Most people learn about employee benefits during their first days on the job. They get the word on vacations, sick pay, health care and retirement plans, sign off on some paperwork and, in general, get back to work as fast as possible.
Over time, they may get updates on new benefit offerings, but many of these notices–whether in employee bulletins or in “Dear Employee” letters–get tossed in a file somewhere.
As a result of this less-than-full attention, many benefits go unused, costing workers untold amounts every year.
“It is amazing the stories you hear about benefits and how people don’t know what they have,” says Kevin Brown, a vice president with Price, Raffel & Browne, a retirement plan and benefits consultant.
Finding out exactly what your company offers is a worthwhile exercise. Many benefits coordinators suggest doing this review annually, perhaps during enrollment time for the health-care plan. Others suggest reviewing benefits any time there is a significant change in your life. Some financial advisers work with clients to maximize the value of available benefits.
“We look at someone’s employee benefits manual and it is surprising sometimes to see how much people overlook,” says Roy T. Diliberto of RTD Financial Advisors in Philadelphia. “It is very easy to neglect this stuff. People don’t think that this is real money, but it is.”
While employers have taken steps to educate workers, the onus remains on the individual to find out what is available. Here are some areas to look at:
– Retirement benefits. A recent Merrill Lynch survey of benefits administrators revealed that the people who oversee retirement programs believe that less than half of their charges understand retirement savings concepts.
Consider 401(k) and 403(b) plans, both of which require worker contributions, often matched by the employer.
The money is not taxed until it is removed from the plan, which means a savings of roughly 30 to 40 percent. (For every $100 set aside, you do not owe the, say, $30 in taxes that would otherwise be due.) If the company matches your contributions to a certain level–say 50 cents for every dollar–that is an instant 50 percent return just for signing up.
Yet plenty of people leave this free money on the table. The rule is simple: Anyone who does not maximize his company’s matching funds is giving money away.
Speaking of giving money away, that also happens when workers fail to take advantage of employee stock ownership plans, many of which allow stock purchases at a significant discount, or when they fail to understand how certain pensions work.
If you are nearing the time when you are vested in a pension plan, for example, you may want to put off a job change until you secure the benefit. Vesting allows you to keep some or all of the benefit once you leave the firm. Human resource managers say that many workers are so unaware of the vesting requirements that they often leave jobs weeks or months before they could qualify for a lifetime pension benefit.
“You have to know the rules of each program, from what you are allowed to contribute to how you borrow against it and more,” says Brown. “Your retirement benefits are not something you want to make assumptions about; find out how everything works.”
– Flexible medical benefits. If you and your spouse both pay for health care, you may be able to save money by cutting one plan. Depending on the rules of the employer, you could simply save the difference or you could direct the money into other benefit areas, such as retirement or child-care savings.
“That’s a benefit that you actually pay for out of your own pocket,” says Carmen Gonzalez, a benefits and human resources specialist at Work Family Directions, a Boston-based consulting firm. “You wouldn’t pay twice for health care if you had to write the check. You should look at your benefits together and see if there are ways to consolidate coverage and get the best from both employers.”
– Life insurance. Many companies buy group life insurance policies that cover their workers for a limited amount. At the same time, however, the insurers offer additional individual policies to workers.
Typically, these policies are for a limited amount of term insurance and the rates aren’t always the most attractive because the insurer assumes that it will get only the worst health risks from the employee pool.
The reason insurers make that assumption is because the policies generally are available with no physical and without regard for things such as weight, health or smoking. For anyone who is not in perfect health, therefore, coverage offered through the company becomes competitively priced.
– Financial help for family care. Many employers now offer assistance, or tax-advantaged savings programs, for employees with dependents to care for, either children or adults.
In addition, financial assistance to help with the adoption process is also becoming more readily available. Several benefits experts said they knew of employees who found out too late about this help; at a time when they needed extra money as they brought a new child home, these families had forfeited thousands of dollars in assistance.
– Educational reimbursement. One common benefit is tuition reimbursements if you take courses related to your job. Some extend that benefit regardless of subject matter, so long as the courses are part of a program that will result in a degree. Some even tie the percentage of reimbursement to the grades you bring home.
In addition to seeing what your company will do for your schooling, see what kinds of scholarship and/or savings programs they have that could benefit your children (or grandchildren).
– Personal improvement programs. Many employers will pay for weight-loss or fitness programs or offer discounts to health clubs and more.
Consider this an adjunct to paying for education and live by the following rule: Before doing something that is supposed to be good for you, find out if the boss will foot the bill.
– Charity. The fact that some companies match the charitable gifts given by workers is of no direct financial benefit to you. But if your employer is willing to help a cause that you believe in, you might as well know how to take advantage.
Most companies that encourage charitable giving among their workers have matching gift forms that must be submitted when you write a check for a donation. Get a bunch of the forms and take them home, so that they are available whenever you make an eligible donation.
