Most college students are not offered a class that teaches them about employee benefits. This can leave students feeling lost upon graduation with their first job offer because they don’t understand what the benefits package means or what they need to be looking for. Benefits are just as important, if not more, than base salary when looking at a job offer. Benefits vary greatly by company, but this guide will lay out the basic terms and a variety of benefits information that will be helpful when it’s time to evaluate your own benefits package.
What to Know Before Starting a Job
Some companies have a waiting period between when employment begins and when the benefits become effective. For example; the first of the month after 30 days of employment. If employment starts on June 6th, the benefits would be effective August 1st.
Benefits are elected when employment begins and deducted out of the employee’s paycheck.
How to Select Insurance
Consider personal health and current needs, what may become a need in the future, do research, and ask questions.
Benefits Terms to Know: Medical Insurance
PPO: Preferred Provider Organization
In this plan participants pay co-pays for office visits and prescriptions until they meet the deductible. Monthly premiums and out of pocket costs are typically higher with this type of plan.
HDHP: High Deductible Health Plan
In this plan participants do not pay co-pays, but instead pay a discounted rate for services until they meet their deductible.
HSA: Health Savings Account
An HSA allows participants to put aside pre-tax dollars into a savings account that they can use towards medical expenses. There are annual contribution limits based off the participant’s medical coverage type and there can be investment options for the account for the savings to grow. The HSA account rolls over year to year and individuals have ownership of their HSA dollars even if they leave their current employer.
The amount the covered individual pays for medical expenses before the insurance starts to pay out. If the deductible is $2,000, then the individual pays the first $2,000 of covered services out of pocket.
The amount the individual pays per month for their insurance coverage. This cost will be deducted out of the employee’s paychecks.
Out of Pocket
Out of pocket is the amount the individual pays each calendar year for healthcare including co-pays, deductibles, and co-insurance. If the $2,000 deductible is met, the individual continues paying co-pays until the out-of-pocket maximum is reached.
In Network vs. Out of Network
Each insurance provider has certain health care providers that are “in network” or accept their plan. Going to providers that are in network then will result in a lower rate for services.
The annual time period when employees can enroll in benefits for the next year. If employees do not elect certain benefits at the time of hire or during open enrollment, then there are other events that occur that can qualify an individual to enroll at that time.
The other events that can occur to make it possible for one to enroll in benefits outside of an open enrollment period. Events such as; turning 26 – the age when individuals can no longer be covered under their parent’s insurance; a change in family situation including birth of child, marriage, divorce, death of dependent; or if a spouse loses their group benefits.
Insurance to cover any dental healthcare needs including services from regular cleanings to major dental work.
Insurance to cover any vision healthcare needs such as regular checkups, glasses, and contacts.
FSA: Flexible Spending Account
An FSA is a type of savings account that employees can contribute pre-tax dollars to and use for qualified expenses such as medical expenses or dependent care expenses. There are annual contribution limits and the account does not build year after year, the money must be used within the specified time period – typically the calendar year.
Other Benefits Terms to Know
Long Term and Short-Term Disability
Disability insurance is used when a medical issue prevents an employee from being able to work. With this insurance employees can receive a portion of their salary while being out of work. Long term disability typically starts whenever the short-term disability ends.
PTO and Holidays
Paid time off and holidays. Paid time off can include personal days, sick days, and vacation days. The amount of PTO varies among employers and the schedule for which employees accrue PTO varies as well. In some cases, a new hire may receive 5 vacation days, 3 personal days, and 1 sick day at the time of hire or the individual may have to work a few weeks or months before they have accrued vacation days, etc. Holidays are discretionary by employers- some may close the office for every calendar holiday, while others may stay open on holidays depending on the nature of the business.
Wellness is relatively new to employee benefits and varies by employer. Wellness programs can range from the reimbursement of a gym membership to a full year of events and activities to attend with incentives from the employer.
Employers may offer education reimbursement. Some pay for employees to get their master’s degree others pay a percentage of the tuition. In certain industries, employers pay for certifications like an accounting firm paying for their employee’s CPA exam expenses. Some employers do not provide education reimbursement of any kind.
A defined contribution plan offered by companies that allows employees to set aside tax-deferred income for retirement purposes. Employers often match a portion of the contributed amount for each employee. If the employer does match funds, then there is often a vesting schedule for the employer contribution. For example, if an employee has worked at a company for three years, then all of the money they contributed towards their 401(k) will always go with them at termination, but they may only receive 75% of the employer match amount.
Maternity leave is the amount of paid or unpaid time off a new mother receives when she has a baby, and paternity leave is the amount of paid or unpaid time off a new father receives when his partner has a baby. Many maternity and paternity leave policies also include time off after a family has adopted a child.
Flexible Work Schedule
Some employers offer flexible work schedules that are different from the typical 9:00am-5:00pm office schedule. This means that the employee may be allowed to work from home on some days and in the office other days. It may be a set flexible schedule that is decided for the employee based on their individual needs, or it may be at the will of the employee to work wherever and during whatever hours are best for them.
Extras: Paid Parking, Food, etc.
There are other benefits that are important to consider although they may seem like a small detail. Paid parking that is close to or attached to the building, free food twice a month, discounts on products/services, etc. These extra perks are the ones that can make a big difference in employee satisfaction at work and set a company apart from others.
The main key to getting the most out of your benefits package is to educate yourself as much as possible prior to and after electing benefits. Utilize the Human Resources department to answer your questions and make sure to attend open enrollment meetings. It is a best practice to check your deductions on your paystubs and address anything that looks incorrect. Choosing benefits for the first time can be overwhelming, the more educated you can be on the offerings and what you elect, the better off you will be!All Insights