essentially leaving part of your compensation package on the table. It’s one of the few times your employer will literally give you extra funds for your future.
- For example, if your company offers a 100% match on contributions up to 6% of your pay and you earn $80,000, that’s $4,800 contributed by you and another $4,800 from your employer going into your retirement account.
- HSA vs. FSA: You generally can’t contribute to both at the same time.
- HSA: This is famously known as a “triple threat” because your money is tax-deductible going in, grows tax-free, and is tax-free coming out as long as it’s used for qualified medical expenses. Consider maxing this out and investing the funds for the long-term, keeping in mind that these investments can fluctuate in value.
- FSA: Think of this as a “short-term medical spending account.” You get the same tax-free benefits on your contributions, but it’s owned by your employer and is “use it or lose it”. Typically, we recommend you only contribute what you know you’ll spend in a year (like on new glasses, therapy, or prescriptions), as any leftover funds usually vanish on December 31st.
- Limited Purpose FSA: This is an exception to the “can’t have both” rule. If you have an HSA, you can also have this account, but it can only be used for dental and vision expenses (like braces, contacts, or LASIK). Like a regular FSA, this is usually “use it or lose it,” so only fund it if you have a specific dental or vision cost planned for the year.
- Disability Insurance: Most people insure their phones and their cars, but they forget to insure their ability to earn an income, which is also protecting your independence. Short-Term (STD) covers you for a few weeks or months (think recovering from a surgery). Long-Term (LTD) covers you after being out for 6+ months and can pay you until you reach retirement age. LTD is the priority if you’re choosing one.
- Legal Benefits: Many employers offer a legal plan for a few dollars a month. You may want to use it to set up a basic will and Power of Attorney (POA). It’s designed to help ensure your wishes are followed, though you should consult a legal professional for your specific situation.
Final Thought: Don’t Set it and Forget it
Benefits aren’t a “one-and-done” decision. Your life—and the tax laws—will change, so treat open enrollment as a yearly check-in with your goals. If you’re curious about how to optimize your choices, check out our other blog on benefits enrollment.
Ready to see how your benefits fit into your big picture? If you’d like a second set of eyes on your “Total Compensation” package, let’s chat.
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Disclaimer: This material is provided for informational and educational purposes only and does not constitute legal, tax, or investment advice. The strategies discussed may not be appropriate for all individuals or situations. Eligibility and suitability depend on your specific circumstances, financial objectives, and current laws, which are subject to change.
Any examples are hypothetical and provided for illustrative purposes only. They do not represent actual client outcomes, and results will vary. You should consult with qualified tax, legal, and financial professionals before making decisions related to the topics discussed.
Employer plan provisions, contribution limits, and benefits may vary by company. Confirm specific plan details directly with your employer or benefits administrator.
SeedSafe Financial, LLC provides tax preparation and planning services for advisory clients; however, this material is for educational purposes only. Transmission of this information does not create a client-preparer relationship. Please consult with your SeedSafe advisor or a qualified tax professional before implementing these strategies
References to third-party resources or websites are provided for informational purposes only. SeedSafe Financial, LLC does not endorse or assume responsibility for the accuracy or completeness of external content.
Advisory services are offered through SeedSafe Financial, LLC, an SEC-registered investment adviser. Registration with the SEC does not imply a certain level of skill or training.
