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Not All In Texas Understand The Nature Of Their Benefit Plans

Aug 18, 2007
So you have benefits. But what does that really mean?

For people living in Texas, and especially in cities like Dallas, Houston and Austin, the question deserves some attention. It's especially the case when considering that a good number of people may not fully understand what either their employer is delivering as part of a comprehensive benefits package, or, in the case of someone who is paying at least a portion of their own benefits coverage, what they are getting for their hard-earned dollars.

Benefits aren't cheap. According to the Bureau of Labor Statistics, it costs an employer roughly 30% of full-time payroll to cover benefits and that's a percentage that continues to rise with healthcare costs, which most people think about first when considering benefits.

Employees who have benefits - - including health insurance -- should be aware of what they have, whether they're paying for it or not. One key point is to not assume you have coverage. Even if the insurance plan is going to pay for a medical bill, the amount of coverage over an employee's lifetime might be affected. Understanding the limits of coverage including the maximum coverage is important information to know.

It's also important to know and understand what choices might be available to you as an employee. In some cases, a person may be able to choose their own doctor -- with a certain amount of the costs paid for by the health insurance plan. In other cases, a plan might pay the majority of costs, even preventive costs which some plans would not cover, but there is a list of "approved" doctors from which to choose.

Benefits may also include some sort of retirement fund, so employees who have those available to them would be wise to check out exactly what's included in their benefits package and take advantage of what the employer is already willing to pay out. In some cases, the contribution of an employer will depend on how much the employee is willing to contribute to a fund, but if the money is available, it would be wise to jump in, even if an employee has to cut back on other areas of expense in order to do so.

Even if someone can't contribute the maximum amount that an employer would allow (and for which they are willing to match), starting somewhere is better than no contribution at all. By starting small and gradually raising the percentage of money being contributed, progress is being made.

Another option in some benefit plans is the ability of employees to make after-tax contributions to their retirement plan. Experts say the best advice is to take full advantage of pre-tax dollars, contributing to a Roth IRA, if you are eligible, before making such contributions to a retirement plan.

Those who have a pension plan in addition to a 401(k) or other retirement-savings plan should take the time to learn exactly how the employer calculates employee benefits. In many cases, that calculation will be based on years of service and average pay when an employee retires.

What happens if you become unable to work because of disability? Think the odds are in your favor? Perhaps, but the odds are you're more likely to become disabled than you are to die while working. For that reason, having disability insurance as part of a benefits plan is a good thing.

Think about it: how long could you be out of work without having an impact on you or your family? Would you be able to pay for rent or a mortgage? Other bills?

Many employers offer disability insurance as part of a benefits package. If someone makes the choice to buy it, they'll likely pay less than if you purchased it on your own.

Still, only 28% of employees sign up for long-term disability coverage. For those who work in an office, the percentage is higher -- up to 40%. Some may think nothing will ever happen to them, but it might be surprising to know how often people need to take advantage of this benefit.

Short-term disability often covers benefits for one year or less and sometimes an employer will automatically cover any short-term disability, with long-term coverage typically replacing 50% to 70% of a salary. That coverage is not always automatic, though, so employees need to make sure to sign up if they want the benefit before they need it.

How an employee pays for disability insurance may also make a difference should they need to collect. If coverage is paid for with after-tax dollars, future benefits would be tax-free. But if premiums are paid with money before it is taxed, the benefits will be taxable. A company that pays for a disability policy with pre-tax dollars might be convinced to make a change in their policy if they know it's a concern.

Other benefits to consider and to fully understand include life insurance, specialty health coverage such as that for eye, dental or hearing, and various stock options that a company might offer.

If an employer offers benefits to its employees, understanding the extent (and limitation) of the various components of the plan is an important undertaking. But even if benefits aren't available, there are options to consider.
About the Author
Pat Carpenter writes for Precedent Insurance Company. Precedent puts a new spin on health insurance. Learn more at Precedent.com
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