Starting a new job is often as stressful as it is exciting—not only are you learning new systems and developing relationships, but you also have to reevaluate your financial situation—specifically whether and how to leverage your employee benefits. If you’ve changed jobs recently or plan to soon, you’ve probably asked yourself:
Should I take advantage of my new employer’s insurance plan or search for other options? Should I consider my spouse’s plan?
Can I keep my current plan?
How do I know if I have enough coverage?
If you’re looking for answers to these questions, we’re here to help! In this blog, we’ll discuss your options for changing benefit plans and the factors you should consider to make the most of what’s offered to you. And of course, we’re always happy to answer additional questions you have—just give us a call or send us an email!
For now, let’s review a few types of benefits and what you need to know about each when leaving a company or changing jobs…
Health Insurance Coverage
When you transfer to a new company, make sure to review the health insurance plan it offers and compare it to what you had at your previous job—if it provides less coverage or comes with much higher premiums, you may want to consider an independent plan or supplemental coverage. If you’re married and your spouse’s employer offers a health plan, you should also consider the cost of joining his or her plan and the coverage you would receive.
With any employer-offered plan, remember to check whether your preferred physicians are in network—if not, you might want to seek an independent plan.
Health Savings Account (HSA)
A Health Savings Account is almost like an IRA for medical expenses, and it can be funded by you, your employer, or both. HSAs are only available to individuals with high-deductible health insurance plans, but the good thing about these tax-advantaged accounts is that they belong to you, not your employer, so you have several options when you transfer jobs:
- HSA Transfer: If your new employer offers an HSA, you can transfer your current HSA funds into the new account. Your new employer will need to provide the paperwork to complete this transfer.
- HSA Rollover: Similar to a 401(k) rollover, with an HSA rollover, you’re issued a check for your HSA balance, and you have 60 days to deposit the funds into your new HSA account. Just note that if you don’t deposit the funds within the 60 days, those funds will be taxed and you’ll be penalized.
- Maintain Current HSA: You can also keep the funds in your current HSA. But if your previous employer has been paying administrative costs, you will now be responsible for those costs.
Flexible Savings Account (FSA)
Unlike an HSA, an FSA is owned by your employer, and you don’t need to be enrolled in a specific health plan to be eligible for it. If you have an FSA at your current job, your best option when you leave or change jobs is to check your account balance and try to spend the remaining funds before your last day at the company. These accounts can’t be transferred from one company to another, nor can they be owned by an individual, so the money remains with the employer if you don’t spend it before you leave.
Group Life Insurance
If you have a group life insurance policy with your current employer, you should check and see whether your benefit is portable or if it can be converted to an individual policy. Here’s how those options work:
Porting Your Policy
If your policy is portable, that means you can continue your current group policy as an individual. However, your rates will likely be higher than your original premium because group plans often calculate rates based on generic health classifications. That means that under a group plan, you might be classified under a rate that applies to a generic unisex smoker (which could elicit a high premium)— even if you’re a young, fit female who would typically pay lower life insurance premiums.
Converting Your Policy
Most group plans are term life insurance policies, but you might be eligible to convert your plan to a permanent individual policy. This offers more comprehensive coverage, but it will likely increase your premiums.
You should also explore any benefits your new employer offers for life insurance. Most companies offer a low-cost term policy that applies while you’re employed at the company. These premiums typically increase every five years.
Depending on what your new company offers and what you need, it might make sense to enroll in a completely new policy independent from your employer. Choosing an individual life insurance plan would mean you don’t have to rely on your employer (or your employment, for that matter) to protect your family in the event of your death. This option can also be very cost effective because you can lock in your rates.
Evaluating the advantages and disadvantages of each plan can be overwhelming, but it’s important to review the details of the policies available to you. That’s why it’s a good idea to discuss your options with a professional—your advisor should help you understand what each plan offers and how they could affect your overall goals.
Group Disability Insurance
Unlike group life insurance policies, group disability policies (both short- and long-term), are generally not portable. So when you transfer jobs, you’ll want to see if your new employer offers disability coverage and exactly what the plan covers. If your new employer doesn’t offer a disability plan, you should consider purchasing your own, especially if you’re the sole (or majority) provider of your family’s income. If they do offer a plan, you’ll want to review how much of the premium the company pays and whether you have the option to supplement your coverage by paying out of pocket.
For example, your employer might offer to pay for a long-term disability plan that covers just 40 percent of your salary*; but they might allow you to buy an additional 20 percent of coverage for which you pay the premium—giving you a total of 60 percent income coverage if you were to become disabled.
You could also consider purchasing an individual policy to supplement what you have through your employer—this is one of the best ways to maximize disability benefits. That said, there are lots of long-term disability plans available and multiple ways to customize them, so it’s wise to discuss your options with your advisor. They’ll help you sort out the details and determine what options best support your goals.
*It’s important to note—any portion of a benefit from a plan that is paid for by your employer is taxable. If you pay the full premium, the full benefit is tax-free. If you pay a portion of the premium, whatever percentage of the premium you pay is the percentage of your benefit that will be tax free.
We’re Here to Help
Each of these decisions—from choosing the right health plan to determining how much disability insurance you need—creates a significant impact on your overall financial plan and future goals. That’s why we don’t want you to walk this road alone. If you’re transitioning jobs, we’d love to guide you through the process so you can identify the benefits that are best for you—just give us a call or send us an email.
If you’ve changed jobs recently or plan to soon, you probably have additional questions about your 401(k) and other investment options—don’t worry; we didn’t forget these vital components of your plan! Check out Part II of this blog where we discuss your options for pensions, 401(k)s, and other benefits when you transition jobs.