By Pam Krueger
Before you accepted your current position at your company, chances are you sat across a table and negotiated your salary along with a healthcare plan that works for you and your family. Looking back, maybe you’re pleased with the total compensation package you were offered, but it’s also quite possible you didn’t realize there are more ways to get paid in addition to the obvious dollars and cents you see in every paycheck. That extra money may be hiding in plain sight right within your benefits package.
As of June 2018, the U.S. Bureau of Labor Statistics estimates that on average, employee benefits now make up one-third of a typical employee's total compensation. Of course, your actual benefits package may be a lot more or a lot less than one-third of your compensation because benefits vary widely from employer to employer across every industry, but this demonstrates just how much money you could be overlooking. So are you taking advantage of this “extra pay”? The fact is most employees are not.
Benefits that never get used
The International Foundation of Employee Benefit Plans found in a recent survey that only 19% of employers believe their employees even fully understand the benefits they’re offered, and 80% of the employers offering tax advantaged 401(k) savings plans don't think their employees ever read the full description of their plans. This might be the moment to take a second look through your own benefits manual and discover some generous giveaways you could be using.
Employee benefits packages can be robust, especially now because companies have to compete for talent, and they want to retain their best employees. A good benefits package aims to go the extra mile to help employees financially both now and long-term, and for good reason. PricewaterhouseCoopers found in its 2018 financial wellness survey that more than half of employees feel stressed about their finances, and feeling stressed lowers overall productivity at work.
Unpack your benefits package
Many employers now offer highly effective financial wellness tools to reduce your worries about money and help you better manage your whole financial picture. Take student loans, for example. According to Forbes, it’s those in their 30s who carry the biggest burden of student loan debt, and they’re paying back loans that total more than $461 billion. That amounts to about $300 every month for a typical payment plan. This is why some companies have adopted creative programs that help their employees pay down student loan debt, a perk that attracts and retain younger employees. Others provide Dependent Care Assistance Programs, which reimburse parents for some of the cost of caring for their children or to deduct dependent care expenses from their paycheck on a pretax basis. There are many more examples of creative solutions to common financial problems and they’re offered within an employee benefits packages, but you have to know to look in your employee benefits manual.
Even if you’re not dealing with serious financial troubles right now, it still pays to know about all the non-monetary parts of your compensation because there are plenty of other valuable employee benefits you may not have ever heard of.
Here are the top three gifts you might be giving away right now:
1). Your health savings account: the gift that keeps on giving
One of the most valuable and overlooked benefits is the health savings account (HSA). It’s a tax-advantaged account that lets you save up money pre-tax to spend on health and wellness expenses. Think of your health savings account as an additional retirement savings account; instead of penalizing yourself by taking from your IRA to pay for an unexpected medical expense, you can tap into the funds you’ve stashed in your HSA. You can contribute up to $3,450 for an individual or $6,900 for a family for 2018 per year, and this money is rolled over from year to year without any limits. Think of your HAS as a vehicle to save pre-tax money to pay for future healthcare costs to in retirement. You can even use these funds to pay for dental exams or braces and eye care expenses that include braces.
2). The free money in your 401(k) match
Your 401(k) and other tax-advantaged savings plans go a long way to helping you build a serious nest egg. If your employer is willing to match any portion of your contributions, It's easy to see how much money you're leaving on the table. It pays to max out your contributions to your retirement plan to get the highest match from your employer. According to Forbes, common match programs have the employer contributing either $1 or 50 cents for every $1 the employee puts in, up to 5% of their salary for the year. That can add thousands to your compensation every year.
3). Paid time off (vacation, sick pay, personal days, FMLA, bereavement leave, etc.) Employers aren’t required by law to provide paid time off, but most do as a general rule of thumb. It used to be common for employers to give workers two weeks of vacation time, plus a set number of allowable paid sick days per year, but now it's common for employers to use a "paid time off" model that's more flexible and allows employees to take a certain number of days off every year, however they want to split the time. This keeps workers from taking paid sick days when they aren't really sick just to use them up.
When you first look at the benefits your employer provides, it's a lot to take in. It can be even smarter to ask a qualified financial planner or fiduciary investment advisor to help you comb through your benefits and make sure you're making full use of as many as you can. Your accountant can also help you use those benefits to your advantage on your tax return.