Employee Benefits: How to Select the Right Options

Starting a new job often comes with a range of employee benefits to consider, such as 401(k) plans and life insurance. Employers typically require employees to fulfill specific periods known as vesting before they can access or resume these benefits.

Knowing how typical employee benefits function can assist you in making informed decisions tailored to your circumstances. Discover how to select employee benefits that align with your requirements and how to steer clear of potential missteps.

Key Points to Remember:

401(k) Plans

Many companies offer their workers a 401(k) plan, which is a tax-efficient method to save for retirement.

The Internal Revenue Service (IRS) permits you to contribute up to a specified maximum amount, which varies annually. As of 2025, the maximum contribution is $23,500, unless you are 50 years or older. In that scenario, you can make an additional catch-up contribution of $7,500, bringing the total contribution to $31,000.1

Contribute Early and Consistently

Experts suggest contributing as much as possible from an early age to benefit from compound growth. Ideally, aim to contribute between 10% and 20% of your gross salary. Starting later means needing to contribute more. At the very least, aim to contribute enough to receive your employer’s matching contribution, which averages around 4.6%.

Take Advantage of Employer Matches

Employers often match employee contributions up to a specific limit. Failing to utilize this full employer match is essentially forfeiting free money that could be yours.

When deciding on your contributions, it is important to consider how you want your money invested. Take into account your risk tolerance and investment objectives when selecting your 401(k) investments. Typically, younger individuals can afford to take on more risk as they have a longer time horizon to navigate market fluctuations.

Investing Options

You will have various options for investment, including money market funds, stock, and bond mutual funds. Mutual funds serve as a diversified investment option, offering a basket of assets that you can invest in collectively. One type of mutual fund is the target-date fund, also known as a life-cycle fund, which dynamically adjusts risk levels based on the investor’s age.

Youth and Risk Tolerance

In general, a younger individual might find it advantageous to have a higher exposure to a riskier stock-based fund rather than opting for a money market or bond mutual fund. On the other hand, those approaching retirement age may benefit more from the latter options.

Health Insurance

Employers often provide health insurance as a benefit. When selecting a plan, you may need to decide between a Health Maintenance Organization (HMO) and a Preferred Provider Option (PPO).

With an HMO, you can only visit physicians who have a contract with the specific insurance company. It’s essential to ensure that your preferred doctor is included in the plan. While HMOs can be more cost-effective, you may have limited choices regarding healthcare providers.

On the other hand, a PPO offers more flexibility in choosing healthcare providers compared to an HMO. While the doctors have ties with the insurance company, you can still see a provider who is not on the PPO’s list and receive some coverage. Although you may incur higher out-of-pocket costs, there are fewer restrictions on your healthcare options.

Choosing Dental Insurance

When considering your options for dental insurance, you will need to make a decision on whether or not to enroll in a dental plan. The cost of dental insurance is often reasonable, and it usually includes coverage for basic services like regular cleanings and X-rays. Opting for dental insurance can be advantageous, especially if you have ongoing dental concerns. By having dental insurance, you can mitigate some of the expenses associated with dental procedures, reducing the need for significant out-of-pocket payments for costly treatments.

Vision Plan Considerations

When evaluating a vision plan, it is essential to examine the services it includes and assess whether you are likely to utilize them. Typically, vision plans provide coverage for an eye examination and contribute towards the cost of eyeglasses.

Life and Disability Insurance

Life insurance provided by employers aims to provide financial compensation to beneficiaries in case of the policyholder’s death. Individuals who are single and do not have dependents may not find life insurance necessary. However, those with families should consider how much support their loved ones would need if they were to pass away. It is important to note that term life insurance offered through employment typically ends once the individual leaves the job.

Disability insurance offers financial protection by providing income replacement in the event of a disability that prevents the policyholder from working. It serves as a critical support system for both the insured individual and their family during times of inability to work.

Additional Employment Perks

If you are curious about how your employer’s perks stack up against other organizations, it’s essential to note the wide range of benefits available. Apart from the standard retirement, health, life, and disability insurance plans, some companies also offer other benefits.

If you are presented with a perk that is unclear, reach out to your company’s HR department or benefits manager.

Making Adjustments to Employee Benefits

Companies generally offer the flexibility to adjust employee benefits periodically. Employees can typically modify their 401(k) contributions and investment choices as frequently as desired. However, changes to health insurance and life insurance options are usually limited to once a year, unless eligibility for a special enrollment period is met.

The Finance Avenue explains that the Consolidated Omnibus Budget Reconciliation Act (COBRA) permits individuals to continue their employer’s group health plan upon leaving a job. It is crucial to apply promptly for coverage once employment concludes, as there is a time restriction. COBRA serves as a temporary measure, typically offering coverage for a maximum of 18 months post-employment separation.

Can I Adjust My Benefits Selection?

Absolutely, it is possible to make modifications to your benefits, although the timing varies based on the specific benefit. For instance, altering health insurance coverage is typically restricted to once annually, unless you meet the criteria for a special enrollment period.

Why is Life Insurance Essential?

Having life insurance provides a sense of security by guaranteeing that your loved ones will receive financial assistance if you pass away. Typically, employer-provided life insurance only equals one year’s salary and ceases when your employment terminates.

How to Get More Information About Your Company’s Benefits

Companies often share detailed information about their benefits online. If you want to learn more, you can reach out to your human resources department or check the company’s website.

The Bottom Line

Employers offer a range of benefits, including tax-advantaged retirement savings accounts and health insurance.

Take the time to understand your benefits to maximize their value. Review your choices when your circumstances change. Contact your HR department for enrollment assistance or questions about your benefits.

How to Choose a Health Insurance Plan

Health insurance is essential for managing healthcare costs, but the process of choosing a plan can be overwhelming. Understanding the different types of health insurance plans available can help individuals make informed decisions about their coverage.

Types of Health Insurance Plans

There are various types of health insurance plans, each with unique features and coverage options. Some common plan types include Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Exclusive Provider Organization (EPO), and Point of Service (POS) plans. Each plan has its own network of doctors, specialists, and hospitals, as well as different rules for coverage and referrals.

When choosing a health insurance plan, individuals should consider factors such as their healthcare needs, budget, and preferred healthcare providers. Comparing plan features, costs, and coverage options can help individuals find a plan that meets their specific needs.

COBRA Continuation Health Coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows workers to continue their employer-sponsored health coverage for a limited period after leaving a job. COBRA coverage can be beneficial for individuals who are between jobs or have recently lost their job but still need health insurance.

Understanding the COBRA continuation coverage rules, costs, and eligibility requirements is important for individuals who may need to take advantage of this option. Employers are required to provide COBRA information to eligible employees and their dependents when coverage is lost due to specific qualifying events.