The Benefits and the Doubts

401(k)s and Health Insurance Can Be Intimidating, but Research Helps

Philip Javellana, a 2005 American University graduate, took a personal finance class in college, but even that didn't fully prepare him for the admittedly difficult task of selecting his benefits options -- including health insurance and retirement plans -- at his first job.

"I guess the most daunting thing was trying to figure out which things to invest in for my 401(k)," said Javellana, an eCampaigns associate for M&R Strategic Services, a District-based consulting firm. With a little help from his parents, some online research and the memories he had from class, the Columbia resident selected the benefits he needed and calculated how much of his income he'd need for rent, car payments and insurance and basic living expenses.

The term "benefits" describes a variety of perks offered when you start a full-time job, from the more obvious, such as health and life insurance and 401(k) plans, to the less obvious, such as paid days off and direct deposit. When considered as a whole along with salary, this collection of perks and pay is often called a "total compensation package."

Choosing among benefits can be complex, intimidating and boring -- but necessary to protect yourself from unexpected costs associated with an illness or injury, for example. Often, employers will pay a portion of the benefit cost but require the employee to cover some of the expense, too. Javellana did what many new grads don't do -- lots of research to figure out which health insurance plan to choose, what to invest in for his 401(k), and how much he'd make after contributing to benefits and paying taxes.

"My experience with students has suggested that they're not thinking much about that [benefits] part of the process," said Janice Sutera, director of University Career Services at George Mason University. Students and new grads think about job hunting and how much money they need to live, she said, but not usually about benefits.

"Now, once they have that [job] offer and they're contemplating benefits, then I think it's overwhelming," Sutera said. That's when many grads seek out family members to help them, she said, as Javellana did.

The benefits that employers offer vary widely. Bigger companies with lots of employees tend to offer more benefits than smaller companies, according to a recent survey by the Society for Human Resource Management. New employees usually get a packet during their orientation that contains information about the benefits offered and their cost. Experts say it is important to sit down and review all options thoroughly before making any decisions.