This is the time of year that has come to be called "open season," when many companies lay before their workers a menu of available benefits and ask the workers to pick the ones they want.
In some cases, the menu is a price list, and workers can pick the options they prefer and the money comes out of their paychecks, before taxes for some benefits, after taxes for others. In other arrangements, employees start with an overall dollar amount allotted by the employer and shop the menu with that.
Whatever the arrangement, open season is the most vivid illustration of how complex workplace benefits -- once called fringe benefits, but now anything but fringe -- have become. A generation ago, a job came with a benefits package, and that was that. If there was any choice, it may have been the option to enroll in a health maintenance organization (though it wasn't called that) instead of the traditional medical insurance plan.
Today, workers must not only figure out the best benefits for themselves but often also how to integrate them with those offered by their spouse or partner's employer.
Here are some tips to help make those choices:
Health insurance -- Gone are the days when a married couple could use his-and-hers insurance to cover 100 percent of their medical costs. Now companies "coordinate" benefits to make sure everyone pays something. So the decision for couples is whether to go separately or together, and if together, on whose plan.
Childless couples may find that the premiums for two "self-only" coverages cost less than "family" coverage ("self-plus-one" isn't very common among private employers, but it's worth checking into if offered). So unless one of the plans is really weak, that may make the most sense. However, some companies offer a credit to workers who decline health insurance, and if either of you has that option, it should be factored into your calculations.
Families will generally find it most economical to go with one spouse's plan. It's fairly easy to compare the premiums and things such as how much you'd pay for a doctor's office visit, but don't forget to check the deductibles and the out-of-pocket limits and lifetime maximums, if any. Companies are tightening up on all of these, so check -- and don't assume that your employer's own policy limits are the same this year.
Another big item is prescription drug coverage. This is where the typical family spends most of its medical money. If both plans have it, look closely at how they work. Tracy Watts, a consultant with Mercer Human Resource Consulting in Washington, notes that many companies have gone to "three-tier" coverage, requiring the lowest co-payment for generic drugs, a higher one for drugs on the plan's "formulary," or approved list of drugs, and the highest co-payment for non-formulary brand-name drugs.
If you take a drug regularly, check the two plans' formularies, which are usually on their Web sites. They are not all the same, and if your regular drug is second-tier on one plan and third-tier on the other, it can mean a difference of $20 or $30 every time you get a prescription filled.
Also check to see if there is a mail-order discount. Some plans offer that on "maintenance" drugs that people take regularly.
Another growing trend is "self-directed" medical coverage, in which the employer provides a certain amount of money to go toward routine medical expenses, backed up by a catastrophic-coverage policy. If you are thinking of switching to this kind of plan, you should find out the real cost of such services as office visits -- not just the co-pay but the actual cost, which is what you will have to pay. Watts suggested checking with your current insurer -- many have computerized records of the services you use and can tell you what they cost.
Disability insurance -- This insurance steps in to give you a portion of your pay if you are disabled and can't work. It doesn't get as much attention as some other benefits, but experts recommend it because disability is more common than many people realize.
Employers often offer policies in their benefits packages, allowing workers to buy coverage that replaces, typically, half or two-thirds of their pay. Sometimes the policy can be paid for with pretax dollars; sometimes with after-tax money. Pretax is cheaper, obviously, but when bought that way, the benefits are taxable. If it is bought with after-tax dollars, benefits are not taxed. It's hard to tell which is preferable. Pretax is better if you don't become disabled; after-tax is better if you do. Like all too many benefits decisions these days, 20-20 foresight would be very helpful.
Some employers provide disability coverage free, but Watts said a growing number are putting limits on the coverage, such as cutting benefits off after two years. In the past, such coverage often paid until you were 65, she said. However, she said, if you buy coverage yourself, you own the policy and benefits will continue as long as you qualify for them.
Life insurance -- Most employers offer some form of group term life insurance. Typically, coverage for a death benefit equal to one year's salary is paid for by the company, and then the employee can opt for higher multiples and pay the premium or part of it. Like disability, the insurance is valuable for a worker with dependents who would be in trouble if the worker's pay were to cease.
If you are young and healthy, you may be able to do better buying a policy of your own. Rates in this market are very competitive, and of course such a policy won't cease if you leave your job, the way employer-sponsored coverage will. For older workers, or those with health problems, group term life insurance can be a very good deal.
There is, however, a tax wrinkle. Under Internal Revenue Service rules, group term policies over $50,000 can generate taxable income. The IRS has tables that lay out what the costs ought to be for such insurance for workers of different ages. If the employer pays the entire premium, the IRS requires that so many cents per $1,000 of coverage over $50,000 be "imputed" to the worker and included in his or her taxable income. If the premium is split between the employee and employer, the difference between what the employee pays and the IRS figure is the taxable amount. All this applies to the premiums; death benefits, as with other life insurance, are not subject to income tax.
Health Care Spending Account -- The tax law allows employers to let workers set aside money pretax to pay medical costs not covered by insurance. Such "flexible spending accounts" have become increasingly common, and are very helpful in covering deductibles, co-payments and items that are often not insured, such as eyeglasses. The IRS this year loosened the rules significantly, specifically authorizing use of such accounts for nonprescription drugs, such as antacids, allergy medicine and painkillers. Dietary supplements and other such things used for the maintenance of general health, though, cannot be reimbursed from one of these accounts.
The bad news is that the accounts continue to be "use it or lose it" each year, so try to err on the side of caution in deciding how much to place in such an account. Unused money will become the property of your employer.
Predictions that members of the baby boom generation stand to inherit huge sums have received much attention, but while the total may really turn out to be enormous, most boomers won't get much, according to a study released last week by AARP.
It found that as of 2001, more than 82 percent of boomers had yet to receive any inheritance, and only 14.9 percent expected to. The median value of inheritances so far was $47,909 (in 2002 dollars).