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Your Benefits

In Open Enrollment, Diligence Reaps Big Benefits

October 22, 2000|LIZ PULLIAM WESTON | TIMES STAFF WRITER

If you work for a large employer, the dreaded open-enrollment packet is about to land in your mailbox--if it's not there already, taking up all available space.

The fat packet details the choices you're allowed to make regarding your workplace benefits, and it's not an illusion that the options seem to increase each year. In an effort to customize benefits for all kinds of people--single, partnered, with children and without--companies are offering a far wider array of choices than they did 10 years ago.

In addition, employers are once again struggling with higher health insurance costs, meaning many are making changes to the medical plans they offer.

Your choices can have a big effect on your wallet, so it's important to pay enough attention to do it right. Here's what you need to know, and what decisions you absolutely have to make:

For the Record
Los Angeles Times Sunday November 5, 2000 Home Edition Work Place Part W Page 3 Financial Desk 3 inches; 76 words Type of Material: Correction
Spending accounts--An article in the Oct. 22 Work Place section incorrectly characterized the limits for flexible spending accounts and what expenses may be eligible. A household may contribute a maximum of $5,000 to flexible spending accounts for child-care costs and a maximum of $5,000 to flexible spending accounts for unreimbursed medical expenses. Qualifying medical expenses can include dental work such as orthodontia, but contributions may not be used for purely cosmetic procedures unless necessary to correct a deformity.

Health insurance. This is the Big Kahuna of open enrollment and probably the reason most employees hate open-enrollment season. It seems you either have too few choices or too many, and comparing all your alternatives seems difficult.

Unfortunately, there are no easy answers. But you can get plenty of helpful information about your options in the special report that appeared Sept. 25 in The Times' Health section. The section is reproduced at http://www.latimes.com/health. Click on "Health Care: A Consumer's Guide."

Here are the basics of what you need to consider:

In general, if you have health problems or children, a health maintenance organization may be your best choice. To help you pick which one, check out the rating service at http://www.ncqa.org.

If you're willing to pay extra to have more control, a point-of-service plan might be the better option. POS plans work like HMOs but allow you to use physicians outside the HMO network. (Before you pay for a POS plan, though, see if the physicians you want to use are within your HMO network. You might not need to pay more if they are.)

If you're in great health, have no kids and rarely go to the doctor, consider the catastrophic plan if your company offers one. You pay for all routine medical visits and exams but are insured against huge hospital bills if disaster should strike. In return for a high deductible, your premiums can be as low as a few dollars a month.

You can use last year's expenses to help determine whether vision and dental coverage make sense to you. If you had the coverage, consider what your out-of-pocket costs would have been without it. Balance that against the premiums you'll pay to decide whether to sign up for the insurance. The big exception: If you expect to need major dental work or have serious eye problems, the insurance usually makes sense regardless of what you've spent in the past.

If your partner has health benefits, you'll want to coordinate your coverage. It may be cheaper to use one partner's health insurance to cover both, or you may opt to keep coverage separate. Crunch the numbers to see which makes sense.

Generally, your employer will continue the coverage you have this year if you fail to choose another option. If your current option is no longer available, however, you could get dumped into another plan--one that you might not like.

Domestic partner benefits. This option extends health and other benefit coverage to an employee's unmarried partner. Premiums for the additional coverage are usually not tax-deductible, and the amount the employer pays for the partner's benefit is typically added to the employee's taxable income. For more information, see the Sept. 24 article on this subject at http://www.latimes.com/workplace.

Flexible spending account. Pay attention here; this is a valuable benefit for most workers.

Flexible spending accounts go by other names, including tax-saver plans, tax-free spending accounts and 125(c) accounts. The idea is the same: You put aside pretax money throughout the year to pay for child-care costs or for medical expenses that aren't reimbursed by insurance. (If you have both types of expenses, you'll need an account for each; you can't use child-care money to pay medical expenses, or vice versa.) If you're in the 28% federal and 8% state tax brackets, contributing $5,000 to a flexible spending account could save you nearly $1,700 in taxes.

One drawback is that you lose any money in the account that isn't used for qualified expenses. You want to make sure you estimate fairly accurately, and that you spend any money left in the account by year's end. (You can do that by purchasing an extra pair of glasses, scheduling an elective procedure or hiring your child-care provider for a few extra evenings, depending on the type of account and your individual situation.)

You should also consult a tax advisor before using a flexible spending account for child-care expenses, because the account can interfere with your ability to take a tax credit for the same costs. For many families, the account will be a better deal, but it pays to make sure.

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