Financial Fitness 16x9 1

Insurance

Employees, with Benefits

Understanding the benefits offered with the employment contracts you’re considering.

SALARY, VACATION TIME, COMPENSATION STRUCTURE AND CME MONEY are surely important to consider when comparing and negotiating employment contracts. But there are other (often overlooked) factors when comparing two jobs and their benefit packages.

Let’s cover the different benefits that should be considered when comparing contracts.

Health insurance

It should surprise no one that health insurance is a hugely impactful benefit. In my experience, the options vary vastly at different employers. Let’s take a look at the basics.

Deductible.

The amount the insured must pay out of pocket before insurance starts kicking in.

Co-pay.

A fixed amount the insured pays to the doctor’s office per visit.

Co-insurance.

The percent the insured pays even after they have met their deductible until they reach their out-of-pocket maximum.

Out-of-pocket maximum.

The amount after which insurance pays the remaining costs in full for covered medical expenses.

Preferred Provider Option (PPO).

This is the typical health insurance most people had in days past, where an insurance company contracts with a list of doctors and hospitals to offer discounted rates. Annual out-of-pocket costs are usually lower and premiums are usually higher than other options.

High Deductible Health Plans (HDHP).

These typically offer lower premiums in exchange for higher out-of-pocket costs. To help offset the out-of-pocket costs, participants in HDHPs are usually offered access to specialized health savings accounts.

Health Savings Account (HSA).

This kind of account is triple tax protected: the contributions are pre-tax; contributions can be invested in the stock market and the growth is not taxed; and the withdrawals are not taxed if they are used for eligible health expenses. Additionally, contributions can be rolled over to the next year if not used. This can be a very powerful account to pay for out-of-pocket costs or to save for health care costs down the line in retirement. Some employers even contribute a set amount into employees’ HSAs for them.

Flexible Spending Account (FSA).

An FSA has lower contribution limits than an HSA and generally cannot be fully rolled over to the next year in full.

Health Reimbursement
Arrangement (HRA).

These employer-funded plans reimburse employees for out-of-pocket costs tax-free. However, unlike HSAs, they
are not portable and remain with the employer if the employee leaves.

Health Maintenance Organizations (HMOs).

These plans offer a small selection of physicians who work for the insurer.

Exclusive Provider Organization
(EPOs).

These are like PPOs but offer coverage only while seeing in-network providers.

Disability insurance

Long-term disability insurance protects physicians if they develop a career-threatening medical ailment and are unable to do their jobs to support their families. Most physicians should still have individual “own-occupation” insurance, but look at your options carefully to determine how much you need to buy.
Short term-disability insurance covers for disability that lasts less than two years and can be an important coverage for women who plan to take maternity leave in the future. It is important to understand when you would qualify for coverage and the amount of your maximum monthly benefit.

Other insurances

Most employers offer dental, vision and some life insurance. Dental and vision insurances generally cover preventive care in full, but offer little problem visit coverage. Some employers offer access to legal service insurance, which can come in handy for drafting wills and such. Some may offer extra insurances like accident, critical illness or cancer insurance. These are less critical to have and are only useful in certain rare occasions.

Retirement plans

Retirement plans are a very big determinant of future financial health for an employee and should be seriously considered when comparing employment contracts.
For-profit employers generally offer a 401(k), and not-for-profit employers offer an equivalent 403(b). When comparing these accounts, make sure to ask for the investment options from HR (usually not provided in the contract itself). Investment options can vary widely.
Also, some employers provide the option of doing a Mega Backdoor Roth contribution (which may or may not exist in the future depending on what Congress decides), an option that can be very important for super savers.
Finally, most employers provide an employer match for contributions and these should be compared. Be sure to understand your vesting schedule—when employer contributions become yours.

Student loans

If you have student loans, it is immensely important to have a plan for them and see how a future employer can help. Research Public Service Loan Forgiveness, the CARES Act of 2021 and The SECURE 2.0 act currently under debate in Washington.
As you can see, the different benefits offered by employers can really affect future out-of-pocket expenses and savings ability. Look beyond the salary and factor in the cost of various benefits (or the lack thereof) when comparing and contrasting different job opportunities.