Open Enrollment Is Here: Keep Your Plan on Track with an Annual Benefits Review

For many employees, open enrollment is a rushed exercise: check a few boxes, keep last year's choices, and move on. That is a missed opportunity. Your benefits package is one of the largest pieces of your compensation, and the choices you make before your enrollment deadline can affect your insurance protection, your tax bill, and your retirement savings for the year ahead.

Group life and disability coverage

Group benefits are often the most cost-efficient way to buy term life and disability insurance. Group rates are pooled, employers frequently subsidize the premium, and coverage is often available with limited health screening. Three questions are worth asking:

• Is the coverage enough? Employer-paid life insurance is often a small multiple of salary, which may fall well short of your family's needs. Supplemental and spousal coverage may be available, often with guaranteed-issue limits, so review whether topping up makes sense.
• Does it follow you? Group coverage usually ends when you leave your employer. Ask whether it is portable or convertible.
• How does the disability plan define disability? Compare short-term and long-term benefits, the waiting period, and how much of your income is replaced.

Group coverage can be a strong foundation, though for some households it will not be the whole answer.

Group vs. individual disability: the tax difference

How the premium is paid determines how the benefit is taxed, and the difference can be significant. When your employer pays the premium, or you pay it with pre-tax dollars, disability benefits are generally taxable income. When you pay the premium with after-tax dollars, benefits are generally received income-tax-free. That is the usual position of an individual policy you buy yourself, and some employers let you elect to pay your group premium after tax.

In practice, a group plan that replaces 60% of your income may deliver noticeably less after taxes if the benefit is taxable, while a policy with after-tax premiums pays its stated benefit in full. The trade-offs run both ways:

• Group coverage: lower cost, limited or no health screening, but often a cap on covered income, benefits that may exclude bonus or commission pay, a definition of disability that can tighten over time, and coverage that typically ends when you leave.
• Individual coverage: higher cost and full medical underwriting, but portable, owned by you, and often more favorable in how it defines disability and in how it can be renewed.

For many households, especially higher earners, the right answer is a group plan as the base with an individual policy to fill the gap. Ask your advisor and tax professional how the premium payment choice affects your net benefit.

The HSA-eligible health plan

A high-deductible health plan that qualifies for a Health Savings Account (HSA) can do more than lower your premium. HSA contributions may be tax-deductible, growth inside the account is tax-deferred, and withdrawals for qualified medical expenses are tax-free. Used as a long-term account, with today's medical costs paid from cash flow, an HSA can become a meaningful supplement to your retirement plan. A high-deductible plan is not right for everyone, especially households that expect high medical costs, so compare the total annual cost rather than premiums alone.

Flexible spending accounts

Health and dependent care flexible spending accounts (FSAs) allow pre-tax payment of eligible expenses, but they come with rules. Elections are generally made once a year, and unused balances may be forfeited, subject to any carryover or grace period your employer offers. One point matters especially for HSA-eligible households: a general-purpose health FSA can make you ineligible to contribute to an HSA, while a limited-purpose FSA generally does not. Check which type your plan offers before you elect.

Recalibrate your 401(k)

Your pay, your goals, and the contribution limits all change over time. Enrollment season is a natural moment to confirm that your withholding still matches your plan and that automatic increases are working as intended. Three checks:

• Capture the full employer match. It is part of your compensation, and the vesting schedule determines when it becomes yours.
• Consider Roth vs. traditional deferrals. If your plan offers a Roth 401(k) option, the right mix depends on your current tax bracket, your expected retirement tax bracket, and your other accounts.
• Confirm your investment elections. Balances drift, and default fund choices may not fit your plan.

The 457(b) for public and nonprofit employees

If you work for a government agency or a nonprofit, ask whether your employer offers a 457(b) plan. For many public-sector employees, a governmental 457(b) can be funded in addition to a 403(b), which allows more tax-advantaged saving than a single plan permits. It can also offer more flexible access to funds after you leave your employer. Plan features vary considerably, so review the details with your plan administrator and your advisor.

Dental and vision

These are easy to overlook, but they are often a real "bonus" of employment. Group premiums are typically low, and routine care adds up. Check whether your employer contributes and whether your family's expected needs justify the coverage.

Legal aid and pet insurance

More generous benefit packages now include legal assistance plans and pet insurance, typically as voluntary, employee-paid options. They will not matter to everyone, but for the right household, a predictable premium can be a sensible part of regular financial planning, protecting the budget against costs that are otherwise unplanned.

Beneficiaries: the five-minute review

Enrollment is the easiest time to confirm that the beneficiaries on your group life insurance, 401(k), and HSA are current. Beneficiary designations generally override your will, so an outdated form after a marriage, divorce, birth, or death can send assets to the wrong person.

For higher earners and equity compensation

If your employer offers a nonqualified deferred compensation plan, elections are typically irrevocable and must be made during a specific window, so decisions about salary and bonus deferral should be made with your tax advisor and financial plan in view. Employee stock purchase plans, restricted stock units, and stock options often follow their own enrollment calendars, and each carries concentration and tax considerations worth planning for.

Don't overlook

• Voluntary products: long-term care, critical illness, accident, and hospital indemnity policies. These are often less cost-efficient than the core benefits, so compare them carefully against your plan and your savings.
• Family coverage rules: spousal surcharges, dependent coverage to age 26, and qualifying life events that allow mid-year changes.
• Smaller perks: commuter benefits, tuition assistance, student loan repayment help, and employee assistance programs.
• Approaching retirement or Medicare: HSA contributions must stop once you enroll in Medicare, and COBRA and retiree coverage rules deserve a plan of their own.

Make an annual benefits review part of your plan

Benefit elections interact with your taxes, your insurance needs, and your retirement strategy, which is why they belong in your financial plan rather than in a separate annual chore. Treating an annual benefits review as a habit, done each fall before the enrollment deadline, keeps your coverage and savings aligned as your life and your employer's offerings change. If you would like help evaluating your options, please reach out to BCM.

Plan features, eligibility rules, and contribution limits vary by employer and are subject to change. Verify current limits and rules with your plan administrator and tax advisor before making elections.